Insurance experts are encouraging law firms to take particular note of the proposed rise in insurance premium tax (IPT) announced in last week’s summer budget.
Nick Paterno, managing partner of McBrides Chartered Accountants, and lead adviser to McBrides legal sector clients says: “Some [law] practices may be forgiven for missing the Chancellor’s ‘stealth tax’ this year in the form of a rise in IPT from 6% to 9.5%. This 58% increase is costly to most businesses but in the legal sector the impact on professional indemnity premiums will be significant.”
For firms renewing insurance this October Legal Risk partner Frank Maher says that it could be worth considering a longer policy period to beat the tax hike. “Eighteen-month policies are generally available, and carry the added bonus of broad cover for a longer period before the dramatic cuts proposed in the Solicitors Regulation Authority’s (SRA’s) consultation can take effect.”
The SRA’s discussion paper, "Protecting client’s financial interests", published earlier this month sets out a number of possible options for reforming professional indemnity insurance (PII) arrangements. More detailed proposals will follow in a further consultation in early 2016.
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