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Tax warning for Lloyd's of London firms

CITY broker Collins Stewart has sounded alarm bells over insurers Brit and Beazley, after it emerged that the tax man will watch like a hawk companies moving abroad for tax reasons. <br /><br />Ben Cohen, an analyst at the brokerage, has labelled the stocks as &ldquo;higher risk&rdquo; because HM Revenue &amp; Customs (HMRC) is expected to subject firms that shift to tax havens to years of scrutiny.<br /><br />The warning, which appeared in a research note issued yesterday, will raise fears the Lloyd&rsquo;s of London insurance market, on which the firms operate, could suffer under a clampdown on tax exiling. <br /><br />Cohen said Beazley&rsquo;s decision to move its incorporation to Jersey and its tax residence to Ireland &ndash; which he had predicted would net it a tax reduction of 16 per cent in 2009 &ndash; puts it in the firing line.<br /><br />Brit may also come under tough scrutiny as it is in the process of moving its domicile to Netherlands.<br /><br />Cohen said insurers Catlin and Hiscox are Bermuda-domiciled and their top managers reside in the UK, but they have not pushed for tax cuts as aggressively as have Brit and Beazley. This makes them only &ldquo;medium risk&rdquo;, he said.<br /><br />Amlin and Novae have not shifted their domicile abroad, making them &ldquo;low risk&rdquo; he said.Lancashire is incorporated in Bermuda but senior bosses live on the island, making it also low risk. <br /><br />Cohen&rsquo;s concerns come hot-on-the heels of comments from a senior official at HMRevenue &amp;Customs who said there will be an onus on firms to prove that they have genuinely relocated. <br /><br />Permanent secretary Dave Hartnett has warned companies who are leaving the UK for tax reasons that they could face a challenge several years after they have relocated. <br /><br />He has warned that even if board meetings are held abroad, a company could be forced to provide evidence &ndash; including emails and diaries &ndash; to prove that key decisions were not taken in the UK.