Taxpayers expect to lose in L&G tax rebate settlement

Hundreds of tax payers look set to lose rebate claims for overpaid tax worth almost z6m on life assurance policies they hold with Legal & General.

The withdrawal of life assurance premium relief in March 1984 prompted a flurry of activity from L&G processing staff. Thousands of claims were rushed through before midnight on 13 March in a bid to ensure that new policy holders would enjoy the tax break.

The dispute arose because L&G altered its processing criteria, including the need for a letter of acceptance from the insurers, to enable rapid registration. L&G claimed it acted in the best interests of customer care.

But the Inland Revenue argued that L&G’s unilateral decision to assume potential customers had wanted to go-ahead with the policy meant the contract was incomplete.

The current batch of claims are for the eight years between 1984 and 1991.

Special commissioner Thomas Everett adjourned his hearing to allow the two parties to reach agreement. A meeting is planned between L&G and the Revenue to resolve any outstanding issues.

Everett said: ‘Such a unilateral act on the part of the society, not communicated to the policy proposers or their agents cannot be construed as an action completing the contracts in question.’

He continued: ‘Some action by its (the policy’s) proposer is necessary in these cases to complete the contract of insurance either expressly or by conduct.’

Ernst & Young insurance tax partner, David Arnold, said most similar cases had already been settled. ‘I was surprised that this case is still going on after 12 years as the Revenue was very quick to look at cases at the time. Every case would be slightly different as each society would have used a different method to speed up its processing.’