Budget '97: budget shorts

Budget and you

Insurers fear accident costs

The Chancellor's reference to collecting the full cost of treating road traffic accidents from insurance companies caused consternation in the insurance industry yesterday. Manycompanies leapt to the conclusion that they would be asked to pay the full cost of hospital treatment for all accident victims, certainly in cases where liability is admitted, possibly in all cases.

The total costs of treating road accident victims is not known but could be in excess of pounds 100m - enough to add significantly to the motor insurance industry's costs and to motor insurance premiums.

The Department of Health last night confirmed, however, that the Chancellor merely intends hospital trusts to pursue the costs they are already entitled to claim under the Road Traffic Act of 1988. These limit costs which can be reclaimed to a maximum of pounds 295 per person for out-patient treatment and pounds 2,950 for in-patients, regardless of the actual costs of treatment.

Insurance companies are only liable to pay this amount if they accept liability on behalf of their policy-holder and pay personal compensation to injured parties. In practice, only a proportion of claims are recouped.

More for schools and hospitals

Schools and hospitals in Northern Ireland, Wales and Scotland are to receive extra funds.

Northern Ireland is to receive an extra pounds 58.8m in 1998-9 for education and health, and will benefit from pounds 140m set aside from the Windfall Tax for the Welfare-to-Work initiative. An additional pounds 110.5m is going to Wales in 1998-99 for schools and the health service. The allocation of the extra funds is pounds 60.2m for hospitals and pounds 50.27m for schools. Scotland will receive an extra pounds 195.6m in 1998-9, of which pounds 106.6m is for the health service and pounds 89.01m for schools.

New rules for multinationals

Tax rules for multinationals will be changed and modernised in the next Budget. The aim of these changes is to make the tax provisions more effective, to allow them to be applied more fairly, and to protect UK tax revenue. Under the new rules, taxpayers will now be required to apply the arms'- length basis for transfer prices in calculating taxable profits in tax returns. And UK companies will be required to include amounts chargeable under the controlled foreign company rules in their tax returns.

The Government said that these changes would strengthen current legislation and bring it into line with modern practice in other major countries. The changes will also contribute towards the drive against tax avoidance.

Gilts to become more accessible

The Government announced initiatives to make the gilt-edged stocks market more accessible to investors and to reduce custodians' tax compliance obligations.

The initiatives will be achieved by giving everyone the choice from April next year to receive interest on gilts gross rather than after the deduction of tax.

The change affects the time at which tax on gilt-edged stocks must be paid, but it does not alter the extent to which interest is taxable.