DEMERGERS announced by British Gas and Hanson have put a question mark over tens of thousands of single share Peps which hold these stocks.
The manager of the Hanson single company Pep, Henderson Administration, is writing to the Inland Revenue to ask the position of its thousands of planholders when the company splits into four.
British Gas's plan manager, NatWest Investments, is confident that the split down the middle will not have an adverse affect on its 14,000 planholders.
Adults can hold up to £3,000 each tax year in a single company Pep on top of their £6,000 general entitlement.
The rules state that only the shares of one company can be held in a single company Pep unless a demerger occurs, in which case you must designate one stock as your primary holding but the other can be retained as long as it is a qualifying company.
This is what happened when ICI split into two. Its single company Pepholders could choose to designate their Peps as either Zeneca or ICI but could continue to hold the other company's stock in their plans.
That is expected to be repeated in the case of British Gas. Jonathan Hale, Pep product manager at NatWest Investments, said: "It depends partly on what British Gas wants to do. We have not started talking to them yet but as the split is not expected until next year there is plenty of time to decide."
However complicated the British Gas demerger might prove to be, it is unlikely to be as complex as the Hanson split. The company plans over a period of time to split into four divisions, each concentrating on a particular part of the Hanson interests.
Justin Urquhart-Stewart, a director of Barclays Stockbrokers' said: "You will have a choice between going for the income stream, likely to come from the tobacco interests, or the capital growth which should come from the rump of the company."
The Revenue is being asked what the tax position will be if Hanson planholders are impelled to sell off the shares in the new companies because of their foreign listing.
