ABI and BIBA present Budget wish-list

Reducing corporation tax to help London retain its name as a world leading financial centre should be a top priority for the UK Budget, according to a wish-list drawn up by the ABI and BIBA.

Both industry bodies are concerned about the number of insurance companies, such as Brit, Beazley and Hiscox, moving their headquarters abroad. Brit moved its headquarters to the Netherlands this year after publically declaring that London was uncompetitive, while Beazley moved its headquarters to Dublin and Hiscox transferred its operations to Bermuda.

“What we’d like looked at carefully is how large groups that have operations abroad and bring profits back to the UK are being taxed. The government has said that it is reviewing it so we will look to see what they come up with.

“We need the government to come up with a strong signal about the importance of keeping the UK competitive in global business,” said a spokesman for the ABI.

Chancellor Alistair Darling is due to give his second UK Budget speech on Wednesday 22 April. Ahead of the Budget, both the ABI and BIBA drew up a list of other issues that they would like it to address.

Sean McGovern, Lloyd’s director and general counsel, said: “Lloyd’s continues to talk to the government about the role of tax in ensuring that the UK is a competitive place for insurance business. We hope any measures announced will take the importance of improving the competitive position of the UK into account.”  

Requests from BIBA

  • To help brokers, the government should reduce the cost of regulation and remove the FSCS (financial services compensation scheme) cross subsidy.
  • The government should not make any increases in insurance premium tax (IPT) and should consider a reduction in IPT on personal travel insurance to bring it into line with the standard rate of 5%.
  • The government should reduce IPT on home insurance to encourage take-up.
  • The chancellor should consider implementing tax concessions for repair work to flood-damaged properties where they are repaired in a resilient fashion.
  • The government should create a tax incentive to encourage uptake of private medical insurance, particularly for those over 60.

Requests from the ABI

  • More capital expenditure on efficient flood defences. “We reached agreement with the government last July and they said there would be a long-term investment strategy announced this spring. We hope that the strategy will be announced in the Budget,” said an ABI spokesman.
  • For the benefit of life insurers, the non-cash ISA limit should be upped to £10,800. “There should be incentives for people to provide for their own financial security by saving more and protecting themselves from loss of income,” said the ABI.
  • The ABI also warned against industry-specific tax changes which could lead to sizeable administration costs. The ABI said taxes could be disproportionate to the issues and risks faced. “In the current climate it’s only going to add to the difficulties that businesses may face as well as reduce competitiveness. The government will need to look at the total impact on what the changes will be on firms of all sizes,” it said.