Specific guidance in relation to political risks
"If a UK company takes out a political risks policy covering assets of an overseas business establishment or subsidiary, IPT can be due in certain circumstances. For example, if the policy protects the investment of the UK company in the overseas establishment and compensates it for the loss of the capital invested, Customs and Excise consider that the risk relates to the UK company and IPT is payable on the premium. They also believe that a policy covering the equity investment of an UK parent company in an overseas subsidiary is liable to IPT.
If the risk can be shown to attach to the overseas establishment or subsidiary, IPT will not be due although there may be an exposure to premium taxes in the country where it is located. This could happen, for example, if the overseas establishment or subsidiary is the policyholder or in the case of property where the policy covers its loss through a political action. For policies, which cover buildings and their contents, location is determined by the location of the property.
Underwriters have questioned this interpretation in respect of certain policies but it is suggested that, as a practical measure, the approach advocated by Customs and Excise is followed. The Political Risks Sub-committee of the NMA endorses this approach. "
Specific guidance in relation to kidnap and ransom risks
"Because of the confidential nature of this business a company may not be aware that its employees are covered by a kidnap and ransom policy. This can happen, for example, where a parent company takes out a policy which covers employees working for its subsidiary companies as well as the parent company and pays the whole of the premium. If the parent or any of the subsidiary companies whose employees are covered by the policy are in the UK, the premium must be apportioned and IPT is due on the proportion which covers the business establishments in the UK. The apportionment must be made on a just and reasonable basis.
So if, for example, a UK parent company with French and German subsidiaries takes out a kidnap and ransom policy and the employees of all three companies are covered, the premium must be apportioned. IPT is due on the proportion of the premium covering UK parent company and the proportions covering the subsidiary companies are subject to French and German premium taxes respectively. This applies even if the French and German subsidiary companies are not aware that a policy has been taken out and the UK parent pays the premium. Underwriters are reminded that they may be required to substantiate the liability and/or apportionment of a premium to Customs & Excise."