The ABI is this week demanding that the Treasury delays implementing a European court ruling on VAT which will cost the industry £200m a year.
The ruling will substantially cut the amount of insurance-related activities eligible for exemption, meaning services like claims handling, back office administration and loss adjusting will face a 17.5% hike in their VAT bills.
The Treasury is expected to implement the ruling in January 2006 but the ABI claims the deadline is ‘unrealistic and likely to lead to confusion.'
John Breckenridge, acting head of taxation and accountancy at the ABI, said: “We accept that the ruling will be implemented but the guidelines laid by the Treasury are unclear and we can't support an overtly hasty implementation.
“If the Treasury demands the January 2006 deadline there will be a situation where company's are implementing the ruling in different ways and at different times leading to confusion and possibly even legal disputes. This must be avoided.”
The ABI said it was asking for a reprieve for at least a year, and is calling on the Treasury to ensure that other member states implement the ruling at the same time.