Insurer body seeks seat on influential forum, as ministers back down on foreign profits.
The ABI is set to challenge the Treasury on a raft of different taxes as big business loses patience with the government’s fiscal policy.
The ABI has said it will use the tax forum which the government has set up to improve UK competitiveness as an arena to push its views on corporate tax, capital gains tax and other points of dispute.
Big business has already scored a victory this week, as it was reported that the Treasury will back down on plans to tax foreign profits of UK multinationals.
The U-turn was sparked by threats from companies including Brit Insurance and Amlin to redomicile if the changes went ahead. In response to sustained pressure from big business, the government has agreed to put watered down proposals out to consultation in June.
Peter Vipond, director of financial regulation and taxation at the ABI, said: “All too often, the outcome of government reviews in this area is a revenue grab dressed up in anti-avoidance clothing – not a credible tax policy. The next stage of consultation will be key, and we will continue to work to ensure the insurance industry’s view is heard on this crucial issue.”
The ABI said it hoped to win a seat on the tax forum, which was announced at the end of April and will be chaired by Treasury financial secretary Jane Kennedy. The full membership has not yet been announced, but will include high profile representatives of UK businesses.
Sarah Knight, assistant director of financial regulation and taxation for the ABI, said: “We will try to ensure that, if there’s an insurance representative on this group, which there should be, these issues are key. It’s a huge business risk not knowing what your tax liabilities are going to be for future years.”
The ABI plans to lobby the government on tax issues surrounding reserves. Excessive reserves are not currently taxed, but it believes the government is about to introduce new taxes, and the ABI wants to know what they will be.
UK insurers face another potential tax hit from the US. UK insurers covering an American risk are currently exempt from paying federal excise tax – a tax on the gross premium at 4% for property-casualty insurance, and 1% for life insurance and all types of reinsurance.
But a recent Internal Revenue Service ruling means UK insurers might have to pay 1% tax if they use a reinsurer outside of the UK and the US to cover a US risk. The ABI has said it will investigate the consequences of this change.