Canadian FET: I have received an Excise Tax notice from the Canada Revenue Agency (CRA), what does this mean and how do I get more information?
The Excise Tax Act imposes a 10% levy on insurance premiums (other than reinsurance) against a risk in Canada. If you have received a notice from the CRA, this means that you have taken out insurance policy/policies at Lloyd’s which have been reported to us by your insurance broker as being subject to FET in Canada. Your policy/policies have been included in the annual FET return submitted to the CRA by Lloyd’s.
Lloyd’s Tax Department will only be able to provide you with the high-level policy information submitted in the FET return. If you would like to receive the full details, please contact your UK insurance broker who placed the policy/policies at Lloyd’s.
Canadian FET: An excise tax policy has been incorrectly reported for my organisation, how can I get this resolved?
Excise Tax is only applicable to an insurance policy that meets ALL of the following conditions:
- The policy covers insured(s) resident in Canada
- The policy covers or partially covers a risk ordinarily situated within Canada
- There is no Canadian broker involved in the placement or named on the policy documentation / market reform contract (”MRC”)
- The risk does not fall within any of the exemptions (detailed on Crystal)
If any of these conditions are not met, please contact your UK insurance broker who placed the policy at Lloyd’s to inform them of this suspected error and receive their confirmation. Once confirmation is received, please forward this to the Lloyd’s Tax Department – firstname.lastname@example.org and they will send communication to the CRA to have these policies amended/removed from the return.
Canadian FET: I am a Lloyd’s broker, what should I do when a client takes out an insurance policy that is subject to FET?
If a policy is subject to excise tax, you must complete a C-FET01 form for inclusion in the work package submitted to Xchanging for processing. Please make sure to complete this form correctly as errors within any of the data fields may lead to discrepancies in the return sent to the CRA by Lloyd’s or delays in having the premium processed by Xchanging.
You must inform your client in Canada, (this may be the Canadian subsidiary/branch of your client) that a 10% excise tax will be charged on the Canadian element of the premium for their Lloyd’s insurance policy and that they should expect a request for payment from the CRA which will need to be settled.
Canadian FET: How are the C-FET01 forms completed and how are these relevant to the Excise Tax returns submitted to the CRA by Lloyd’s?
The C-FET01 form is the Canadian Federal Excise Tax form that is completed by the Lloyd’s brokers when a policy is subject to Canadian FET. It is important to note that this form must only be filled out if the policy satisfies ALL the conditions required for excise tax to be applicable, as stated in the above FAQ and at the top of each C-FET01 form.
Once this form is completed, it is sent to Xchanging as part of the premium work package to be processed. Upon receipt, Xchanging will input the additional policy details provided on the C-FET01 form into their system, which creates a taxable policy data line charged on the premium. This is important because this information is typically not found in the MRC. This data is then provided to the Lloyd’s Tax Department to ensure it is included in the FET return to be submitted by Lloyd’s annually. Please note that this return is submitted to the CRA around March/April and therefore clients will often receive their payment requests from the CRA in Q2 and Q3.