Overview
Yesterday (14 September 2023) saw the welcome announcement that the 1.5% stamp duty/ SDRT charge on issues and transfers of shares and securities integral to capital raising will formally be removed - this is relevant in particular to the listing of shares in UK companies through a depositary on non-UK exchanges and so could be seen as good news for using a UK topco on listing.
This is an issue which you may have come across (particularly on US listings of UK companies) where, due to EU case law, HMRC stopped enforcing the 1.5% charge, but it remained in law.
More detail
By way of background, Finance Act 1986 imposes a stamp duty/ SDRT charge at the rate of 1.5% on transfers or issues of chargeable securities to a clearance service or to a depositary in exchange for the issue of depositary receipts.
However, a number of decisions of the Court of Justice of the European Union (CJEU) found that the 1.5% charge on issues of securities into depositary receipt systems and clearance services and certain related transfers (those integral to a capital raising event) was incompatible with EU law.
Subsequently (but pre-Brexit), HMRC advised that they would no longer seek to impose the 1.5% charge on issues of new securities to depositary receipt issuers and clearance services anywhere in the world.
Post-Brexit, HMRC confirmed that they would continue to not impose the 1.5% charge on the issue of shares (and transfers integral to capital raising) into clearance services and depositary receipt systems following the UK’s exit from the EU. However, following Royal Assent of the Retained EU Law Act on 29 June 2023, which will, from 1 January 2024, mean that the existing UK legislation which imposes the 1.5% charge is superior to EU law, there has been concern that the charge would be reinstated.
We have been aware that HMRC and the Government have been discussing approaches for a few months. The outcome announced yesterday is that they will legislate to remove the 1.5% charge on both issues of securities into depositary receipt systems and clearance services and also on transfers into such systems which are ‘integral to capital raising’. The 1.5% charge will remain on other transfers into or between depositories and clearance services.
If you have any queries on this please contact Aidan Coleman, head of PwC UK’s Stamp Taxes Network.