Months of lobbying came to fruition this week after the Treasury announced it would indefinitely delay plans to start charging VAT on outsourced insurance-related services.

In a dramatic move predicted by Insurance Times last month, Gordon Brown revealed in his pre-budget report that the government would not change the policy relating to VAT until the completion of a European Commission review of financial services and insurance.

And because the recommendations of the review will require the unanimous support of the Council of Ministers in order to become legislation, it is unlikely that there will be any change to the rules for several years.

Peter Vipond, the ABI's director of financial regulation and taxation, said: "The ABI urged the government not to be first past the post in Europe to introduce new VAT rules on outsourced insurance services.

"We are pleased that the government has taken note of that. Every quarter this change is not brought in will save the industry and its customers £50m."

It was widely feared that the government would demand that run-off companies, outsource service providers, managing agents and even wholesale brokers start charging VAT from 1 January 2006.

Steve Parkinson, head of life and pensions at Capita, said: "We are delighted and pleasantly surprised by the decision."

FSA to cut down on consultation papers
The FSA will issue fewer consultation papers under Treasury proposals to reduce financial services regulation.

Under measures unveiled in the pre-Budget report, the FSA would be able to avoid consultation over a proposed rule change if the impact would be "minor" or if there was no "prejudice".

The Treasury said this would reduce costs and remove the need for unnecessary consultation and delay.

The proposal was part of a 10-point action plan to reduce the burden of regulation.

The Treasury also said it would consider the impact of FSA regulation on competition in the general insurance sector.