Schedule 9 - Insurance companies etc
Finance Bill
10:00 am
Ivan Lewis (Economic Secretary, HM Treasury; Bury South, Labour)
Amendment No. 107 is misconceived. On amendment No. 108, I have some sympathy with the points that the hon. Gentleman raised, although the amendment does not help to address the issues in a way that would be acceptable. I will explain why in a moment.
I want to explain why amendment No. 107 is misconceived. Section 444AB is about the assets retained by the company losing its business. If such a company had £1,000 of assets and £900 of liabilities, and it retained £100 of the assets, there would be a charge under that section on £100, if all the other conditions of the section are met.
For the paragraph 7 rules to apply, as I have explained, there has to be an excess of the liabilities over the assets transferred to the recipient. That is the key point. So, in relation to the example that I gave, there might be a transfer of £900 of liabilities and only £750 of assets. That would mean that £150 of assets of the transferor had been retained or, more likely, gone somewhere else. They could not have been part of the section 444AB amount, because we are not talking about the same assets. In this example, the total assets not reaching the recipient would £250 and the amounts taxed would add up to £250 minus the £100 on the company losing the business and £150 on the company receiving it. I use that example to demonstrate why concerns about double charging are not relevant or appropriate, and I hope that that reassures the hon. Gentleman.
Amendment No. 108 seeks to refine the new charge in section 444AC. First, the new charge is likely to arise only rarely, if at all. Transfers of businesses with more liabilities than assets have been made to secure a tax advantage. Once the tax advantage is gone, such transfers are likely to be no longer relevant and to cease.
Any attempt to apportion the charge between different types of a life company's business involves a large element of approximation; that is another key point. In the interests of simplicity, we have sought not to deal separately with the small amount—it is less than 2 per cent. of the industry as a whole—of non-life business carried on by life companies. The hon. Gentleman's amendment attempts to deal separately with that tiny amount of non-life business, but it does not do the job properly. It takes an amount away from the life profits without adding it to the non-life profits. In that sense, the amendment is flawed and cannot be accepted, although the hon. Gentleman has raised a legitimate point.
Even if that flaw were corrected, it is not obvious that the result would lead to an improvement on the approach proposed under the Bill. Because of the different way in which different types of business are taxed, the result will be, most likely—but not definitely—to the disadvantage of more companies than it benefits. On that basis, I hope that the hon. Gentleman will consider withdrawing the amendment.