Mazars partner Stephen Brown reflects on the residual impact of this year’s UK Budget on the insruance industry
The UK Budget 2017 is a bit of a mixed bag for the insurance industry. Obviously one positive is the IPT hasn’t been raised again, but there was a change to capital gains for corporates which will impact certain areas of the sector in the future.
Friendly Societies and Life Insurers with taxable business will no longer be able to get tax relief for future inflationary gains through indexation relief from January 2018 which will increase the tax on those affected businesses. Some help has been offered to those businesses currently operating through branch structures though if they are currently looking to re-structure pre-Brexit on the basis of losing passporting rights.
Many of those have been looking to incorporate their branches and transfer the business from the branch to a new corporate in the relevant jurisdiction. This could have created a capital gain with a postponed tax charge, but for some groups because of the way that several different pieces of legislation interacted it actually created a tax charge at the point of re-structure. The Budget confirmed that this was an unintended consequence and fixed the position to give some certainty to those groups already caught and those still considering this type of restructure.
There was also good news for investments in technology with the increase in R&D tax relief to 12%. Now more than ever those who are spending big in this area need to make sure that they a getting all of the tax relief that they are entitled to. It was generally good news on the position paper looking at taxation of the Digital Economy. The examples given don’t look to be targeted at the insurance sector selling online, instead the consultation seems to be aimed more at social networks and businesses that supply online market places that bring together consumers and service providers. Although it does mean that potentially some of the new innovative insurance models currently being looked at would be within the scope.
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