The Institute of Actuaries (IUA) has added a fresh slant to the campaign against a £250m new tax on general insurance by discovering the Inland Revenue's rules will contravene the Government's own standard accounting practices.

Chancellor of the Exchequer, Gordon Brown effectively landed insurers with a tax time-bomb in the budget last March when he allowed the Treasury to claw back tax on insurers' provisions for unpaid claims.

It was universally condemned by insurer bodies as a stealth tax.

The IUA this week stepped up the pressure by criticising the Inland Revenue for failing to make allowances for the risks involved in the claims reserving process when accounting for the tax.

Under the Inland Revenue's proposed reforms, insurers must discount their best estimate of the relevant liability – the mean average of the possible distribution of outcomes – rather than the worst.

Moreover, insurers will be penalised if their best estimate proves inaccurate by more than 5%.

But this appears to contravene standard accounting practice FRS12 where the Accounting Standard Board insists that companies must allow for not only the discount but also the risk.

IUA chairman, Peter Wright, said: "This new proposal by the Revenue is unfair in singling out the general insurance industry for special, adverse, treatment.

"It is also somewhat surprising that one branch of Government, responsible for accounting and solvency regulations, prohibits discounting of claims, except in certain restricted circumstances.

"At the same time another, the Inland Revenue, is trying to impose it.

"The Revenue also needs to appreciate that companies will frequently fail to estimate their claims liabilities accurately to within a 5% margin of error through no fault of their own."

The rule change, effective from January 2001, mean insurers will have to pay a levy on any tax deferred if they have enjoyed a level of relief greater than the value of any claims made.

The reforms will hit hardest those classes of business where risks are most volatile. These are likely to be long-term liabilities such as asbestos claims.