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Revenue in move to plug tax loophole

The ABI is to meet the Inland Revenue after it announced the closure of a

tax loophole which enabled some life companies to trigger losses for tax

purposes.

Experts say that traditional with-profits life offices and those which have

recently demutualised will be hit hardest by the proposals.

The Revenue says its proposed package will deal with anomalies which are

allowing a small number of companies to pay much less tax than others by

offsetting investment losses against other parts of the business.

Given the huge losses caused by the current bear market, it is thought that

the Revenue wanted to plug the hole as soon as possible, unusually

implementing some measures with immediate effect. Paymaster General Dawn

Primarolo said the changes would be included in this year&#39s Finance Bill

when the measures were announced just before Christmas.

Ernst & Young insurance tax partner Peter Spokes says: “It is bizarre

that at a time when the life industry is in difficulty and when there is a

debate in progress about the future of life company taxation that the

Revenue should come up with a series of quite significant proposals with

effect from the end of the year – the very worst time to do it.”

ABI spokeswoman Leo-nie Edwards says: “We are surprised at the timing and

that some of the measures come into immediate effect. We are going to meet

the Revenue to discuss our concerns.”

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