DISQUALIFICATION OF CERTAIN LIFE INSURANCE POLICIES (Hansard, 16 July 1980)

§ Sir Graham Page
I beg to move amendment No. 16, in page 18, line 3, leave out 'with reference to the other, or'. This is an amendment to clause 30 which, quite rightly, ends the exploitation of life assurance relief by the issue of certain short-term bonds. It does so by disqualifying a life policy which is connected with another policy which gives what I would call extraordinary benefits—that is to say, in the words of the clause, benefits which are greater than would reasonably be expected if any policy connected with it were disregarded. In clause 30(2) what is meant by one policy being connected with another is 1674 defined. In that definition are the words I seek to leave out, which I cannot think mean anything except to extend the clause to cover policies which, obviously, were not intended to be covered. The clause goes much too wide in those words. If I might give an example, it is not uncommon for life insurance companies to offer existing policy holders an opportunity to take out new policies on preferential terms—for example, without a medical examination. I do not think that that was intended to be covered by the clause. However, it would be covered if those words were left in the clause.
They can be removed without in any way damaging the tax avoidance value of the clause, by which I mean the value of the clause in catching tax avoidance—the mischief which it is intended to catch.

§ Mr. Peter Rees
Of course, one understands and appreciates the fears and suspicions of my right hon Friend on this point. It was touched on in Committee and I have looked again closely at the clause and its possible ambit.
We must strike a balance between a clause that is effective in putting an end to the problems mentioned by my right hon. Friend, but which does not confine and prevent legitimate activity. I should hope that, on a fair reading of the clause, it would not stop the kind of innocent operations which my right hon. Friend has in mind.
However, to give double reassurance, a press release was issued on 16 June which set out the kind of operations that this clause was not intended to catch. I know that a press release has no sanctity whatever but it at least indicates the way in which the Inland Revenue construes this provision and the way in which it intends to operate it.
I give this undertaking to the House, that if it should be found in the years to come, and as long as I have any responsibility for these matters, that the kind of operation or transaction that my right hon. Friend has in mind is caught we shall be prepared to introduce legislation to put the matter beyond doubt. On that basis, I hope that my right hon. Friend will feel able to ask leave to withdraw his amendment.

§ Sir Graham Page
My hon. and learned Friend knows that I intensely dislike government by press release, but an undertaking given by him in the House can, to a great extent, be relied on to mean that the clause will be so interpreted by the courts. In the light of that undertaking, I beg to ask leave to withdraw the amendment.

§ Sir Graham Page
I beg to move amendment No. 17, in page 18, line 21, leave out 'think necessary' and insert 'may reasonably require'.

Mr. Deputy Speaker
With this we may discuss Government amendment No. 152 and amendment No. 18, in page 18, line 22, at end insert: 'and as the person to whom the notice is addressed has or can reasonably obtain'.

§ Sir Graham Page
The amendment deals with the provision under which the Board of Inland Revenue can acquire any information about the policies to which I referred in the debate on the previous amendment. The board can demand that information from anyone involved in the issue of the policy. It can demand such particulars as it thinks necessary for the purpose of the clause. This includes forcing a solicitor to breach the privilege to which a client is entitled of secrecy between solicitor and client.
The Government amendment provides that a solicitor who has advised on a policy being taken out is not a person who is concerned with the issue of a policy. That does not go as far as is necessary. To give the board the power to demand any information which it thinks necessary puts the matter out of question by the courts or anyone. It is a dictatorial provision.
If the words "may reasonably require" are used instead of "think necessary", I am convinced that a court will decide that it is unreasonable to require a solicitor to disclose communications with his client. My amendment would protect the privilege which has been protected by many Finance Acts.
I am grateful to the Government for tabling amendment No. 152, which covers the proposal in amendment No. 18.

§ Mr. Peter Rees
I understand my right hon. Friend's anxieties. He gave vent to them in Committee. However, it is not always possible for the Revenue to determine with precision at whom its requests for information should be directed. Latitude must be granted.
Before the House says that it is always dangerous to entrust the Executive with too much latitude, I must remind hon. Members that the Revenue is not armed with enforcement powers. It must go to court and say that it requires particular information from a particular person. The court has to decide whether the request is reasonable and whether it is directed at the right person. If it is found to be unreasonable, no penalty will be imposed and the matter will drop. I hope that my right hon. Friend will not press the amendment to a Division.
I am grateful to my right hon. Friend for what he said about Government amendment No. 152, which was tabled in response to his arguments in Committee. It goes further than amendment No. 18. We are anxious to defend professional privilege. I hope that my right hon. Friend will not feel obliged to press his amendments and that the House will accept Government amendment No. 152.

§ Sir Graham Page
I fail to understand my hon. and learned Friend's argument for requiring "think necessary" to remain in the clause in place of "may reasonably require". He says that the board would have to go to the court and that the court would decide whether it was reasonable. The court would have to decide whether the board thought it necessary according to the clause. That is all that the court would decide.
Why does the board have to go to the court? If the Bill is enacted, the board can require information as it thinks necessary. If a person objects to producing that evidence and does not think that it is relevant, he will be advised, no doubt, "It is no use objecting to this. If the board says that it thinks it necessary, that is the end of the matter. It is not a question of reasonableness according to the clause".
That is unreasonable. The board will have sufficient powers if the clause states 1677 that the board may obtain evidence that it reasonably requires for the purposes of this section. Surely that would be a perfectly acceptable provision for the Government.