Changes to Life Fund Taxation
Legal & General Group PLC
03 December 2004
Legal & General Group Plc
3 December 2004
Changes to Life Fund Taxation
Legal & General Group Plc ('Legal & General') announces today that draft
legislation, if enacted, and draft regulations published yesterday are likely to
give rise to a one-off reduction in the reported embedded value (EV) of Legal &
General Assurance Society's UK long term fund.
The changes proposed are complex and the process of estimating their likely
impact will take some time. However, for the purpose of ensuring an informed
market, Legal & General is seeking to provide shareholders with such information
as it has available at the earliest opportunity.
Legal & General's initial review indicates that one of the proposed changes in
particular is likely to be significant. This change will have the effect of
altering the way in which the taxable profit from writing pension business is
determined.
As a consequence, it is likely that the tax attributable to the non-profit part
of the fund from 2005 onwards will increase.
At this early stage, it is not possible to give a precise estimate of the likely
financial impact of the proposed legislative change on Legal & General.
However, it is our belief that the impact of this proposed change on the EV will
not exceed £300m. A reduction in the EV of this order would also reduce the net
of tax transfer on a Modified Statutory Solvency Basis for the full year from
the long term fund by up to £20m.
Further work is being undertaken both on possible mitigating actions and on
refining our estimates of the impact both of the change in tax treatment
referred to and the other proposed changes. Shareholders will be kept informed
if there is any material change.
Enquiries to:
Investors:
Peter Horsman, Head of Investor Relations 020 7528 6362
Media:
John Morgan, Head of Public Relations 020 7528 6213
Anthony Carlisle, Citigate Dewe Rogerson 07973 611888
Note 1.The reported EV is modelled each half-year using a set of assumptions
which include assumptions about future tax. The effect of incorporating our
understanding of this change is to produce a one-off reduction in that EV
number.
Note 2.The grossed up reduction to embedded value will be taken after operating
profit but before the 'profit on ordinary activities before tax' line on the
Consolidated Profit and Loss Account - Achieved Profits Basis.
This information is provided by RNS
The company news service from the London Stock Exchange
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