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Financial services

The emergency budget included announcements of higher tax burden on the financial sector with the new bank levy, increases in the rates of insurance premium tax and more irrecoverable VAT with the 20% rate. The future reductions in the main rate of corporation tax will however benefit the financial sector as much as other companies. This section has details of these and of other specific tax changes.

A first step towards pension freedom? Interim measure deferring the requirement to buy an annuity to age 77.

The Government has announced that it will end the effective requirement for members of registered pension schemes to purchase an annuity by age 75 with effect from 6 April 2011.

The new bank levy will have wide applications and may impact on the non-banking business of banks

A levy will apply from 1 January 2011 to the balance sheets of banks and banking groups with liabilities of at least £20bn.

Life insurance companies transfers of business

The following measures were announced with reference to transfers of business by life insurance companies:

VAT/IPT changes

The standard rate of VAT is set to rise to 20% with effect from 4 January 2011.

Life insurance deficiency relief

HMRC has backtracked on their original statement of 24 March 2010 that life insurance deficiency relief would apply to the additional rates of income tax as from 6 April 2010. This would have seen a favourable tax result for individuals set to pay tax at the additional rates of 50% and 42.5% as they could claim relief at the additional rate despite originally having suffered tax at the higher rate.

Authorised Investment Funds (AIFs)

HMRC has announced measures to put an end to a corporation tax avoidance scheme involving UK corporate investors in AIFs such as open-ended investment companies and authorised unit trusts.

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