Delayed payment of ATE premiums could cost NHS quarter of a million in Insurance Premium Tax

The NHS will have to pay an additional 3.5% in Insurance Premium Tax (IPT) if it continues to delay its payment of outstanding after-the-event (ATE) premiums for clinical negligence cases that were concluded before November 2015.

The warning has come from ATE provider ARAG, which has estimated that 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 NHS Litigation Authority (NHSLA).

It also revealed that it has already warned defendant solicitors that they need to discuss the additional liability with clients urgently if the tax is to reach HMRC in time to avoid attracting the new, higher rate. The Chancellor announced the increase in IPT from 6% to 9.5% in his Summer Budget, with the new rate applying from 1 November.

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

“Delaying payments is a familiar tactic in clinical negligence cases, but I’m not sure clients are fully aware that it could significantly add to their costs following the IPT increase.”

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.

Mark Dugdale