HC Deb 15 July 1987 vol 119 cc1202-3

Question proposed, That the clause stand part of the Bill.

8.15 pm
Mr. Blair

The Financial Secretary to the Treasury quite rightly said that clause 75 should be taken with clause 74. The effect of the clause is to ensure that life assurance companies continue to pay the capital gains tax at the old rate of 30 per cent. As I understand it, the Inland Revenue will be conducting a review of the taxation of life assurance companies. Has the Financial Secretary to the Treasury any idea when that review is likely to be completed?

Mr. Norman Lamont

The hon. Gentleman said that capital gains of life assurance companies would be taxed at 30 per cent. I want to make it quite clear that we are talking about the capital gains of policy holders. We have drawn that distinction. The capital gains of the life companies themselves, the gains reserved for shareholders, will be taxed as before.

We have said that we believe that there should be a wider review of the taxation of life assurance companies. It is true that there is room for argument about the burden of taxation that falls on life companies. Certainly, I do not believe that even if we had stuck to our original proposal the effects would have been as onerous on the companies as some of the critics have said.

The taxation of life companies has developed in a somewhat piecemeal fashion. It is certainly highly complex and it has been argued that it no longer fulfils the function of taxing the shareholders' interest in a broadly similar way to the shareholders' interest in any other company and of taxing a proxy for policy holders' interest.

The review will consider whether the burden of tax on life assurance companies and policy holders is appropriate and whether there is consistency between one class of business and another and also between insurance and other broadly similar activities. Naturally, the life assurance industry and other interested parties will be fully consulted during the review.

With regard to the timing, I am afraid that all I can say is that we will press ahead with all possible speed. However, given the need to look comprehensively and thoroughly at what is a very complex area, it will inevitably take a little while. I am afraid, therefore, that I can give no assurance about the timing of any action which we may decide to take in the light of the review.

Question put and agreed to.

Clause 75 ordered to stand part of the Bill.

Clause 76 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clauses 77 to 79 ordered to stand part of the Bill.

To report Progress and ask leave to sit again.—[Mr. Norman Lamont.]

Committee report Progress: to sit again tomorrow.