§ Dr. Marek
To ask the Chancellor of the Exchequer what estimates he can make of the gain or loss to the Exchequer if life offices were(a) allowed relief of pension business expenses only against pension business profits, (b) not allowed to escape taxation by setting up foreign life funds, (c) not allowed to create money boxes where surplus funds could be held free of tax, (d) to treat profits from stocklending and underwriting commissions as investment income or gains and (e) to be subject to special rules to ensure that there would be no manipulation of reassurance transactions in order to gain tax advantages; (f) entitled to prompt and regular repayments of all tax credits and tax deducted in respect of their pension business in line with self-administered funds and (g) not liable to stamp duty on life policies and reassurance contracts.
§ Mr. Norman Lamont
Options for change to the current tax regime for life assurance were outlined in an Inland Revenue consultative document, "The Taxation of Life Assurance", published on 17 June. These options would address in differing ways the issues mentioned by the hon. Member. The cost or yield from change would depend on the option chosen and its detailed implementation, on the timing of change, and on developments in the life assurance industry.
Assuming however that each change mentioned were made in isolation by amendment to the current rules, the following estimates can be made:
- a. on recent experience, an Exchequer yield in the range £100 million to £200 million.
- b. relief for foreign life funds does not of itself amount to tax evasion. There are however questions about the scope of relief which should be available and the effectiveness of the current rules;
- c. a significant yield, but it cannot be quantified without a more precise specification of the measures proposed and any transitional provisions;
- d. the yield would vary significantly depending on the level of market activity, but might be around £10 million a year on recent experience;
- e. any yield would depend on what special rules were introduced;
- f. no direct gain or loss to the Exchequer. Any change in the timing of payments would however have cash-flow effects, particularly in the year of change;
- g. a loss of £85 million in 1988–89, before taking account of any offsetting change in corporation tax payments.