Taxes Consolidation Act 1997 section 588

Demutualisation of assurance companies

Section 588 sets out the capital gains tax treatment of rights conferred on members of a mutual life assurance company on its demutualisation, including the treatment of shares issued to trustees for the benefit of members, and imposes a reporting obligation on the assurance company.

• Rights conferred on members of a mutual life assurance company to acquire shares in a successor company (whether free, at a discount, or in priority to others) are treated as an option with no value at the time of acquisition.
• Where shares in the successor company are issued to a member in exchange for the member's interest in the mutual company, their base cost for capital gains tax is restricted to any new consideration actually paid by the member.
• Where shares are issued to trustees for transfer to members for no new consideration, both the trustees and the members are treated as having acquired the shares for no consideration, and a no-gain/no-loss disposal is deemed to arise when a member becomes absolutely entitled.
• The assurance company must make a return to Revenue within 30 days of the demutualisation, detailing each member's name, address, share entitlements, consideration payable, asset entitlements, and any other information Revenue requires.