Schedule 11

Finance Bill – in a Public Bill Committee at 5:00 pm on 22nd May 2007.

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Technical provisions made by general insurers

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I beg to move Government amendment No. 76, in schedule 11, page 172, line 38, leave out from first ‘the’ to ‘and’ in line 40 and insert

‘reinsurance to close amounts of the members,’.

Photo of Eric Illsley Eric Illsley Labour, Barnsley Central

With this it will be convenient to discuss Government amendments Nos. 77 and 78:

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

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.

Amendment agreed to.

Amendments made: No. 77, in schedule 11, page 173, leave out lines 1 to 6 and insert—

‘(a) the reference to reinsurance to close amounts of any member of a Lloyd’s syndicate is to any consideration which, in accordance with the rules or practice of Lloyd’s, is given (or any amount which, in accordance with those rules or practice, is treated as consideration given) by the member in respect of the liabilities arising from the member’s underwriting business in an underwriting year for the purpose of closing the accounts of the business for that year, and’.

No. 78, in schedule 11, page 173, line 19, at end insert—

‘(10A) The Commissioners for Her Majesty’s Revenue and Customs may by regulations—

(a) provide in prescribed circumstances for paragraph 1 not to apply in relation to any member of a Lloyd’s syndicate, or

(b) provide in prescribed circumstances for a reduction in relation to any member of a Lloyd’s syndicate of the amount which (as a result of that paragraph) is not to be taken into account in the calculation mentioned in sub-paragraph (2) of that paragraph.’.—[Ed Balls.]

Schedule 11, as amended, agreed to.

Clauses 42 and 43 ordered to stand part of the Bill.

Schedule 12 agreed to.

Clauses 44 and 45 ordered to stand part of the Bill.