A dispute has reportedly erupted whether Aviva’s new business protection products are allowable within tax rules.

Aviva launched two business protection products at the end of January on the Aviva Life Protection Solutions (ALPS) online platform, including "a market first" Relevant Life Insurance with the option to add critical illness cover.

The insurer said the inclusion of critical illness benefit as an option on Aviva’s Relevant Life Insurance – which provides individual death in service benefit for an employee -will make it easier for advisers to cover their clients’ business protection needs in one application.

Aviva will also offer Business Life Insurance Options, which will provide life and critical illness cover for business clients.

With the products just launched, it was reported iby Money Marketing that it understands several rival providers are questioning the critical illness option.

A Royal London spokesperson confirmed Royal London product architect Ian Smart as saying:: "We are looking at this closely to form our own opinion as to whether this is actually possible but have concerns that this could prompt HMRC to think again about whether the legislation around relevant life policies is working as originally intended."

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Aviva responded by saying: "Relevant Life Insurance is complex, but under the current tax legislation these plans can include critical illness benefit (it’s the same legislation that lets providers include a terminal illness benefit).

"On our Relevant Life launch we have liaised with the HMRC and taken legal advice on this from a QC who has confirmed that our product is compliant with the relevant legislation and therefore qualifies as a relevant life plan. We take great care to assess our products before putting them into the market."

A spokeswoman for Legal & General told Life Insurance International it has not reported or is in any way in conflict with Aviva.

In terms of L&G’s own position, the spokeswoman said:"The addition of Critical Illness conflicts with our current interpretation, and that of the market, of the Government legislation with regard what is allowed within a Relevant Life Plan as laid down by the Income Tax (Earnings and Pensions) Act 2003, part 6 chapter 2 and Income Tax (Trading and Other Income) Act 2005 sections 481 and 481)..

"We are currently re-examining the legislation and will be raising the issue with the HMRC to get further clarity on the situation. Our first responsibility has to be to our policyholders and advisers and we do not want to make any changes to our product which could jeopardise its adherence to the HMRC rules and it retains its current tax efficient position. Currently we are of the opinion that the Legal and General Relevant Life plan does meet this legislation."

She added: "If it is found that the legislation does indeed mean that we can add an option to add Critical Illness and retain its current tax efficient status we will of course look to add this feature to our plan."