Budget 2012: ABI says tax cuts will improve UK competitiveness

The Association of British Insurers has praised Chancellor George Osborne’s decision to make further cuts to the UK corporation tax in today’s Budget.

“We strongly welcome the latest reduction in the rate of corporation tax,” ABI director general Otto Thoresen said in a statement.  “It will undoubtedly improve the competitiveness of the UK, and increase returns for investors in British companies.”

Osborne announced a 2% cut in corporation tax to 24% for 2012, up from the 1% originally envisaged in 2011’s budget. This means that following the 1% cuts planned for the next two years, UK corporation tax will be 22% by 2014.

This year’s 2% cut follows last year’s 2% reduction to 26%.

However, Thoresen gave a lukewarm reception to controlled foreign company (CFC) rule reforms, which will mean businesses based in the UK will not be subject to UK tax on profits made abroad. He argues that uncertainty will remain until the rules are introduced with the new Finance Bill later this year.

“The [CFC] reforms have the potential to attract insurers to Britain rather than drive them away as the current rules do,” Thoresen said. “However, the rules work rather differently for insurers than for other industries and much of the legislation important for insurers will only be published for the first time in the Finance Bill. Other crucial parts are still uncertain.”

He added: “Until we have seen the Finance Bill we will not know if the reforms will be a success, but we welcome the Government’s focus on this important area of business taxation.”