Overseas insurers apply here...
Yesterday's pro-work UK budget breathed life into the hugely anticipated changes in the UK's Controlled Foreign Company (CFC) regime. This, together with the announcement of a phased reduction in the UK's corporation tax to 24%, is a much needed shot in the arm for the UK insurance industry as it should relax the tax impact on overseas profits generated by UK-owned insurers.
The new CFC rules are intended to be more closely targeted at profits that are artificially diverted from the UK and a "gateway" test has been developed which seeks to identify such profits. This pro-business approach is a major seal-of-approval for the offshore insurance locations of Guernsey and Isle of Man where many UK firms have established bona-fide insurance subsidiaries to create an effective funding mechanism for their corporate risks. Removing the taxation threat to profits generated through these offshore insurance structures should allow these firms to fund such risk in a more cost effective way (i.e. through lower premiums) and thereby retain more funding in their core UK businesses to facilitate growth and create jobs which creates a "win-win" for UK firms, the UK government and the UK society as a whole.
Of course, the devil is in the detail and while we will not know how the new rules will be applied to UK owners until the the Finance Bill is published on March 29, yesterday's announcement is definitely a move in the right direction by a UK government desperate to not only maintain but improve the UK's competitiveness in the global insurance sector.