Clause 170 - Policies of life insurance etc: miscellaneous amendments
Finance Bill
8:55 am
Mr John Healey (Economic Secretary, HM Treasury; Wentworth, Labour)
The clause introduces the four measures in schedule 34 and provides that they take effect from Budget day. They all relate to the way in which gains from life policies are taxed in the hands of the policyholder. The clause and schedule contain a number of beneficial measures affecting the taxation of gains from life assurance. They provide new exemptions, while correcting some anomalies and closing some loopholes.
Part 1 of schedule 34 deals with group policies: policies that insure the life of more than one person and pay benefits on the death of the persons whose lives are insured under the policy. Part 2 deals with charitable and non-charitable trusts. Part 3 contains a minor amendment applying only to annuities issued to friendly societies. Part 4 repeals, subject to transitional provisions, the rule that enables the owner of a life insurance policy to defer tax by allowing a policy to mature and reinvesting the proceeds in a new policy instead of extending the term of the old policy.
The changes in the clause and schedule represent some tidying up of the special regime for taxing gains from life policies. When it has been possible to consult the industry, we have done so to ensure that the changes meet the industry's concerns. Consequently, many of the changes proposed in the clause and schedule are welcomed by the industry. That is particularly true of the new exemptions for group policies, which the industry has sought for some time. The new exemption is the main change provided for by the clause and schedule.