NORTH-west travel agents may soon be able to claim back thousands of pounds in overpaid insurance premium tax (IPT) following a landmark High Court ruling, says tax expert Martin Ruffles of Arthur Andersen.

The court rules that it is not lawful for Customs & Excise to charge IPT at 17.5pc on items such as holidays, where the product and insurance are sold together.

"IPT is usually charged on all insurance policies, including travel insurance and car warranties, at four per cent," he explained.

"However, last year Customs & Excise claimed that businesses were deliberately increasing the value of insurance policies and warranties, therefore reducing the amount of VAT they had to pay on the value of the actual product or service provided.

"Customs therefore introduced higher rate IPT at 17.5% to counter this. Travel agent Lunn Poly opposed this, claiming they had to charge higher rate IPT on insurance bought as part of a holiday package while customers buying separate insurance from a broker only paid four per cent.

"The ruling in favour of Lunn Poly means travel agents, plus suppliers of warranties for cars and electrical goods, could now reclaim substantial IPT refunds."

He added: "Even though Customs are appealing against the ruling, it is important to make a claim now. If the ruling is upheld, Customs may impose a deadline after which claims are not valid.

"The ruling is good news for travel businesses and their customers who may see a reduction in holiday costs. British holidaymakers already face a triple tax whammy every time they book a holiday, as they pay VAT, IPT and air passenger duty, all for the same holiday."

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