Taxation of Chargeable Gains Act 1992 Schedule A1 paragraph 18

Special rules for assets acquired in the reconstruction of mutual businesses etc.

Paragraph 18 of Schedule A1 deals with how taper relief applies to shares or other assets that a person receives when a mutual business (such as a building society or mutual insurer) converts into a company or otherwise reconstructs its operations.

• When a mutual business demutualises or reconstructs, members may receive shares or other assets in exchange for their former membership rights — paragraph 18 sets out how the holding period for taper relief purposes is determined for those assets.
• The assets received on demutualisation are generally treated as having been acquired at the date of the reconstruction, not at the date the person originally became a member of the mutual organisation, meaning taper relief runs from the conversion date.
• This rule prevents individuals from claiming a longer taper relief holding period by reference to the potentially much earlier date on which they first became members of the mutual body.
• The provision was amended by Finance Act 2008, Schedule 2, paragraph 45, as part of the wider reforms that ultimately abolished taper relief for disposals on or after 6 April 2008, replacing it with a flat rate of capital gains tax.