Select Committee on Statutory Instruments First Report



APPENDIX

First memorandum by the Commissioners of Inland Revenue

OVERSEAS INSURERS (TAX REPRESENTATIVES) REGULATIONS 1999 (S.I. 1999/881)

1. The Board of Inland Revenue regret that for the reasons set out below they are forwarding this instrument in breach of the rule which requires laying of an instrument 21 days before its provisions take effect.

2. The Regulations have been drawn up in accordance with the vires contained in section 87 of the Finance Act 1998 (c. 36). This section imposed a requirement for an overseas insurer in certain circumstances to have a UK tax representative who would be responsible for providing information to the Inland Revenue about the gains from life insurance policies made by the overseas insurer's UK resident policy holders. The measure is due to come into force on 6 April 1999.

3. The Regulations include the detail of the administrative arrangements for the nomination, appointment and replacement of tax representatives. They also provide that an overseas insurer to whom section 87 of the Finance Act 1998 applies may apply to be released from the requirement to have a tax representative provided the insurer undertakes to provide certain information about its policy holders directly to the Inland Revenue.

4. The Inland Revenue have drawn up the Regulations through a lengthy and contentious process of liaison and consultation with the main bodies representing overseas insurers. This met a commitment that the then Paymaster General made in the Standing Committee on the Finance Bill. It was essential that agreement should be reached with the companies affected by the measure about the way in which the Regulations would work in practice. The Inland Revenue put out a draft of the Regulations for official consultation in early December after discussions with the representative bodies. This consultation continued through February this year and confirmed the need to make a number of changes. Making the necessary amendments to the draft and ensuring the formal agreement of the representative bodies to those changes have further delayed the laying of the Regulations.

5. Unfortunately, despite every effort being made to complete the consultation within the allotted time, it was not possible to reach a final agreement with the representative bodies in time to give the Committee the full 21 days for review of the Regulations before they come into force on 6 April 1999.

18th March 1999


Second memorandum by the Commissioners of Inland Revenue

OVERSEAS INSURERS (TAX REPRESENTATIVES) REGULATIONS 1999 (S.I. 1999/881)

1. The Select Committee has requested submission of a memorandum on the following point:

    Where the Board have given notice of their decision to withdraw their approval of the person nominated by the overseas insurer on the ground that he no longer fulfils the requirements of section 552A(7) of the Taxes Act [regulation 6(1)(a)], regulation 6(2)(a) provides that that person continues to be the tax representative of the overseas insurer until they give notice of their approval of the nomination of another person or themselves appoint another person in his place. Given that subsection (7) of section 552A (under which this instrument is made) provides that a person shall not be a tax representative unless certain requirements (as to residence or business establishment in the United Kingdom) are satisfied, explain what authorises the provision in regulation 6(2)(a) that a person nominated is to continue to be a tax representative when he no longer satisfies those requirements.

2. The Commissioners of Inland Revenue would first like to make it clear that they accept that no person can be appointed as, or continue to act as, an overseas insurer's tax representative if he does not satisfy the requirements of section 552A(7) of the Taxes Act. Regulation 6 is, therefore, at all times subject to the provisions of section 552A(7). However, the giving of a notice of the Board's decision to withdraw approval of an overseas insurer's tax representative on the grounds that he no longer satisfies the requirements of section 552A(7) does not conclusively establish that those requirements are no longer satisfied. The overseas insurer may appeal against that decision under regulation 13(1)(b) and, so long as the matter is in doubt, regulation 6(2)(a) will operate to continue the appointment until there is either a final decision in the appeal or, before such a decision is given, the overseas insurer nominates another person and the Board give their approval to such a nomination.

3. Alternatively, the overseas insurer may decide not to appeal formally while still disputing the correctness of the grounds relied on by the Board. In that case too, the appointment will continue until the nomination of another tax representative has been approved by the Board.

4. While it is a question of fact whether a person satisfies the requirements of section 552A(7) at any particular time, the Board submit that it is a legitimate exercise of the power contained in section 552A(9)(f) to require a person to continue as an overseas insurer's tax representative so long as there is a doubt whether or not those requirements are satisfied.

26 April 1999


Third memorandum by the Commissioners of Inland Revenue

OVERSEAS INSURERS (TAX REPRESENTATIVES) REGULATIONS 1999 (S.I. 1999/881)

1. The Select Committee has requested submission of a further memorandum on the following point:

    The Department, in their memorandum of 26 April, submit that it is a legitimate exercise of the power contained in section 552A(9)(f) of the Taxes Act to require a person to continue as an overseas insurer's tax representative so long as there is a doubt as to whether or not the requirements of section 552A(7) are satisfied. In relation to a case where there is no doubt that the requirements are not satisfied and accordingly the overseas insurer does not wish to appeal against the Board's decision or to dispute the correctness of the grounds relied on by the Board, explain whether regulation 6(2)(a) has the effect that a person can continue to be a tax representative when he no longer satisfies those requirements; and, in particular, explain how the supplemental power conferred by section 552A(9)(f) to make provision with respect to the termination of a person's appointment as a tax representative authorises a provision which contradicts section 552A(7).

2. The Commissioners of Inland Revenue have conceded, and would assert, that no person can be appointed as, or continue to act as, an overseas insurer's tax representative if he does not satisfy the requirements of section 552A(7) of the Taxes Act. This means that, in a case where the facts are not in dispute, regulation 6(2)(a) does not have the effect that a person who no longer satisfies these requirements can continue to be a tax representative. The Commissioners do not contend that the power conferred by section 552A(9)(f) authorises a provision which contradicts section 552A(7).

3. While this could have been made clear by stating explicitly in the Regulations that regulation 6(2)(a) was subject to section 552A(7) of the Taxes Act, it is understood that it would have been both bad drafting practice and ultra vires for the Commissioners to have done so, since it is axiomatic that the Regulations cannot override primary legislation. Accordingly regulation 6(2)(a) only has effect in situations where, notwithstanding that the Board have given notice under regulation 6(1)(a), doubts remain as to whether or not the requirements of section 552A(7) are no longer satisfied.

10 May 1999


 
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