§ Mr. McCrindleasked the Chancellor of the Exchequer how many representations he has received following his decision to remove the tax advantages of offshore life assurance policies; what was the sense of these representations; and if he will make a statement.
§ Mr. Moore[pursuant to his reply, 9 December 1983, c. 262]: Up to 9 December, eight written representations had been received. While not dissenting from the fundamental objective of the proposals, these mainly expressed concern about two detailed aspects. First, that the proposals may unfairly penalise United Kingdom expatriates, some of whom may have taken out such policies to save for a pension. Secondly, some representations have also complained that no warning of the Government's intentions was given, or that the announcement did not give full details of how the legislation would apply.
As to the first point, I made it clear in my announcement of 17 November that, in removing this clear — and possibly very expensive — anomaly in the life assurance legislation, special provisions would be made for bona fide United Kingdom expatriate business written after that day. We intend that where an expatriate returns to the United Kingdom and is subsequently taxed under this legislation, the gain attributable to the period of non-residence in the United Kingdom should be exempt. Compared with the tax treatment of policies issued by United Kingdom life offices, this seems the right approach. I do not think the proposals can usefully be compared with the tax treatment of pensions, where entirely different circumstances apply. Thus, normally pensions may not be paid until retirement age and—apart from a limited lump sum — they are taxable. Proceeds from a qualifying life assurance policy can be taken after 10 years—or even less—and are normally entirely tax-free.
530WOn the second point, if we had given advance notice of our intention to legislate, there would have been a considerable risk that this would merely have provoked an intensive marketing campaign by companies already selling such policies. I appreciate that there is some uncertainty in the industry about the precise effect of the legislation. This is why I intend to issue draft clauses as soon as they are ready.