Life Companies, Capital Gains and Indexation Relief


HMRC’s initial take on the impact of the removal of indexation relief was, to say the least, disingenuous. HMRC’s Budget policy paper (still on site, unchanged) said that “This measure has no impact on individuals or households as it only affects companies.” When challenged on Budget Day about the impact on individual policyholders, the HMRC response was a non-committal “I can confirm that, as life assurance companies are subject to corporation tax on their capital gains, this measure will apply to them”.

It would now appear that the official stance has changed somewhat. According to Royal London, the Treasury’s standard letter in response to correspondence from the public on the subject says “…the impact passed on to individual policy holders is likely to be small”. No specific measure of what “small” means is supplied, nor is there any explanation of why the letter contradicts the website impact statement.

Royal London, primarily in the guise of Steve Webb, is calling on MPs to challenge the measure as the latest Finance Bill goes through parliament. The chances of a government U-turn look unlikely given the current political landscape.



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