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IPT05900 explains the de minimis provisions generally.

Clearly if the value changes, or the proportion of the premium which relates to taxable insurance changes, it is possible that a premium which was treated as wholly exempt (by virtue of the de minimis provisions) may become partly taxable. This will occur where the value of the AP increases the value of the total premium above 拢500,000, or the taxable element exceeds 10%. The following examples illustrate each of these situations.Example 11(a) - change in level of premium only Premium 拢450,000 - 5% (拢22,500) taxable

• De minimis limits apply (total premium under 拢500,000): so whole premium treated as exempt.
• Additional premium of 拢60,000 received, of which 5% is taxable.
• Total premium now 拢510,000.
• De minimis limits exceeded: whole premium no longer treated as exempt.

Example 11 (b) - change in taxable proportion of premium

• Premium 拢450,000 - 5% (拢22,500) taxable.
• De-minimis limits apply (total premium under 拢500,000): so whole premium treated as exempt.
• Additional premium of 拢30,000 received, which relates wholly to taxable risk.
• Total premium now 拢480,000 - 10.9% (拢52,500) taxable.
• De minimis limits exceeded: whole premium no longer exempt.

Where a policy becomes taxable in part, the insurer must quantify the tax due. The AP they charge the insured may, then, consist of:

• the net value of the AP (拢30,000 in example 11(b)), plus tax on that value (拢1500 at the standard rate); and
• tax on the chargeable amount of the initial premium (拢1125, being 拢22,500 x the rate of tax applicable).

The tax point for the tax on the AP (拢750) is the date on which the additional premium is entered in the insurer鈥檚 records (Regulation 24(3)). Because the de minimis arrangements are an ESC, they do not completely tie in with the IPT Regulations, and there are no provisions that allow the tax point for the tax on the initial premium to be the date of entry of the additional premium. However, in cases such as this, it is acceptable for the insurer to bring to account the tax on the initial premium at the same time as the tax on the additional premium. If they do not, and the tax relating to the initial premium is assessed, then the legal tax point should be used to determine the accounting period assessed (the legal tax point being the date 鈥渁s at which鈥� the initial premium was due). You may wish to inhibit any interest.

It is possible for a policy which was previously partly exempt to become wholly exempt by virtue of the de minimis rules, following the receipt of an AP.Example 11(c) - change in taxable proportion of premium

• Premium 拢250,000 - 15% (拢37,500) taxable.
• De minimis limits do not apply as 10% limit exceeded. Premium is partly taxable.
• Tax charged and paid in period 03/95.
• Additional premium of 拢200,000 received in period 06/95, which relates wholly to exempt risk.
• Total premium now 拢450,000 - 8.33% (37,500) taxable.
• De minimis limits now apply: whole premium may be treated as exempt.

In this case, although the insurer chooses to invoke the de minimis ESC they are not obliged to 鈥� see IPT05920). Having written the AP in example 11(c), they may claim a refund of the tax paid on 拢37,500, provided, of course, that they repay the tax to the policyholder (see IPT07680).