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Clifford Chance

Clifford Chance

Briefings

Solvency II – UK tax implications

25 March 2011

The advent of Solvency II has resulted in detailed discussions between the UK's HM Treasury ("HMT"), HM Revenue and Customs ("HMRC") and insurance industry (both general and life) as to what it means for the tax treatment of insurance companies. At a policy level, it provides an opportunity to try to simplify insurance company tax and bring it into line with the taxation of other UK businesses. In March 2010, a Consultation Document was issued jointly by HMT and HMRC to highlight the implications of the move to the new regulatory regime and what it might mean in tax terms. In addition to considering the changes needed because of the implications of the Directive, the UK Government also indicated that it wanted to start discussions on a much wider ranging reform of the life insurance taxation regime (including the possibility of an alternative to I-E).


The publication of that Consultative Document marked the beginning of an extensive consultation between the Government and the insurance industry, with HMT and HMRC hosting an Open Day in July 2010 to update the industry on the results of the consultation and indicate current HMRC progress on the various issues raised. At that Open Day it was confirmed that discussions on a wider reform of I-E would be deferred, even though reform remains a long-term strategic objective of the Government.

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