Firms prepare appeal to European court to grant ‘special case' status
The run-off sector is preparing to mount a last-ditch attempt to avoid a European judgment on VAT which could cost the industry hundreds of millions of pounds a year.
Financial adviser Grant Thornton is in talks with the Association of Run-off Companies (ARC) and other major run-off players. It wants to utilise a little known procedure to force the European Court of Justice to clarify its decision because it believes run-off is a special case. The ECJ ruling will substantially cut the amount of insurance-related activities eligible for VAT exemption.
Paddy Behan, VAT director at Grant Thornton, said: "It is legally arguable that the closed fund [run-off] sector represents a special case. Bodies and institutions can appeal to the European court to demand clarification and I believe there is scope to do that in this case."
Forcing the court to justify its decision would at the very least delay its implementation, potentially saving the industry hundreds of millions in VAT bills.
ARC's newly-appointed chairman, Philip Grant, said: "The run-off sector can't absorb the added VAT costs by increasing premiums and we have made that clear to the Treasury. Implementing the decision in January will necessitate massive change and we urge the government not to be over-hasty."
Earlier this month the ABI called on the Treasury to delay implementation of the ruling until other European nations had committed to its enforcement.
The Treasury is expected to outline the exact details of the judgment's implementation in November.
ARC announces management changes
The Association of Run-off Companies (ARC) has become a limited company and announced a number of changes to its board of directors.
Former treasurer Philip Grant has replaced David McGuigan as chairman. Grant will be joined by Peter Abbott as deputy chairman, Tony Bamber as secretary and Luke Tanzer as treasurer.
Grant said: "We decided, in consultation with our members, to incorporate ARC as a company limited by guarantee. This is in line with other market bodies and reflects ARC's growing stature as a trade association for the run-off sector.
He added "ARC has made a significant contribution to the evolution of the discontinued business community into a respected and coherent business sector."
Mike Palmer, Howard Ryles and David McGuigan will all sit on the board as directors.