1.5 percent stamp duty charge no longer set to return

Legislation will be introduced to preserve 0 percent stamp duty charge where UK companies list overseas when EU Law supremacy ends on 1 Jan

0 percent stamp duty retained

The introduction of the Retained EU Law (Revocation and Reform) Act 2023 (REUL) saw the 1.5 percent stamp duty charge on issues of new shares into depositary receipt or clearance service systems (Higher Rate Systems) set to make an unwelcome return on 1 January 2024, when the supremacy of EU Law ends. However, the Government has now confirmed that it will legislate to preserve the 0 percent charge going forward and announced a four-week technical consultation on the draft legislation. The statutory removal of the 1.5 percent charge was widely seen as detrimental to the UK’s international competitiveness on tax and so should be welcome news for readers considering an overseas listing, as well as those that have already done so.

Who is affected?

The following businesses will be impacted by this announcement:

  • UK companies listing on non-UK markets;
  • Those already listed and making subsequent issues of new shares onto non-UK markets as part of share schemes etc; and
  • Anyone considering takeovers, mergers or take-private transactions on such entities. 

What is changing?

If no action is taken, issues of new shares onto overseas markets would be subject to a 1.5 percent stamp duty charge when the supremacy of EU law, which has held that this charge is contrary to the freedom of movement of capital, ends on 1 January 2024.

Draft legislation published on 14 September 2023 will remove that 1.5 percent charge on issues of new UK shares (and other chargeable securities) into overseas systems, as well as on transfers of existing shares into those systems that are part of capital raising arrangements or, where such transfers are restricted from taking place as part of the capital raising arrangements, but take place as soon as possible after such restrictions are lifted.

Capital raising arrangements are defined as arrangements pursuant to which relevant securities are issued by a company for the purpose of raising new capital.   As with most legislation there are areas that are open to interpretation. For example, the term ‘new capital’ isn’t defined, and whilst HMRC have historically interpreted the concept of capital raising quite broadly, it is unclear whether this will continue to be the case. This is one of the things that we will explore further as part of the consultation process.

As it stands, it looks as though the charging provisions will remain and still apply to transfers of shares onto clearance or depository services where there is no raising of capital – so care may still be needed when existing shares are moved in such a manner. 

What action is required

The pool of businesses impacted will be limited to those looking to list and those who have already done so. If you are or may be affected by this change, please do get in touch. Businesses can respond to the consultation on the draft legislation directly, or by contacting the authors of this article for consideration for inclusion in KPMG in the UK’s response. The consultation period closes on 12 October 2023.