§ Mr. Matthew BanksTo ask the Chancellor of the Exchequer if he will make a statement about the reform of the tax rules for life assurance policy holders and the proposal to publish draft legislation. [39942]
§ Mr. JackThe Government intend later this year to publish draft clauses and secondary legislation on the taxation of life assurance and similar policyholders. The draft legislation would form the basis of a comprehensive code for taxing profits from life assurance policies and other types of insurance which are used for investment. The aim of the new rules is to conserve what is good in the existing regime, which dates from 1968, but to modernise it to take account of nearly 30 years of developments in the insurance industry. If enacted, the legislation would give effect to the proposed reform of policyholder taxation I announced on 8 November last year,Official Report, column 912.
At the time of that announcement it was hoped that the draft legislation would be available in the spring, but we have found that more time is needed for the preparation 550W of the new rules. In order to allow time for full consultation with all interested parties, the Government have decided that they will not, in any event, introduce legislation based on the draft clauses in the next Finance Bill.
Earlier this year there was speculation that the Inland Revenue was intending to change the tax treatment of guaranteed income bonds, which are a life assurance-based product. An Inland Revenue press release of 15 March made it clear that it was Ministers' intention to ensure that the tax treatment of holders of existing bonds was consistent with the insurance industry's understanding of the position at that time. That remains true, and discussions with the insurance industry's representatives, including the Association of British Insurers, are continuing to determine how this might be achieved.