INSURANCE COMPANIES: HOLDERS OF UNIT TRUSTS ETC. (Hansard, 16 July 1990)

§ Mr. Deputy Speaker
We now come to amendment No. 40, to be moved formally. I call Mr. Nick Brown.

Hon. Members
Aye.

§ Mr. Nicholas Brown
I hear hon. Members shout, "Aye," I am happy to take that as the consensus view rather than launching into my half-hour oration.
Nevertheless, I beg to move amendment No. 40, in page 147, line 18, at end add—
'(4) Relief under this paragraph shall be calculated in such a manner as is just and reasonable notwithstanding anything in section 35 Capital Gains Tax Act 1979 (part disposals).'. 819 Clause 46 provides for an annual deemed disposal of holdings of unit trusts and relevant interests—I am sure that this is going to keep the attention of the whole House—in offshore funds held by an insurance company as part of its long-term business fund. There are transitional provisions in schedule 8(2) to provide relief for assets held on two back liabilities in respect of policies issued before 1 April 1990.
These provisions were foreshadowed in the December 1989 Inland Revenue press release, which stated in respect of assets relating to pre-1 April 1990 policies:
These assets will not be chargeable under the new rules for so long as the corresponding liabilities are outstanding. There is a problem with the existing part disposal rule for capital gains tax calculations, which means that the value of the relief is eroded much more quickly than the liabilities run off. During discussions with the Inland Revenue, a solution to this problem was suggested, but the Financial Secretary stated in Committee that the legislation required to deal with that calculation in detail would be very complex and lengthy and that he was not persuaded that the introduction of such legislation would be appropriate.
The Association of British Insurers suggested to us and, it appears, to other members of the Committee the simple amendment now before the House. It requires little space in the Bill. Effectively, it empowers the Inland Revenue to ignore the effect of section 35 of the Capital Gains Tax Act 1979, when applying the rule in schedule 8, if the Revenue accepts that it would be just and reasonable to do so. Everyone from the ABI who approached us seems to think that that would meet the point. We are persuaded that it would do so. I hope that the Government will reconsider and accept our modest, constructive amendment.

§ Sir William Clark
From the outset I should state that I am a consultant to Commercial Union Assurance. I congratulate the hon. Member for Newcastle upon Tyne, East (Mr. Brown) on reading out the brief, of which I have a copy, with such panache. He put the point that was made by the ABI, as he rightly said.
There is no question but that the Government are sympathetic to what the insurance industry seeks to do. The only thing that holds them back is the complexity of any legislation. I hope that my hon. Friend the Financial Secretary will give the House an assurance that the Government will reconsider. There appears to be an anomaly, and if it proves to be one that affects the insurance industry, I hope that remedial action will be taken.

§ Mr. Lilley
Our problem is that dealing with the underlying problem would require complex further legislation. An amendment which simply refers to calculations proceeding in a just and reasonable manner does not provide the required level of certainty or the sound basis on which the law should be framed. Different companies may have different ideas of what is just and reasonable. That lack of precision could give rise to disputes that would have to be resolved before the appeal commissioners or in the courts.
However, I recognise the industry's worries. While it is not possible to introduce detailed legislation in this year's Bill, I can say without commitment that we shall consider returning to the problem next year. By "we", I mean my hapless successor.

§ Mr. Nicholas Brown
I am sure that it will not be a hapless successor.
It is not often that the right hon. Member for Croydon, South (Sir W. Clark) and I have similar speeches to make and similar briefs to read in the House. That is a welcome event. I hope that it is the beginning of a new consensus between us. Nevertheless, I suspect that probably I have not incited sufficient rebellious spirit on the Conservative Benches—although I can see that I have made a start. I would waste the time of the House by putting the matter to the test of a Division. I know that the Financial Secretary's not hapless successor will want time to reconsider the points raised. He may even arrive at a different conclusion. To facilitate that, I beg to ask leave to withdraw the amendment.