UK Incorporated but non-UK listed? 1.5 percent stamp duty may be returning

1.5 percent Stamp Duty Reserve Tax (SDRT) is only really relevant for UK incorporated, non-UK Listed companies, but the trend in overseas listings is on the increase and, where the charge applies, it can be a hefty bill. HMRC have accepted that in many cases the charge was ultra vires to the freedom of movement of capital, but with the Retained EU Law (Revocation and Reform) Act 2023 (REUL) removing the supremacy of such freedoms, one has to remember that the charging provisions were never withdrawn: they simply haven’t been enforced for a while. If no action is taken by Government, these charges (on transfers, and issues of new shares, into a depository or clearance service) will just come back into force on 1 January 2024. 

The following transactions may all be impacted:

• UK companies listing on non-UK exchanges;
• Anyone looking at takeovers, mergers or take-private transactions on such entities; and
• Those with share schemes where new shares would be issued onto non-U exchanges.

The SDRT charge is ultimately a liability for shareholders (although traditionally settled by the listing entity) however the law can make a number of other parties (usually the brokers and banks) accountable for the deduction of SDRT, and the penalties for failure can be sizeable. If nothing changes between now and 1 January 2024 there will be concerns for all those involved in such listings, and the uncertainty between now and then is at best, unhelpful. 

The recent consultation on the reform of stamp duty specifically excluded this 1.5 percent charge, and REUL makes it clear that legislation (if only a statutory instrument) is required if the charging provisions are not to be brought back into force. HMRC are likely looking for direction from Ministers, but the author has no insight on which way they might lean.

If this does affect you, no doubt you are asking what can I do? In which case please come and talk – there might not be a magic wand, but engagement with HMRC may encourage them to provide clarity on the situation sooner rather than later. 1 January really isn’t that far away……

For further information please contact:

• Michael Hope
• Fiona Cole