The Budget: Tax-free concession comes to aid of names: Lloyds

Click to follow
The Independent Online
LLOYD'S names facing bankruptcy from expected losses of pounds 2.4bn this year will receive no help from tax measures designed to boost the market's prospects, write Peter Rodgers and Paul Durman.

The names - investors who put capital at risk in the market - will be allowed to put half of their profits into a tax-free reserve each year from 1995, as a cushion against unexpected lurches into the red.

The new reserve scheme is more generous than the present arrangement in which the ceiling on transfers to a special reserve has been frozen at pounds 7,000 a year since 1956.

There will still be a ceiling, but it will not come into force until the reserve fund grows to half of each name's overall premium limit. The average premium limit at Lloyd's is pounds 450,000.

The Government has been under pressure to give the concession, but dropped the changes from last year's Budget because it feared a pre-election row about helping the rich.

Insurance companies welcomed the Chancellor's recognition of their demands to be allowed to establish special reserves but acknowledged that they still had to win the argument.

Norman Lamont said there may be a case for allowing relief on reserves for occasional exceptional losses and said he would produce a consultative paper in the spring. But he also said that British industry's complaints about competitive disadvantage was 'not the whole story - in other respects, our own tax system is very favourable'.

Commercial insurance companies complain that they are at a disadvantage compared with their European rivals, which receive tax relief on money set aside for so-called equalisation reserves.

Mike Jones, chief executive of the Association of British Insurers, said: 'The Government has accepted that there has got to be change. The important thing is that we have the recognition that something has got to be done.'

Comments