It is a pleasure to serve under your chairmanship, Mr Chope.

As the hon. Member for Bristol East pointed out, clause 15 modifies the rules that apply when liabilities under long-term insurance contracts are transferred from one company to another. Such a transfer of business will involve not only the transfer of liabilities, but the transfer of assets held to meet those liabilities. The current tax rules are necessary because transferring assets in excess of liabilities could allow taxable profits to escape tax. Current rules, however, do not always give the right result.

The clause attempts to address an unintentional tax charge. A UK company wishing to transfer insurance contracts to a company outside the European economic area, or to an EEA company without a UK permanent establishment, could be taxed more than it should be. As the hon. Lady pointed out, the tax would be on the full market value of assets transferred, without any deduction for the value of the liabilities that the assets are intended to meet.

In addition, the solvency II directive will introduce significant changes to the regulation of insurance companies in 2012. It aims to produce a modernised, risk-based approach to such regulation while ensuring that there is appropriate protection for policyholders. In preparation for that change, insurers are considering whether business that is written in non-EEA countries should continue to be administered, and thus regulated, in the EEA. The prospect of a significant unwarranted tax charge inhibits what should be a commercial decision, which is bad for fostering the insurance business within our country. Accordingly, we are modifying the rules to remove inhibition to making commercial decisions. Critically, however, we are still ensuring that profits cannot escape the UK untaxed.

The rule changes have been made following discussion and full consultation with the life insurance industry. The clause fixes an unintentional tax charge that inhibits commercial transactions.

Let me try to address the points that the hon. Member for Bristol East raised. The revenue will be negligible because there is no scorecard impact. On fair value, the rules will be consistent with those that apply across the rest of the insurance industry, while the date she mentioned is simply the date of the emergency Budget.