In the wake of the 2007 Budget, Mazars has warned that it will be smaller brokers that suffer in the long term.
Andrew Green, partner at international accountancy firm Mazars, said: “The reduction in the headline rate of corporation tax to 28% is welcome, but long overdue. With the average rate in the EU member states at 25.8% and a number of high profile groups – particularly in the insurance sector – deciding to re-domicile something had to be done. It's good news but probably not enough to stop the issue slipping down the boardroom agenda. More overseas moves could still be on the cards.
"The cut is a move in the right direction but other things need to change to ensure that the UK remains competitive and a welcoming location for investment, including simplification of the tax code.
"At the other end of the scale, there will be an increase in the small companies rate of corporation tax from 20% this year to 21% in 2008, and then to 22% in 2009. This will have really hit smaller brokers in the pocket. By 2010 they will potentially be 15% worse off. Coupled with burdensome FSA regulation, this could spur an increase in the rate of consolidation in the sector”
On the abolition of discounting provisions, which has implications for general insurers and Lloyd's, Green commented: “The loss of the disclaimer election is a blow and could result in some groups having stranded tax losses which they cannot use."
