Pre-Budget report pledges tax reforms to help Lloyd's compete against tax havens
The UK insurance industry received a potential boost to its international competitiveness under tax reforms in the pre-Budget report.
Chancellor Gordon Brown announced that the government intended to simplify the tax treatment of general insurance reserves, as well as clarifying the process of business transfers in group reconstructions within the Lloyd's market.
The Chancellor said the government would introduce legislation to address an anomaly in the tax framework for Lloyd's corporate members.
Some suggested the proposals could prove key in stemming the exit of companies from the Lloyd's market to more tax efficient domiciles, like Bermuda.
Andrew Green, tax partner at Mazars, told Insurance Times: "The insurance industry has come out of the statement quite well with changes on the whole likely to be revenue neutral.
"The importance of the financial services sector, including insurance, to the UK economy should not be underestimated. It generates approximately 25% of all the UK's revenues from corporate tax."
Green added: "Closer links and better working relationships are essential to making the UK a competitive location for insurers and the like."
Green said that the introduction of a relieving provision to allow Lloyd's corporate members to transfer their underwriting activities and UK tax losses to successor corporate members in the same group could lead to more groups streamlining their Lloyd's operations.
The decision to abolish complex rules governing the amount insurers set aside to pay claims follows open consultation between industry bodies and Revenue & Customs.
Rob Gill, head of general insurance tax at KPMG said: "This should be good news for general insurers as the old rules imposed a heavy compliance burden, but the Revenue has yet to announce details of the replacement regime."
Main points of the pre-Budget report
