Section 80A Demutualisation of assurance companies

Summary

This section provides for an exemption from stamp duty on any instrument made for the purposes of or in connection with the demutualisation of an assurance company which carries on a mutual life business. A demutualisation is an arrangement between an assurance company and its members whereby the business carried on by the assurance company is transferred to a limited company and shares or the right to shares in that company or its parent are issued or, as the case may be, granted to members of the assurance company. A self-assessed stamp duty return must be filed under the e-stamping system in relation to instruments in respect of which the exemption from stamp duty is sought. The exemption applies to instruments executed on or after 31 March 2006.

Details

(1) “assurance business”, “assurance company”, “EEA agreement”, “EEA State”, “employee”, “member”, “pensioner” and “shares” are self-explanatory.

“acquiring company” is a limited company which is incorporated in the State, in another Member State of the European Union, or in an EEA State.

“demutualisation” is an arrangement between an assurance company, which carries on a mutual life business, and its members under which—

• the assurance business or part of the business carried on by the assurance company is transferred to an acquiring company, and
• shares or the right to shares in the issuing company are issued, or as the case may be, granted to the members.

“issuing company” is an acquiring company or a parent company of an acquiring company and includes a company which becomes a parent company of an acquiring company as part of the demutualisation.

“parent company” is a limited company incorporated in the State, in another Member State of the European Union, or in an EEA State which, directly or indirectly, owns 100% of the ordinary share capital of the acquiring company.

(2) Stamp duty shall not be chargeable on any instrument made for the purpose of or in connection with a demutualisation where the following conditions are satisfied:

(3)(a) the shares in the issuing company must be offered to at least 90 per cent of the persons who immediately prior to the demutualisation are members of the assurance company,

(3)(b) all the shares in the issuing company which will be in issue immediately after the demutualisation, other than shares which are to be or have been issued pursuant to an offer to the public, must be offered to persons, who at the time of the offer, are:

members of the assurance company,

persons who are entitled to become members of the assurance company, or

employees, former employees or pensioners of the assurance company or of a company which is wholly-owned subsidiary of the assurance company.

(4) A company is a wholly-owned subsidiary of another company if it has no members other than the parent and the wholly-owned subsidiaries of the parent, or persons acting on behalf of the parent or its wholly-owned subsidiaries.

(5) Adjudication has been abolished for instruments executed on or after 7 July 2012 and a self-assessed stamp duty return is required to be filed under the e-stamping system to claim this relief.

(6) The exemption will not apply unless the demutualisation is carried out for bona fide commercial reasons and does not form part of a scheme or arrangement of which the main purpose is avoidance of liability to stamp duty, income tax, corporation tax, capital gains tax or capital acquisitions tax.

(7) Where a claim for exemption is made under this section, the Commissioners may request a statement, or such further evidence as may be necessary, in order to satisfy themselves that the claim is a valid one.

(8) Where a claim for exemption has been granted on the basis of false information, or the conditions set out above are not fulfilled in the demutualisation as actually carried out, a clawback of the stamp duty which would have been charged on the instrument, in the first instance, had the exemption not applied, together with interest on the duty calculated in accordance with section 159D, from the date of the instrument to the date on which the duty is paid, will apply.

Relevant Date: Finance Act 2014