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It is probably fair to say that the PBR contained more specific measures
than most commentators expected. In particular, HMRC has attempted to keep
up the momentum of the ongoing work to reform the tax regime for transfers
of insurance business by today publishing revised 'near final' regulations.
When finalised, these are to be issued under Regulation-making powers
contained in Finance Act 2007, and would extensively re-write the Finance
Act provisions. Although perhaps a minority sport, for companies planning
such transactions these changes will potentially be very significant, and
the draft regulations will need to be worked through in detail over coming
weeks. HMRC has acknowledged the importance of understanding the commercial
impacts of the changes under discussion, but it is to be hoped that the
continued reference in the PBR Notes to a 1 April 2008 deadline does not
mean that HMRC will not heed the industry's representations that the
commencement date should be deferred to allow appropriate assessment of the
proposals.
Draft anti-avoidance legislation has also been published to counter what
HMRC sees as abusive structuring of certain reinsurance arrangements to
maximise tax relief for expenses incurred in selling life business which is
subsequently reinsured. The legislation, which is to be introduced in
Finance Bill 2008, may affect policies or contracts made from today. It may
also impact the quantum of brought forward expenses deductible in periods
beginning after today. Revenue yield of £35m for 2008-9 (£45m for each of
2009-10 and 2010-11) is estimated from measures against "life insurance
companies’ avoidance".
Other changes directly aimed at life insurance are:
Legislation is to be introduced, with effect for accounting periods
beginning on or after 1 April 2008, to tax life policies and annuity
contracts owned by companies – with the exception of protection-type
policies – as debt instruments. HMRC's assessment is that very few companies
own such policies, but those that do should ensure they have taken account
of the transitional rules in particular (which deem the policy to be
surrendered in full at transition, holding over the chargeable event gain
until disposal of the policy or contract). We understand that the position
of investment trusts holding life policies should not be altered by this
change.
The rules affecting the apportionment of income and gains where there has
been a “relevant reattribution” (of an inherited estate) are to be repealed.
These rules were first introduced following an announcement in the 2004 PBR,
and it is uncertain whether those who have been through the process of
making representations to get the regime into its current state will be
relieved at its demise, or concerned at the prospect of reopening the debate
in the context of the ongoing consultation workstream on apportionments.
In addition, consultations are continuing with the industry on a range of
other issues.
General Insurance
No specific measures were announced affecting general insurance.
Consultations are continuing with the industry on a number of issues
including general insurance reserves, general insurance losses and certain
Lloyd’s issues. |
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