On 5 April 2011, HM Revenue & Customs published a consultation document on the taxation of life insurance companies. This followed the announcement in the 2011 Budget of the key features of the proposed new tax regime.
The changes to the taxation of life insurance companies are necessary following the implementation of the EU Solvency II Directive, which will replace the current regulatory returns which form the basis of the taxation of life insurance companies. The current body of tax legislation makes frequent reference to regulatory returns and to the underlying regulatory rules.
The government also sees the need to implement a new tax regime as an opportunity to simplify and rationalise the tax legislation in this area and reduce the compliance burden for life insurance companies.
On 27 May 2011, HM Revenue & Customs published a discussion document on transitional timing and valuation issues arising from mismatches as at 31 December 2012 between the regulatory return reporting basis currently used for the taxation of life insurance companies and the accounting basis in use at that date. Work on draft legislation on these issues is expected to begin at the end of the summer 2011.
The new regime is intended to have effect from 1 January 2013.