On 24 October 2018, HM Treasury (HMT) published a response (the Response) to the Government’s 2016 consultation paper ‘Mutual deferred shares: consultation on technical policy details’ (the Consultation). The Consultation invited opinions on the Government’s proposed Mutuals’ Deferred Shares Regulations which would allow mutual insurers to issue a new type of capital ‘Mutual Deferred Shares’ (MDS) created by the Mutuals’ Deferred Shares Act 2015. A summary of responses to the Consultation’s questions is provided on pages 2 – 6 of the Response.

In response to the Consultation, the Government has met with mutual issuers and their representatives. When discussing the features of MDS’, the Government was informed mutual issuers would only issue MDS both if they qualified as Tier 1 regulatory capital and would not alter the tax treatment of any mutual that issued MDS. HMT concludes that it is not possible to design MDS to meet both these criteria.

The Government has decided not to lay the regulations – the position may be reconsidered if material factors change in the future.