Life office tax move could hit baggers

A move by the Chancellor to close tax loopholes on life office taxation could make it harder for carpetbaggers to justify demutualisation.

Mutuals have previously boosted the level of surplus assets by using future profits to increase demutualisation payouts. But the changes announced in the Budget will make all increases in surplus assets generated by including future profits subject to tax.

The move will reduce the amount of demutualisation windfalls and is likely to help Standard Life in its bid to defeat the demutualisation campaign headed by policyholder David Stonebanks.

Stonebanks says he almost has the 1,000 votes required to trigger a vote among Stan-dard&#39s 2.3 million policyholders on demutualisation at its AGM on April 22.

Standard Life spokeswoman Patricia Corrigan says: “As we have no plans to demutualise, this change to the tax rules does not affect us.”

Hargreaves Lansdown pension research manager Tom McPhail says: “Whatever the finer points of life office taxation, Standard fought a good battle against demutualisation in 2000. Since then, their brand position among IFAs and consumers generally has improved so they will be in a far stronger position this time around.”