Schedule 11
Finance Bill
5:00 pm
Edward Balls (Economic Secretary, HM Treasury; Normanton, Labour)
The schedule repeals complex mechanical tax rules that were introduced in 2000 to limit any tax advantage if general insurers’ provisions to meet policyholders’ claims were greater than necessary. It provides for transition and a new set of rules that will provide a more proportionate response for the tax risk. The rules will be supplemented by regulations.
The Government amendments to the schedule arise from discussion with Lloyd’s. Government amendments Nos. 76 and 77 will substitute for “reinsurance to close contracts” the term “reinsurance to close amounts”. Reinsurance to close is a mechanism by which a Lloyd’s syndicate closes its accounts. The commercial definition of reinsurance to close has evolved over time. The amendments ensure that the tax rule reflects the definition in Lloyd’s rules and that the schedule has its intended scope.
Government amendment No. 78 is a response to the concern of Lloyd’s that the schedule could have unintended unfair results in particular circumstances. It will enable the making of regulations to deal with those circumstances, which include members leaving syndicates and members having their own reinsurance arrangements in addition to arrangements that the syndicate may have. Officials are discussing with Lloyd’s an appropriate solution to the issue, so draft regulations are not yet available to us or to the Committee. Any regulations that are passed under the new power would reduce or eliminate the effects of adjustments that would arise under the schedule. They will be discussed in detail with Lloyd’s before they are laid. I commend the amendments to the Committee.