Life assurance: An anti-avoidance measure designed to stamp out practices whereby holders of life assurance can defer their tax liability indefinitely has been tweaked in this year's Finance Bill.

Last year's Finance Act introduced a measure to clamp down on the indefinite deferral of the 23 per cent exit tax on gains made by life assurance policyholders who "rolled over" their investments when the policy term was complete.

The Finance Act measure was subject to a commencement order pending the outcome of ongoing discussions with the insurance industry.

Following these discussions, a proposal for a tax charge to arise on every seventh anniversary of the policy start date has been changed so that the charge will arise at the end of eight years, except in the case of certain regular premium policies when the charge will be at the end of 12 years.

Where the tax on the gains is higher than the tax liability arising on the subsequent encashment of the policy, there will be a refund of the tax overpaid.

In response to insurance industry calls for a level playing field for policyholders, a comparable regime will be introduced for domestic unit funds and foreign life assurance and unit funds sold to Irish policyholders.

The changes will come into effect from January 1st, 2009, which is the eighth anniversary of the introduction of the gross roll-up regime for life assurance policies.

Up until January 2001, the tax on income earned under these investment products was paid by the life assurance fund and the policyholder had no further tax to pay when he or she received a payment from the policy.