Taxation - Pru win signals Revenue payouts
Insurers are preparing to lobby the Inland Revenue for a refund of tens of millions of pounds in back taxes following a landmark High Court case involving Prudential.
The ruling, which follows a five-year dispute with the Revenue, applies to the treatment of charges on income from 1993 and 1994 and could leave the insurer £4m richer.
The case arose from the differential tax treatment applied to policyholders and shareholders and the way profits are apportioned between the two.
Prudential, which releases interim results today, sought to offset charges on income against profits given to shareholders as they would have been liable for 33.3% tax.
Profits available to policyholders were taxed at 25% and offsetting charges on income here would have increased Prudential’s tax bill. After a legal change profit has to be apportioned net of interest and annuity payments so the differential no longer applies.
The Revenue is expected to appeal but CGU, which has still to agree its 1994 tax return, said it would scrutinise the ruling’s implications. Others are expected to follow suit.