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Consultation on UK vehicles for insurance-linked securities

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HM Treasury is consulting until 29 April 2016 on the tax and regulatory framework that would be needed to attract companies to set up special purpose vehicles for insurance-linked securities in the UK, without creating opportunities for tax avoidance. Insurance-linked securities offer insurance and reinsurance firms a means of transferring risk to the capital markets, as an alternative to conventional reinsurance cover. The existing Taxation of Insurance Securitisation Companies Regulations, SI 2007/3402, were designed to promote the use of such vehicles in the UK, but have had little impact on the sector and are now effectively obsolete following the adoption of new UK GAAP.

The Treasury’s proposals involve the creation of exempt ‘protected-cell companies’, with investors taxed on the distributions they receive. To achieve consistency, overseas investors would be subject to a withholding tax, although the consultation seeks views on the extent to which withholding might undermine the competitive value of the exemption.

Gains arising on the assets in a trust established to hold collateral in the insurance special purpose vehicle would be treated as arising in the vehicle for tax purposes and would fall with the UK’s treaty network. See

Issue: 1299
Categories: News