Corporation Tax: insurance linked securities
Published 16 March 2016
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Who is likely to be affected
Insurance and reinsurance groups seeking to transfer insurance risk to capital markets.
General description of the measure
The measure provides a power to make statutory instruments to deal with the treatment of insurance linked securities issued in the UK. Insurance linked securities are a means of transferring insurance risk to capital market investors. The measure will define the scope, conditions and treatment of vehicles issuing insurance linked securities, as well as allowing for the taxation of investors.
Policy objective
The measure forms part of wider work to establish the UK as an attractive domicile for vehicles issuing insurance linked securities. Attracting insurance linked securities business to the UK will maintain and develop the UK’s position as a major global hub for specialist insurance and reinsurance. A competitive and certain tax treatment is a key component of this work.
Background to the measure
At Autumn Statement 2014, the government announced work to explore options to ensure the UK’s regulatory and tax regime is as competitive as possible to attract more reinsurance business to the UK.
At March 2015 Budget, the government stated that work would focus on developing a new competitive corporate and tax structure for allowing insurance linked securities vehicles to be domiciled in the UK.
Since then, the government has worked closely with the London Market Group Insurance Linked Securities Taskforce to consider the characteristics required for the UK to become a leading market for the issuance of insurance linked securities.
A consultation document was published on 1 March 2016.
Detailed proposal
Operative date
The primary legislation for this measure will have effect on or after the date of Royal Assent to Finance Bill 2016. Regulations made under the power provided in this primary legislation will come into force on the date specified in the regulations.
Current law
The Taxation of Insurance Securitisation Companies Regulations 2007 (SI2007/3338) set out rules applicable to insurance securitisation companies.
Proposed revisions
Legislation will be introduced in Finance Bill 2016 to set out the scope of the new regime applicable to insurance linked securities. The legislation will allow regulations to determine the vehicles to which the rules will apply, the treatment of such vehicles, the conditions that must be satisfied to achieve that treatment, reporting requirements, the tax treatment of payments to investors in such vehicles and anti-avoidance provisions.
Detailed regulations made under this power will be developed in consultation with stakeholders following publication of the primary legislation and conclusion of the consultation on general proposals which began on 1 March 2016.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 |
|---|---|---|---|---|
| nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
The proposed changes will apply only to companies. The measure will have no impact on individuals, or on family formation, stability or breakdown.
Equalities impacts
This measure applies only to companies and will not impact on any equality group.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. This measure will facilitate the growth of the insurance linked securities market in the UK through the removal of obstacles to that growth and will affect a small number of businesses who will incur one off costs to familiarise themselves with the new rules. It is not expected that there will be any on-going costs. There is no impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
This measure is anticipated to have a negligible operational impact for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
This measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact John Stokes on Telephone 03000 588827 or email: john.stokes@hmrc.gsi.gov.uk.