Clause 15

Part of Finance (No. 2) Bill – in a Public Bill Committee at 11:45 am on 26 October 2010.

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Photo of Kerry McCarthy Kerry McCarthy Shadow Minister (Treasury) 11:45, 26 October 2010

Clause 15 deals with the situation where there is a transfer of insurance contracts from a UK company to another company that is carrying on the insurance business but does not have a permanent UK establishment, and where the assets, immediately after their transfer, are not part of a fund equivalent to the with-profit fund for the insurance company. Currently, as I understand it, the company to which the business is being transferred will not fall within the tax law definition of an insurance company and the provision that we are looking at prevents the loss of tax in such circumstances. As such, we welcome the provision.

Currently, if the business is transferred to what is deemed to be a non-insurance company and is an exclusively non-profit business, no account is taken of the transferred liabilities’ value as the transfer charge is computed. If the fair value of the assets transferred exceeds the amount brought into the account of the transferor by those transferred assets, this provision will allow the excess, plus the value of certain liabilities transferred, to be treated as an amount brought into account, and the transferor will be taxed accordingly. That is my understanding of the reasons behind this provision, and I would be grateful if the Minister elaborated. If I am correct, we are in favour of the provisions in the clause.

I have a few questions for the Minister. I gather from eye contact and nods from Government Members that the Economic Secretary to the Treasury will be responding. Will she tell the Committee what effect the changes in clause 15 will have on revenues for Her Majesty’s Treasury, given that the clause changes tax liabilities? Have any  calculations been done or any predictions been made on what the future revenue stream would be, if the clause was enacted?

Will the hon. Lady also tell the Committee whether there is any verification mechanism or external audit of the fair value of assets calculation being introduced in subsection (10)? On a point of information, will she explain what the significance is of 22 June 2010 in subsection (11)? I look forward to hearing what the Minister has to say, because this is a complex clause. I would appreciate it if she outlined what advantages it would give the UK insurance sector, as well as what impact it will have on revenues.