VAT avoidance regulations outlined in last week's Budget could allow the government to clamp down on VAT exemptions in the insurance industry worth millions, tax experts have warned.
Under the Chancellor's new reporting requirements, firms must disclose schemes that offer a tax advantage but do not currently need to be included in their VAT returns. An example is the outsourcing of business functions.
Experts said that these moves would allow the government to obtain detailed information about VAT avoidance schemes operated by brokers and insurers.
Peter Bradley, tax consultant at Mazars, said: "The Chancellor's new reporting regulations are very vague and could give Customs a tool to ascertain the extent to which insurers are engaged in complex offshore structures to avoid paying VAT."
This view was echoed by Peter Young, a tax consultant at CMS Cameron McKenna, who said: "Insurance brokers and providers will certainly get swept up by these wider anti-avoidance measures."
A European Court of Justice (ECJ) ruling earlier this month gave UK Customs licence to claim VAT payments from brokers and insurers who outsource their administrative, back-office functions, where they were previously exempt.
Experts said the new tax avoidance regulations could be used to inform the government's decision on how to implement the ruling.
Mazars' head of tax in London, Andrew Green, said: "This may be a reaction by the UK Government to the recent European Court of Justice decision applicable to outsourced services."
But others played down the significance of the new rules. Andrew Burns, head of insurance in the indirect tax practice at Deloittes said: "These anti-avoidance rules are not a direct attack on the insurance industry as far as I can see."