Clause 47
Finance Bill
9:45 am
Ian Pearson (Economic Secretary, HM Treasury; Dudley South, Labour)
The hon. Gentleman is absolutely right that that provision has been welcomed by the reinsurance industry, which has certainly been pressing us on this for a considerable time. The clause will put in place Treasury power to make regulations that will extend the benefit of tax relief on making equalisation reserves to corporate and partnership members of the Lloyd’s insurance market. He is right to point out that general insurance companies currently benefit from relief when they are required by the Financial Services Authority, as the insurance regulator, to make equalisation reserves, but Lloyd’s members are not required to do so. Essentially, we are seeking to level the playing field, and that has been welcomed by Lloyd’s.
The regulations—a draft is available to the Committee—follow the existing rules that apply to general insurance companies and are suitably adapted to grant tax relief where Lloyd’s members choose to maintain notional reserves equivalent to the equalisation reserves maintained by general insurance companies. The clause increases fairness and helps the competitiveness of the UK insurance market.
More generally on competitiveness, the hon. Gentleman will be aware that groups take into account a range of factors when reviewing their domicile, including regulation and its effect on credit ratings, the availability and quality of local staff, professional support services, infrastructure and also tax. We believe that London shapes up well as an attractive environment and a world-leading, professional centre with support and an unsurpassed insurance industry presence and experience.
The UK corporate tax burden compares favourably with those of similarly developed countries. Luke Savage, the finance director of Lloyd’s, has expressed strong support for the measure, which is expected to make a significant difference to members’ tax bills and improve Lloyd’s market competitiveness compared with other general insurers. That addresses the hon. Gentleman’s point about Bermuda and other jurisdictions. The Government will always want to keep these matters under review, but the clause has been welcomed by Lloyd’s and the industry. We are acutely aware of the need for a competitive regime, but tax is not the only consideration.