After discussions spanning five years, long awaited draft legislation on how companies’ off shore operations are taxed – the controlled foreign company (CFC) rules – has been published.
Commenting on the implications for the UK insurance sector, Colin Graham, UK insurance tax leader at PwC, said:
"This could be a game changer and really help the UK become a more attractive location for insurance groups to be headquartered."
“Profits of foreign insurance subsidiaries will now only be subject to UK tax where they are derived from activities carried out in, or directed from, the UK or from excess capital provided from the UK. The news that the Government intends to continue to work with the insurance industry to develop a capitalisation condition for insurance groups should considerably reduce the compliance burden for insurance groups."
“The Government has confirmed that insurance groups will, in principle, be able to benefit from the new foreign financing partial exemption, putting them on a level playing field with non-financial groups."
“However, the actual draft legislation is complex and it remains to be seen if it can really achieve the stated aim of reducing the compliance burden for insurance groups and other UK businesses."
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