Thousands of Canada Life policyholders will receive demutualisation benefits over the coming weeks. Those who have already received them should consider the tax treatment of those benefits, says Canada Life.

Demutualisation does not change the tax treatment of policies or policy dividends. The following information, some of which may also be found in Canada Life's Policyholder guide to demutualisation, relates to individual Irish policyholders of Canada Life rather than companies, trustees or other bodies.

If you hold the shares. . .

If a customer holds onto the Canada Life Financial Corporation shares received from demutualisation, Irish tax is not immediately payable. Shareholders maintaining their shares will receive a shareholder dividend which is taxable. This is different from a policy dividend or bonus arising on the anniversary of the policy issue date. The dividend received will be net of 15 per cent Canadian withholding tax which is paid by Canada Life to the Canadian tax authorities. Irish taxpayers should claim the gross amount of taxable income in tax computations and claim credit for the 15 per cent paid to the Canadian tax authorities. If you sell. . .

Shareholders deciding to sell must pay tax on the capital gain at the time of the sale. As the shares were provided at no cost, they will have no-cost base for tax purposes. This means the full value received will be included in calculating capital gains. Any costs associated with the disposal of shares, including brokerage fees, may be deducted from the proceeds. Each individual is entitled to an annual exemption of £1,000 (€1,270) and tax is payable in 1999/2000 at 20 per cent.

For example, Jack is a Canada Life shareholder with £1,500 worth of shares who decides to sell them through a stockbroker. The transaction costs £15 and may therefore may be subtracted from £1,500. Capital gains tax is calculated by taking the remaining £1,485 and subtracting the £1,000 exemption if it has not been used previously. This provides a taxable gain of £485 that, multiplied by 20 per cent, equals a capital gain estimate of £97.

For individuals, a payment of preliminary capital gains tax must be paid on November 1st. A return of income, including gains, should be filed by January 31st.