Taxation (I-E Formula) (Hansard, 24 May 2000)

§ Mr. Jack
To ask the Chancellor of the Exchequer what the tax yield has been from financial instruments or products whose taxation is subject to the I-E formula in each of the last eight financial years. [123394]

§ Dawn Primarolo
The information requested is not available.

§ Mr. Jack
To ask the Chancellor of the Exchequer if he will list(a) the financial (i) instruments and (ii) products whose taxation is subject to the I-E formula, (b) the relevant composite rates of tax applied to each such instrument and product and (c) the rates of tax used in each of the last eight financial years in respect of each such instrument and product. [123395]

§ Dawn Primarolo
There are no statutory restrictions on the type of financial instruments that an insurer may invest in to provide funds to meet payments due to policy holders. The funds that are subject to the I-E treatment are those held to meet payments due to policy holders in respect of policies of life insurance, life annuity contracts and capital redemption policies other than those relating to pension business, overseas life assurance business, 527W individual savings account business and life reinsurance business. The rates of tax payable on the income and profits from those investments broadly reflect the tax that policy holders might have paid had they held the underlying investments directly.
The tax paid by the insurer under I-E is treated as satisfying the basic rate tax liability of the policy holder. Policy holders will have no further tax to pay when they obtain the proceeds of their policies unless the policy is not a qualifying policy and they are themselves liable to tax at the higher rate. Qualifying policies are broadly those with regular premiums and a substantial death benefit that last for at least 10 years.
The rate of tax payable by the company on the underlying investments, so far as they are building up for the benefit of policy holders, for each of the last eight years is shown in the table:

Percentage

Rate of tax

Year Dividends on UK company shares and securities Income from gilts and corporate bonds Capital gains Other property¹

2000–01 ²— 20 22 22

1999–2000 ²— 20 23 23

1998–99 ²— 20 23 23

1997–98 ²— 20 23 23

1996–97 ²— 20 24 24

1995–96 ²— 25 25 25

1994–95 ²— 25 25 25

1993–94 ²— 25 25 25

¹Land, underwriting commissions etc.

²Not chargeable

Percentage
	Rate of tax
Year	Dividends on UK company shares and securities	Income from gilts and corporate bonds	Capital gains	Other property¹
2000–01	²—	20	22	22
1999–2000	²—	20	23	23
1998–99	²—	20	23	23
1997–98	²—	20	23	23
1996–97	²—	20	24	24
1995–96	²—	25	25	25
1994–95	²—	25	25	25
1993–94	²—	25	25	25
¹Land, underwriting commissions etc.
²Not chargeable