§ Mr. John Townend
To ask the Chancellor of the Exchequer when, in the course of his review of the taxation of life assurance, he will be consulting the industry and other interested parties.
§ Mr. Lawson
Work done so far on the review of the taxation of life assurance has highlighted a number of unsatisfactory features. The present tax regime has built up piecemeal over many years and has proved increasingly out of line with developments. The incidence of tax between offices is very uneven; some offices pay very much less tax than might be expected given their profits and the
Inland Revenue Customs and Excise £ million £ million £ million £ million (1987–88 prices) (1987–88 prices) 1978–79 * * 46.7 93.9 1979–80 * * 52.6 91.3 1980–81 * * 65.9 98.4 1981–82 * * 74.3 99.5 1982–83 * * 80.1 100.1 1983–84 54.6 65.2 89.8 107.2 1984–85 63.2 71.8 102.5 116.5 1985–86 67.7 72.6 113.6 121.9 1986–87 71.4 74.2 130.4 135.6 1987–88 84.1 84.1 151.2 151.2
The inland Revenue figures relate to accounts investigation work in tax districts, investigations by specialist units and checks by the Revenue's PAYE auditors. Costs for 1982–83 and earlier years were not recorded in a way which permits extraction of the figures requested; the 1983–84318W
investment returns they earn for their policy holders; and in consequence the yield from the industry overall is also less than might have been expected. For many policy holders, the current rules may even so mean a higher effective burden—particularly on their capital gains—than they would face if investing in other ways. And there are many technical weaknesses and uncertainties which call into question the effectiveness of the regime.
With my agreement the Inland Revenue is today publishing a consultative document which examines the position in detail and sets out a number of different ways in which the issues could be tackled.