Industry figures joined the ABI this week in demanding that the Treasury delays implementation of a European court ruling on VAT which will cost the industry £200m a year.
The ruling will cut the number of exempt insurance-related activities, including claims handling and loss adjusting which will face a 17.5% hike in VAT bills.
The Treasury is expected to apply the ruling in January 2006, but the ABI says the deadline is "unrealistic".
John Breckenridge, the ABI's acting head of taxation and accountancy, said: "The January 2006 deadline [will lead to] firms implementing the ruling in different ways and at different times, leading to confusion and possibly even legal disputes. This must be avoided."
The ABI wants a reprieve of at least a year, and is calling on the Treasury to ensure that other member states implement the ruling at the same time as the UK.
A spokesman for business adviser Grant Thornton said: "Unless the Government heeds the warnings the rules will have a detrimental financial impact on UK insurance and outsourcing."
A spokesman for HM Revenue & Customs said:
"We will now look carefully at the views of the industry."
