§ Mr. FormanTo ask the Chancellor of the Exchequer whether he will make an announcement about the outcome of the consultations between the life assurance industry and his officials authorised by his predecessor in his 1989 Budget statement.
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§ Mr. LilleySignificant progress was made in a series of meetings between representatives of the insurance industry and Inland Revenue officials. I am particularly grateful to the Association of British Insurers and the other representative bodies involved for their constructive approach. Treasury Ministers have given the most careful consideration to all the representations made to them.
The legislation in the Finance Act 1989 put in place the framework of the new tax rules for life assurance which followed the Government's policy of broadening the tax base and cutting tax rates. We recognised at the time the 1989 measures were announced that some of the further legislation on the more technical points to be introduced in the Finance Bill 1990 would be integral to the new regime; and that accordingly both sets of measures would need to come into effect at the same time. My right hon. Friend the Chancellor of the Exchequer therefore proposes to bring forward the following legislation in the Finance Bill 1990 which will for the most part have effect from 1 January 1990. These measures include some technical improvements to the legislation now in the Finance Act 1989, in part to fulfil commitments given by the Government during its passage earlier this year. The measures are: Allocation of income and realised gains
—new rules for the allocation of income and realised gains to different types of business where a company writes more than one of the types of business which have to be treated separately for tax purposes;Pension business—rules clarifying the calculation of the profits of pension business for the purposes of section 83 of the Finance Act 1989;General annuity business—consequential changes to the rules for calculating the investment income and profits referable to general annuity business, pending further consideration of the tax treatment of this type of business;Overseas branch and agency business— amendments to the current rules for the overseas branch and agency business of UK life offices;Division between shareholders and policy holders— a revised approach to the allocation of investment income, capital gains and profits between shareholders and policy holders for various tax purposes;Reassurance commissions— new provisions for the tax treatment of reassurance commissions received;Life office holdings in exempt investment media— a new basis of charge on capital gains arising from holdings in authorised unit trusts and comparable offshore investment vehicles, subject to transitional provisions for existing holdings and protection for obligations under investment-linked policies taken out up to the end of March 1990. The charge will ensure that life office investment via unit trusts will be treated on terms more level with direct investment.Transfers of undertakings between insurers— new provisions to provide continuity for tax purposes where life assurance business is transferred to another company (for example, on a merger) or from a friendly society to another society or company, including the carry forward of unrelieved expenses of management to the transferee and incorporation in the legislation of the existing extra-statutory concession.A press release to be issued today by the Indland Revenue gives further details of the proposed legislation.
I will be giving further consideration to the other topics on which consultations have been held:
- — tax treatment of policy holders
- — other international aspects
- — reassurance business
- — general annuity business.