Insurer concerns remain after government climb down.
The ABI has welcomed the government’s climb down on plans to tax companies’ foreign profits.
But the trade body said there were still concerns over some of the proposals.
The Treasury outlined its decision to drop the controversial tax changes this week and said it would delay the implementation of other measures while it conducted further talks with business.
The proposals, published last year, had provoked anger among businesses, including the insurance industry.
The government had initially planned to be tougher on tax avoidance in return for exempting foreign profits from tax. There would also have been a worldwide tax on ‘passive’ income, such as royalties on intellectual property.
But the plans threatened to provoke an exodus of businesses from Britain. Insurers Amlin and Brit said they would consider re-domiciling if the proposals went ahead.
In a letter to the CBI, made public this week, Jane Kennedy the financial secretary to the Treasury, said the government planned to make dividend payments on foreign profits exempt from UK tax. Plans to crack down on tax avoidance would be dropped in their current form, along with tighter tax rules on intellectual property.
Sarah Knight, the ABI’s assistant director of financial regulation and taxation, welcomed the change of stance. But she warned that proposed changes to the rules on interest restrictions could have an impact on transactions between group companies. “We want to ensure that arms length inter-company transactions are not restricted,” Knight said.
This issue would affect many insurance companies that have large subsidiary structures.