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§ Sir William ClarkI beg to move amendment No. 47 in, page 21, line 27, at end add—
`(5) In respect of income which is exempt from tax under subsection (1) above or section 314 of the Taxes Act 1970, notwithstanding the provisions in section 240(5) of the Taxes Act 1970, the board shall make regulations providing for the repayment of income tax and tax credits to come into effect on or before 4th January 1988.'.I believe that it is well known that I am a consultant to the Life Insurance Association.The investment income of pension funds and insurance companies, as far as it refers to pension funds, is tax-exempt. The present rules relating to the repayments of tax deducted at source are anomalous and tend to penalise insured pension business in comparison with the self-administered pension schemes and new pension providers approved under the Bill. My amendment is an endeavour to obviate that difference.
The amendment intends—I trust that the wording is correct and I trust that my right hon. Friend will not resist the amendment because of faulty wording—the repayment of tax on investments and tax credits, deducted at source, to all providers of approved pension schemes in respect of investments that are only attributable to the pension business. If the amendment is effective it will enable competitive distortions, which exist against life insurance companies, to be removed by permitting all providers of pensions to receive prompt tax repayment on an equal basis.
This is a technical amendment and it affects the cash flow position of pension funds. As this anomaly exists, I hope that my right hon. Friend will feel able to accept the amendment or, if not, to give an undertaking that, on Report, he will return to this matter in order to eliminate that anomaly. The wording of the amendment may be slightly faulty, but I hope that my right hon. Friend will accept its spirit.
§ Mr. Norman LamontI have considerable sympathy with my hon. Friend. I would not like to accept the amendment at this stage and I am not sure that, on Report, I will be able to return to the matter. However, I am entirely sympathetic to my hon. Friend's case.
The purpose of my hon. Friend's amendment is to provide a mechanism for insured pension funds to secure monthly repayments of income tax and tax credits. That matter is already a matter of discussion between the Revenue and the Association of British Insurers. Some detailed information has still to be made available to us.
We must take account of the cost to the Exchequer, which could be substantial. I understand what my hon. Friend has said. He wishes these pension funds to be on the same basis as self-administered pension schemes and not to be at a competitive disadvantage. I assure my hon. Friend that I entirely understand that and I am sympathetic to that suggestion.
I cannot give an unconditional commitment, but we are certainly well aware of my hon. Friend's argument. Indeed, we are discussing the matter with the industry.
§ Sir William ClarkI am grateful to my right hon. Friend for that reply. I do not know whether it was a slip 1054 of the tongue, but this change would not cost the Exchequer anything, because tax will be repaid at some time. It is merely a cash flow problem because payments are made monthly rather than quarterly or annually. If vve want to extend the number of pension schemes throughout the country—that is the Government's philosophy and I go along with it—all pension funds should be treated on an equal footing. The amendment will ensure that when repayment of tax is due—this will not cost the Revenue a scrap—the pension fund will receive the money sooner than at present. It will be able to reinvest the money and compete effectively with other pension funds.
In the light of what my right hon. Friend the Minister has said, I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 39 ordered to stand part of the Bill.