Budget 2012: Government measures could attract more foreign insurers

More insurers could announce their intent to move to the UK over the next year, according to PwC.

The firm’s UK insurance tax leader Colin Graham said the 2012 Budget announced today showed Government’s ambition to attract and retain global companies.

The main concern, however, he said was over the introduction of a general anti-avoidance rule with the need to strike a balance between protecting tax revenues and enabling businesses to carry out commercially driven transactions with certainty.

Graham said that overall the Budget was good news for insurers, as was the move to a 22% corporation tax rate and the intent to reduce that further to 20%.

“The Chancellor referenced the progress that has been made on the controlled foreign companies (CFC) reform debate and the fact more firms are moving to the UK,” he said.

“We wouldn’t be surprised to see more announcements of insurers’ intention to move to the UK in the coming 12 months.

He continued: “The reduction of the higher income tax rate will also help the UK and it’s good news for life insurers that pensions relief is largely being left untouched.”

Anne Hamilton, UK insurance tax leader in Deloitte’s financial services tax practice, said that the insurance-specific measures announced today’s Budget were to be expected.

“For general insurers and Lloyd’s, the announcements on claims equalisation reserves and stop-loss arrangements confirm those already made in December 2011,” she said.

“For life insurers, the main interest will be when the Finance Bill is published next week and the amendments to the new life regime, as published in draft in December, can be assessed. Life companies will have been relieved that no changes were announced to pensions tax relief, although they will want to assess the impact of the restrictions announced (from 2013) to premiums into qualifying life policies.  

“The cut in mainstream corporation tax to 24% from April and then down to 22% from April 2014 will be welcome to the insurance industry and will help competitiveness. More generally, insurers will also be waiting for the publication of the Finance Bill on 29 March to see the detail of the proposed controlled foreign companies regime.”