Gifts for Purposes of Educational Establishments

Part of National Finance – in the House of Commons at 10:19 pm on 4th June 1991.

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Photo of Francis Maude Francis Maude The Financial Secretary to the Treasury 10:19 pm, 4th June 1991

I am confident that my hon. Friend the Member for Eltham (Mr. Bottomley) will be wholly reassured when the matters which he has raised come to be considered in detail in Committee.

The hon. Member for Berwick-upon-Tweed (Mr. Beith) asked what the purpose of the resolution is. My explanation of the measures in moving them reflected the desire of the House to deal with the matters with some expedition. The resolution is to cover the new clause that we shall be introducing to change the tax rules for general annuity business and the amendment that we shall table shortly that changes the definition of a friendly society's tax exempt business. Both those proposals were announced on Budget day.

General annuity business will be taxed in broadly the same way as basic life assurance business. The investment return accruing for the benefit of annuitants and prospective annuitants will, after relief for expenses and the income element of annuities in payment, be taxed in the hands of the life office. The resolution is needed to cover that charge. We propose to remove the restrictions preventing friendly societies from issuing small taxable policies because some businesses will be classified as taxable business. The resolution is needed to cover that tax charge.