The FS team looks closely at what direct effects the Autumn Budget will have on IFRS 17, Insurance Premium Tax, pension reforms, VAT and stakeholder pensions.
While we were hoping for more, it is good to see that in the policy paper objectives the following statement:
“Spreading transitional profits and losses for tax purposes will help mitigate the cash flow and regulatory impacts of the accountancy change. This will support the long-term stability of the insurance sector in the UK and contribute to maintaining the UK as a leading financial services centre. The measure will also mitigate the Exchequer impacts of the accountancy change.”
The consultation is set to launch on “Tax Administration and Maintenance Day”.
Insurance Premium Tax
Whilst there are no substantive changes to the definition of where risk is located, the legislation defining it has been introduced directly into the Taxes Acts. This follows early consultation on the scope of IPT and the fact that the UK is no longer bound by EU law. The change is designed to clarify the territorial scope of IPT.
The main reform to note is the increase in age from 55 to 57 from 6 April 2028. Although this is a number of years away, it will have the potential to further affect the attractiveness of pension saving and the assumptions used in new business while locking in a couple of years of growth into the capital assumptions.
Limited reforms to allow the remedies required for historic age discrimination in public sector schemes and the Scheme Pays ability for a pension holder to instruct the pension holder to make good the annual allowance charge out of future pension returns are likely to trouble the operational requirements of companies with the relevant business rather than the business profile.
VAT on investment management fees to be consulted on
There was good news that this is to be consulted on as the current difference between the VAT on Special Investment Vehicles and on other investments appears odd.
There is a proposed relaxation of the 0.75% limit on investment management fees for stakeholder pensions which will allow a wider choice of investments, and stakeholder pensions will likely increase in value as a result. With the amount of irrecoverable VAT on those fees also increasing, some groups may now consider looking for solutions for this additional VAT burden.