Clause 169 - Insurance companies

Part of Finance Bill – in a Public Bill Committee at 7:45 pm on 20 May 2003.

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Photo of John Healey John Healey The Economic Secretary to the Treasury 7:45, 20 May 2003

Clause 169 and schedule 33 make a number of significant changes to the taxation of life assurance companies. They are designed to stop avoidance and close loopholes, but they also make some changes that the industry has been seeking for some time. The provisions stopping avoidance and closing loopholes cover three main areas: case 1 or trading profits, capital gains and transfers of business. I shall explain those areas in more detail when we debate schedule 33 and related amendments shortly.

I should explain the process of consultation and detailed work that lies behind the clause and the schedule. On 23 December last year, the Inland Revenue issued a detailed press release setting out the Government's proposals. That was followed in January by draft clauses and detailed explanatory notes on those clauses. Since the publication of the press release and the clauses there has been extensive consultation between Revenue and Treasury officials, with representatives of the industry and individual companies. As a result of those discussions, a number of significant changes have been made to the draft clauses.

The main thrust of the changes has been to reduce the compliance burden on all companies while retaining the effectiveness of the anti-avoidance measures that are intended to apply to the few companies that have sought to exploit the loopholes. Clause 169 and schedule 33 strike a fair balance between stopping avoidance and closing loopholes,

and making a modest reduction in the tax taken from the business. I commend the clause to the Committee.