On 23 October 2018, HM Treasury published its response to its August 2016 consultation on mutual deferred shares (MDS).

HM Treasury consulted on a draft version of the Mutuals' Deferred Shares Regulations 2016, which were intended to allow friendly societies and mutual insurers to issue MDS, a new type of capital created by the Mutual Deferred Shares Act 2015.

The response summarises the responses received. The Government has considered the issues raised by respondents carefully. Since the consultation closed it has held a number of meetings with mutual insurers and their representatives. Those meetings considered the essential features that MDS needed in order for issuance to be a viable proposition for mutual insurers. During these meetings, industry representatives informed the Government that mutual insurers 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. Following extensive work, HM Treasury says that it has not been possible to design MDS which meet both these criteria.

The Government has, therefore, decided not to lay the regulations. It says that it would reconsider its position if any material factors changed in the future.