§ (1) Arrangements under Schedule 21 to the Income Tax Act 1952 (special reserve funds for underwriters) may authorise the making of payments pursuant to paragraph 7(1) of that Schedule (withdrawals from special reserve funds into premiums trust fund to meet a loss) on a provisional basis before the amount of the loss has been finally ascertained and certified by the inspector.
§ (2) The amount so withdrawn shall not exceed such proportion of the estimated loss as may be specified in the arrangements.
§ (3) When the amount of the loss has been certified by the inspector such adjustments shall he made by repayment to the underwriter's special reserve fund or funds, or by further withdrawal of sums for payment into the underwriter's premiums trust fund, as will secure that the net amount withdrawn from the underwriter's special reserve fund or funds in respect of the loss is that required pursuant to paragraph 7(1) of the said Schedule 21; and no tax consequences shall ensue on the withdrawal of sums in respect of a loss until the amount of the loss has been so certified and any such adjustments have been made.
§ (4) This section shall be construed as one with the said Schedule 21.—[Mr. MacDermot.]
§ Brought up, and read the First time.
§ 9.45 p.m.
§ The Financial Secretary to the Treasury (Mr. Niall MacDermot)I beg to move, That the Clause be read a Second time.
This Clause will enable Lloyd's underwriters to make withdrawals from their reserve fund by reference to provisional losses in advance of the final certification of the losses for tax purposes. The present scheme, which was introduced by Sir Stafford Cripps in 1949, has, on the whole, worked well, but it turns out that these arrangements cannot be operated quickly enough in the exceptional case where underwriters face very heavy losses of the kind that arose following Hurricane Betsy.
The Clause will enable them in such circumstances to make withdrawals on a provisional basis. It will not make any difference in the end to the tax position. The tax consequence will follow as at present on final certification of the loss, after the year's account has been closed two years after its end.
§ Mr. Iain MacleodThe Clause is entirely acceptable to us, and we are grateful to the hon. and learned Gentleman for his explanation.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.