Tuesday, 5 January 2016

Late payment could cost NHS £¼million in unnecessary tax

The NHS will needlessly pay an additional 3.5% in Insurance Premium Tax (IPT) if outstanding after-the-event (ATE) premiums are not paid for cases that were concluded before November 2015.

ARAG UK, a leading provider of ATE insurance policies in clinical negligence cases, has highlighted the limited time left for the NHS Litigation Authority (NHSLA) to pay overdue premiums before the new, higher rate of tax will apply.

The Chancellor announced the increase in IPT from 6% to 9.5% in his Summer Budget, with the new rate applying from 1 November. Cases that were concluded by that deadline should only pay IPT at the old 6% rate, as long as the tax is paid by the end of February.

However, ARAG estimates that, across the industry, there are thousands of concluded clinical negligence cases in which payment of the ATE premium is still outstanding, the majority of which will involve the NHSLA.

 “The additional tax bill for each of these cases is going to be hundreds of pounds, so this amounts to a huge sum of tax that the NHS should not have to pay,” comments ARAG Director and Head of ATE, Paul Hurley. “The total is certainly well in six figures and could be as high as £250,000.

“These are all cases where the NHSLA has already had to accept liability and pay compensation to patients who have been harmed. It’s hard to imagine a reason why the premium should remain unpaid for so long in any of these cases, let alone for so many.

“Delaying payments is a familiar tactic in clinical negligence cases, but there is a great incentive here to settle these outstanding costs before the extra tax becomes due.”

ARAG has highlighted that premiums will need to be paid in good time for the tax to reach HMRC in February and has set a 31 January deadline for defendant solicitors to identify relevant cases, raise the issue with clients and settle any premiums that may be outstanding.

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For more information please contact :
Rachael Wornes, Marketing Manager, ARAG UK, 0117 917 1578, pressoffice@arag.co.uk
Paul Jacobs, Director, Consultable, 079 0982 1731, paul@consultable.co.uk

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