I come now to life assurance. I say at once that I have no 291 desire to weaken the tax position of legitimate life assurance or endowment schemes. But there are some such schemes which have a great deal more to do with tax avoidance than with saving against retirement or with safeguarding the family against the premature death of the policy-holder. My predecessor last year indicated that he was reviewing such schemes with a view to action. I now propose to take such action. I think it is abundantly justified. There have, for instance, been some most blatant recent press advertisements stressing the tax avoidance advantages of single premium policies.
I propose, therefore, to introduce new conditions which policies taken out after today must satisfy if they are to enjoy the present income tax relief on the premiums and freedom from surtax on the proceeds. These conditions will be spelt out in the Finance Bill; I here give only the broad outline. The policy must run for a minimum period of 10 years; there must be a reasonably even spread of premiums; and the capital sum payable on death must be at least 75 per cent. of the total premiums payable under the policy. If a policy does not satisfy these conditions, the premiums will not rank for income tax relief and there will be a surtax charge on the proceeds, less the premiums paid. Capital redemption policies taken out by individuals will be subject to the same charge. The charge will also apply where a policy which satisfies the qualifying conditions is surrendered or sold in the first 10 years of its term or before three-quarters of the term has expired, whichever period is shorter.
My object in these proposals is to stop abuses. The ordinary policies which the vast majority of people take out will be completely unaffected; and, as I have said, the proposals do not apply at all to policies already in existence.
I also propose to strengthen the present provisions for disallowing relief from surtax for interest on borrowed money which is used to pay premiums on life assurance policies.
I now turn to two proposals which, without any increase in the rates of tax, will bring in considerable amounts of revenue.