Standard Life members, who are due to receive demutualisation windfalls, will now only pay tax on the money they receive when they sell.
Changes to pension rules on 6th April this year, have meant that with-profits pension clients would be taxed immediately at 40% on their demutualisation windfalls, even for those who are lower-rate or nil-rate taxpayers.
HM Revenue & Customs were lobbied by the provider, and have since set out draft regulations which bring the proceeds under the capital gains tax regime, so shareholders will only pay tax when they sell. Shareholders can use their annual capital gains tax exemption limit, which is currently £8,500 for this tax year.
The original plan would have affected around 40% of Standard Life's policyholders who qualify for windfall payments, and the Revenue have also confirmed that stamp duty reserve tax will not apply on the transfer of unit trust assets owned by Standard Life upon company's demutualisation.
This is expected to save the provider around £30 million.
Our view
This is good news - but as ever the 'tax man' takes his share.
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