Clause 32
Finance Bill
2:00 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
I beg to move amendment No. 75, in clause 32, page 24, line 15, after ‘premium’ insert ‘or other consideration’.
The clause adds a new section to the special tax rules dealing with corporate members of the Lloyd’s insurance market. It aims to counter a loss-buying scheme reported to Revenue and Customs under the avoidance scheme disclosure rules. The scheme involves companies buying tax losses from loss-making corporate members of the Lloyd’s insurance market, thus ceasing their underwriting activities. The clause will close that window by requiring that the group relationship between a corporate member and company that claims group relief to exist from the last day of the year in which the insurance business was written to the first day of the year in which the claim to group relief is made. The rule is narrowly targeted and will apply only to losses of a corporate member’s final year of writing insurance business. The rule will restore the usual group relief principle that relief for losses incurred in a year will be available only to companies related to the corporate member in that same year, but it will not affect ordinary commercial acquisitions in reorganisations when the newly created group relationship is part of ongoing economic activity.
The amendment arose from discussions with Lloyd’s. It will refine the definition of “reinsurance to close premium” so that it includes “other consideration”. “Reinsurance to close” is the mechanism by which a Lloyd’s syndicate closes its account. The commercial definition of “reinsurance to close” has evolved over time and the amendment will ensure that the tax rule will reflect the definition in Lloyd’s own rule.
I hope, Mr. Gale, that you do not mind that I have put the amendment in the broader context of the clause. It has been part of a wider consultative exercise on tax matters that we have had with Lloyd’s and with representatives of the wholesale insurance market over the past six months. Representatives of the Lloyd’s market will not be surprised that we have proposed bringing Lloyd’s syndicates into line with other companies. Industry commentators agree that the provision is narrowly targeted and not unreasonable. It was discussed with Lloyd’s experts in advance of the publication of the detailed clauses.
As I have said, the provision is part of a wider context under the auspices of the high-level group on City competitiveness, which has discussed a number of tax measures and wider market reforms aimed at enhancing the competitiveness of the Lloyd’s market—an important part of the City of London. I am therefore grateful for the work of the Lloyd’s market and particularly to Lord Levene for his leadership on that issue and for wider co-operation over the past eight months or so. Within the context of that productive work to enhance competitiveness, the change is necessary to bring the Lloyd’s market into line with our wider approach to taxation in that area and the amendment will close a loophole to ensure that the legislation is properly effective. On that basis, I commend the amendment and the clause to the Committee.