Ed Davey to Gordon Brown transcript
Rt Hon Gordon Brown MP
Chancellor of the Exchequer
1 Horse Guard Rd
2nd August 2004
Re: Potential tax evasion on insurance re-selling.
I have a complex constituency case where my constituent alleges that the freeholder and managing agent of the property where he has a leasehold flat is illegally charging him and other tenants a higher premium for the building insurance than was paid to the insurance company for that policy. We are seeking advice elsewhere to ascertain whether this practice is legal or not.
However I suspect that there is a tax issue arising, whether or not other laws have been broken. While the freeholder/managing agent appears to be paying the relevant rate of IPT on the insurance when originally purchased, no IPT appears to be levied on the additional premium being charged to the tenants by the freeholder.
I would be extremely grateful if you could set out the true legal position, as Customs & Excise see it in such a case.
My own understanding is that re-selling of insurance faces an enhanced rate of IPT in various cases but not in the case of building insurance. If this is the case, what rate – what tax – should be applied to the re-selling of building insurance as described? Is VAT chargeable? Is IPT chargeable? Are there any relevant conditions or rules applying of which my constituent need be aware?
Since it is my constituent’s contention that this freeholder – and no doubt – others too – may be guilty of both a landlord and tenant fraud and a tax fraud on quite a large scale, I hope you understand why I felt it appropriate to bring this matter to your attention.
Edward Davey MP.
Transcript of Ed Daveys letter to the SFO
Head of Policy Section
SFO Elm House
10 Elm Street
Dear Peter Kiernan,
Re: Insurance policies, re-selling and alleged fraud.
Thank you for your reply to my last letter. I have now had time to discuss the contents with my constituent and have some following questions.
The test cast to which you referred me, to suggest that it would be legal for a management agent to increase the insurance premium would seem to be inappropriate to my constituents case. It deals with premiums in the case of commercial property not residential and you will be aware of significant differences in both cases and statutory law between these sectors.
Indeed, the case referred to seems obscure for the issues I am raising with you, and so would be grateful for your source for this case. Moreover, I would refer yourselves to standard legal texts, such as Woodfall, which as I understand them as a non-lawyer, seem to suggest clearly that freeholders cannot make a profit out of their lessees in the way I and my constituents are concerned about.
Therefore, I would be extremely grateful if you could examine this issue again and the questions in my original letter which appear now not to have been answered satisfactorily. Can you confirm, with any relevant legal references, whether or not this practice of increasing of increasing premiums is legal or not? If it is not, and it is happening on a wide scale, can you explain what actions you or the relevant police would be prepared to take to counteract what could plausibly turn out to be wide spread fraud?
Thank you for your assistance.
Edward Davey MP
Cc constituent (Graham Chipping)