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Finance Bill

Schedule 9 includes a range of measures designed to simplify and clarify the tax law for transfers of life insurance business. We had a long and interesting debate on those matters in Committee. They are complex provisions and the Treasury and the industry have held extensive consultations on them over the past year. Amendments Nos. 19, 20 and 21, on transfers of business, relate to part of that consultation. Amendments Nos. 22 to 29 apply to schedule 10. Although the schedule deals with a range of issues in insurance tax law, the amendments concentrate on only one aspect of the schedule—the treatment of structural assets, on which I wrote to the hon. Member for Fareham (Mr. Hoban) on 5 June, following our interesting debate in Committee. Amendments Nos. 30 to 32 are consequential amendments to the repeals schedule. I shall first cover the schedule 9 amendments on transfers of business and then the schedule 10 amendments on structural assets. Amendment No. 19 introduces a regulation-making power to enable a quick and flexible response if the regulatory legislation in the Financial Services and Markets Act 2000 changes. It allows regulations to be made amending the tax law definition of insurance business transfer scheme. The definition is important as all the legislation in schedule 9 depends on it. It is wider than the definition that applies in the Financial Services and Markets Act, because the Act allows some types of scheme where policyholder protection issues are not as relevant as in most schemes carried out without court approval. However, tax law allows those excluded schemes to get the benefit of the tax-neutral treatment given by schedule 9. The UK has to transpose the European reinsurance directive into UK law before the end of the year. That work is being done by the Treasury, and has been developed in close conjunction with Her Majesty’s Revenue and Customs. A consultation document will be issued by the Treasury shortly and will contain draft regulations amending FSMA to take the directive into account. In recent weeks, as the regulations were being prepared at the Treasury, it became apparent that changes would be needed to tax legislation as a result, because the latest draft of the regulations will create a new class of excluded schemes for reinsurance transactions. Under the current tax law definition, such a new class of excluded schemes would not get the benefit of the tax-neutral treatment. That is not sensible, so we are introducing this power to enable the tax law to be changed in line with changes to FSMA. The method we have adopted gives us the ability to make the changes quickly, and in particular to have them in place when the regulations come into force towards the end of the year.