Aviva to take £400 million hit from corporate tax loss reforms

Major insurer Aviva is expecting to take a £400-million hit from the UK government’s planned reform of the rules on corporation tax loss relief.

 

The government is proceeding with its proposed changes to UK rules restricting the tax relief that companies, including insurers, can claim in respect of carried-forward tax losses.

 

Previously, companies could receive tax relief equal to their total profits. But under the new rules taking effect from April 1, the losses from previous financial years that firms can offset against their annual tax bill will be limited to 50% of their profits, Bloomberg BNA explained in a report.

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In its 2016 annual financial report released on March 9, Aviva indicated a £0.4 billion decrease to its capital reserves due to the new rules.

 

Aviva said in its report that the adjustment was made “in order to show a more representative view of the Group’s solvency position.”

 

Just two weeks ago, Aviva revealed that it would take a £385-million hit from the Lord Chancellor’s decision to cut the personal injury discount rate from 2.5% to -0.75%.

 

Aviva said the anticipated exceptional charge to its 2016 post-tax profits represents the full impact of the discount rate cut. The estimated impact on the group Solvency II capital ratio is about two percentage points.

 

“Reflecting this charge as an exceptional item recognises the magnitude of the change in policy and the potential for future revisions to the discount rate to cause unnecessary volatility in Aviva’s results,” the insurer said.