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Revenue may bring in new tax on savings

The Inland Revenue is consulting on sweeping reforms of corporation tax which could see a new tax imposed on savings.

The ABI has met with the Revenue to express its opposition to the plans, launched by the Treasury this week.

Investments in life funds are currently taxed only when the asset is realised such as when surrendered, encashed or it is at maturity.

But the proposals would see life companies having to pay tax annually on the capital gains on equities, land and property, irrespective of whether they are realised or not. This would leave policyholders facing a tax on the value of their investments, effectively an additional tax on savings.

The Government accepts the proposals may not be appropriate for life companies and collective investment schemes.

It says it will consult further once the new regime has been agreed, leaving it to the industry to make the case for an exemption or different tax treatment.

ABI taxation manager Leigh Francis says: “We suspect the Revenue has not thought through all the imp-lications. We have already met the Revenue and made clear the impact this would have on life companies.”

Norwich Union head of actuarial support Rob Perry says: “It could have some significant repercussions on the levels paid back to people investing in life funds.”

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