The Finance Bill published today contains, at clause 106, legislation applying to insurance companies and Lloyd’s members. This gives effect to the Government’s intention, announced on Budget Day, to recover the tax benefit which insurers enjoy when the provisions for paid claims they take into account for tax purposes are greater than the discounted value of the claims actually paid.
The Inland Revenue has also published today a Consultative Document about these proposals. This explains how the Government expects the proposals to operate in practice, and invites comment on matters which will be covered in regulations. The Consultative Document is available on the internet in a format that incorporates examples of the operation of the new rules. Users can input their own data in these examples, and instantly see what the impact on tax liabilities would be.
1. Clause 106 of the Finance Bill contains powers to enable the Board of Inland Revenue to make regulations to set out the details of the measure and to prescribe rates of interest and discount to be used in calculating the tax benefit that has been enjoyed by companies and Lloyd’s members.
2. The Government is anxious to ensure that the regulations both achieve their intended purposes and at the same time add as little extra compliance burden as possible on companies and Lloyd’s members. Most individual members of Lloyd’s will be excluded from the new rules, so long as their participation in syndicates is below a minimum level. As announced in the Budget, the Government proposes to pitch this level at 4%.
3. Comments on the proposals set out in the Consultative Document should be sent, no later than 25 May, to-
Financial Institutions Division
Room S20, West Wing
London WC2R 1LB
or e-mailed to Andrew.R.Page@ir.gsi.gov.uk
The document itself is available on the Inland Revenue website www.inlandrevenue.gov.uk. A paper version can be obtained by writing to the Inland Revenue at the above address.
4. The Consultative Document is the first which the Inland Revenue has issued containing interactive features. To make full use of these features, people accessing the document need a computer with Microsoft Internet Explorer 4.0, software capable of reading spreadsheets written in Microsoft Excel 97 and a monitor with a screen resolution of 800×600. Other internet users with equipment not meeting this specification will still be able to view the full text of the Document, including the worked examples of the new proposals.
NOTES FOR EDITORS
Budget Note REVBN2L (“Life and General Insurance Companies and Lloyd’s Members) published on 21 March (Budget Day) announced the Government’s intention to include legislation in the Finance Bill to recover the tax benefit that general insurance companies and Lloyd’s members get if their reserves are set at levels that significantly exceed the discounted value of the claims paid.
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