Insurers face hit from US tax rules
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The Association of British Insurers is fighting for UK insurers to be excluded from tax evasion laws currently being drafted in the US which could cost UK insurers millions of pounds if forced to comply.
Under the Foreign Account Tax Compliance Act passed in the US in March insurers, banks, fund managers and hedge funds will have to go through their existing client bank and hand over the details of US citizens with at least £32,000 of assets.
Systems will also have to be adapted to collect the data for new customers.
The US Treasury is currently drafting guidance about how this act will be implemented.
But the ABI says UK insurance policies and savings products present little or no risk to the US in terms of tax evasion, as less than 0.1 per cent of UK insurance customers are US residents.
The trade body has now submitted its response to the US Treasury calling for UK insurers to be excluded where they sell ’low risk’ policies where there is no investment element, where the plans are taxed in the home jurisdiction of the insurance company, or where plans are designed to provide benefits in retirement or on death if earlier.
For policies that do not meet this criteria and therefore still subject to the US laws the ABI says: “At present the policyholder data held, systems development limitations and the timing of the commencement would make it impossible for UK insurers to be able to fully comply with the FATCA requirements in respect of such policies.”
The ABI adds that any system changes should be timed to take into account of the implementation of Solvency II, with the rules coming into effect at the end of 2012.
ABI director of financial regulation and taxation Peter Vipond says: “We understand the motives and importance of this initiative to the US. However, UK insurers represent no significant risk to US tax revenues and we are keen to avoid unnecessary and onerous costs on the industry that will ultimately be borne by all policyholders.
“We will be liaising closely with the US authorities to find a way of meeting their requirements without damaging commercial relations between the UK and the US.”
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