Aviva CFO planning to cut insurer's tax bill

by Calum Fuller

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08 Aug 2014

  • Financial Director
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Aviva offices

THE FINANCE CHIEF of Aviva has suggested the UK insurer is paying more tax than it needs to after it paid out around a third more than its fdour biggest FTSE 100 rivals in the past five years.

Research by the Financial Times found Aviva paid 30% of its profits in tax between 2009 and 2013. Overall, its four largest UK insurance rivals by market value paid 23%.

Tom Stoddard, the new finance director at Aviva, told investors that the insurer has been too focused on producing pre-tax operating profits, the FT reported. "After [tax], after, after is what I'm after," he said.

He also indicated that the way in which Aviva's £7bn total debt had been structured meant the insurer was paying more tax than it needed to.

"We've not come close to optimising the current after-tax cash cost of our borrowings, which gets me quite worked up, but will be addressable," he said.

One of the reasons for Aviva's high tax charge is the fact that significant amounts of interest deductions are taken in relatively low-tax environments, which means that the net benefit to the group is less than if they had been taken in higher-tax environments, Baker Tilly tax partner Andrew Hubbard said.

International tax competition in order to attract business was also cited as a contributory element, leading to some tax arbitrage in its UK bill.

"In an era when companies are regularly pilloried for not paying enough tax it is a brave finance director who puts his head above the parapet to say that his company is paying too much tax. But that is exactly what Tom Stoddard of Aviva has done," Hubbard said.

"Historically tax was a very much a minority sport for a few anoraks but in today's climate, where it seems as if every member of the public is a self-appointed expert, it sometimes seems that the tax number is the only one that people are interested in. So there is real merit in companies taking an upfront position and dictating the terms of the debate. Aviva's position shows again just how difficult it is to judge international companies on their UK tax position alone."

A spokesman for Aviva said it is looking to bring in a range of corporate finance efficiencies and that tax was not a particular priority in that drive.

He added there are no plans to change the insurer's tax position. 

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