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An insurance contract is a taxable insurance contract unless it is specifically exempted from tax¹.

The following contracts of insurance are exempt:

1. Ìý

   (1)ÌýÌýÌýÌý Contracts of reinsurance².

2. Ìý

   (2)ÌýÌýÌýÌý Contracts of long-term business as defined in the Financial Services and Markets Act 2000³ (Consequential Amendments and Repeals) Order 2001, s 346(3). Included as long-term business is Permanent Health Insurance (PHI), but excepted (since 1 October 1997⁴) from the exemption is non-long-term medical insurance (which is taxable). Confusion often arises as PHI (exempt from IPT) has a similar definition as Accident and Sickness Insurances (and are taxable).

3. Ìý

   Medical insurance (accident and sickness insurance) is defined⁵ as cover for private medical, dental, optical and related treatment. This needs to be distinguished from long-term PHI cover. Both are frequently referred to simply as health insurance. For a contract of insurance to be exempt PHI is should have the following characteristics:

4. Ìý
   1. Ìý

      •ÌýÌýÌýÌý Provision for incapacity.

   2. Ìý

      •ÌýÌýÌýÌý For a period

   3. Ìý
      1. Ìý

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