ABI: budget may help rebuild UK's battered reputation in wake of insurer redomiciling

The Association of British Insurers has described today's budget as "mixed bag" for its members.

Stephen Haddrill, the ABI's Director General said "We recognise the Government faces exceptional challenges and has few easy answers. We are pleased the Government has accepted our arguments on foreign profits and the need to raise ISA limits substantially.

"But this is a disappointing day for pension saving. The decision to curtail tax relief, while only affecting a minority of pension savers, sends an alarming message that pension promises can be easily broken. To maintain consumer confidence in the pensions system, the Government must give a categorical assurance that the historic principle of pension savers receiving tax relief on their contributions will not be undermined any further. "

On the issue of foreign profit taxation the ABI said that in the PBR 2008 the Chancellor announced that foreign dividends received by large and medium groups would be exempt from UK tax. He also announced plans for a worldwide debt cap on interest so that tax deductions for interest claimed by UK members of a multi-national group would be restricted.

Peter Vipond, the ABI's director of taxation commented: "The dividend exemption on foreign profits should help rebuild the UK's battered reputation as a modern base for global financial service firms. It is good news that it will be adopted in July this year and we now need an early completion of the review of controlled foreign companies rules.

"The exclusion from restrictions on relief for interest, (the 'debt cap') for financial service firms is the right move. It recognises the unique nature of the sector."

The ABI sees taxation of foreign profits a key area for insurers; the UK insurance industry pays the third highest amount of corporation tax of any sector, at £2.9 billion and two insurance firms have recently announced plans to leave the UK over worries over the tax competitiveness of the UK. (Brit Insurance to Netherlands and Beazley to Ireland).

On trade credit Nick Starling, the ABI's director of general insurance and health, added: "In ensuring that fundamentally healthy companies will get extra support, the Government has not tried to second-guess the judgement of insurers. By basing its proposals on the risk assessments carried out by insurers, the Government has endorsed the need for the market to judge and price risk. The ABI and trade credit insurers have worked closely with the Government to make this scheme possible, and our constructive dialogue on how insurers can help to provide that support will continue."

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