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HMRC internal manual

Stamp Taxes on Shares Manual

HM Revenue & Customs
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Exemptions and Reliefs: Exemptions: demutualisation of insurance companies

FA97/S96 provides relief from stamp duty for the demutualisation of insurance companies. This relief applies to any documents executed on or after 19 March 1997 where the whole or part of the business of a mutual insurance company is transferred to a company that has share capital. Documents must be adjudicated (STSM021010) in order to benefit from the relief. The relief is meant for transfers under demutualisation schemes where the members of the insurance company become shareholders in the company, and not schemes where the insurance company is taken over by a third party.

There are 2 conditions:

  • that at least 90% of the members of the mutual insurance company are offered shares in the acquiring company (or the parent of the acquiring company); and
  • that any shares issued by the acquiring company (or its parent), other than those issued as a result of an offer to the public, are offered to members of the mutual, persons who are entitled to become members of the mutual or former employees or pensioners of the mutual.

Any potential Stamp Duty Reserve Tax (SDRT) charge is removed when the instrument is adjudicated as having no stamp duty due. However, instruments transferring interests in collective investment schemes are exempt from stamp duty (FA99/SCH19/PART I) and therefore such an instrument could not be adjudicated and stamped under FA97/S96 to cancel an SDRT charge. The potential SDRT charge on the transfer of interests in collective investment schemes is removed by FA86/S90(1A)(c).