ABI: corporation tax proposals ‘encouraging’

Insurers have welcomed the UK government’s roadmap for reforming corporation tax, which was unveiled on Monday.

“It is an encouraging step forward and promises to deliver a truly modern and competitive UK tax system,” the ABI said in a statement.

The government is aiming to make the UK more competitive with other business locations and stem the flow of UK companies going overseas. A number of UK insurers have shifted their tax domiciles abroad, including Brit, which transferred to the Netherlands, and Beazley, which shifted to Ireland, both in 2009.

As part of the proposals, foreign branches of UK firms – so-called controlled foreign companies – will be exempt from UK corporation tax.

However, the ABI has warned that while it supports work to introduce a branch tax exemption, “the details could prevent some insurers from benefiting, forcing them to locate in other countries”.

“Insurers need to know how foreign profits will be taxed as they decide where to headquarter under Solvency II,” the association’s statement said.