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Demutualisation of friendly societies

Last updated 18 February 2018

If you hold or held a policy of a friendly society that demutualised from a not-for-profit friendly society to a profit friendly society, you may be able to disregard your capital gain or loss from the CGT event. You can disregard capital gains and losses you make from a CGT event happening to your interest or other right you have or had in the friendly society except where you receive an amount of money. Your friendly society should advise you whether you realised a capital gain or capital loss.

If you received only shares, or rights to acquire shares, as a result of the demutualisation of your friendly society, we consider for CGT purposes that you acquired each share or right at the time it was issued.

Your friendly society should advise you of the cost base of the shares or rights to acquire shares. The cost base, or reduced cost base, will be a proportion of the total of the:

  • market value of the health insurance business and
  • embedded value of the life insurance business and any other business of the friendly society.

Selling the shares or rights (through the sale facility or otherwise) will be a CGT event that may give rise to a capital gain or capital loss in the income year in which you enter into the contract of sale.