The UK government has announced that it intends to legislate to ensure that the existing stamp tax 0% charge on the issue of UK shares (or other securities) to depositaries and/or clearance service operators or their nominees, and on certain exempt capital-raising transfers of shares and/or securities, will remain in place and be brought permanently into UK law.
UK legislation technically imposes a 1.5% charge on issue and capital-raising transfers, but the charge was found to be incompatible with the EU Capital Duties Directive and could not be enforced (or collected) by HMRC.
The Retained EU Law (Revocation and Reform) Act 2023 would have had the effect of reimposing the 1.5% charge. New draft legislation, expected to have effect from 1 January 2024, has now been published (together with explanatory guidance) for inclusion in a future Finance Bill (possibly Finance Bill 2023/24).
‘This development helps to provide welcome clarity on the expected treatment of such issues and transfers following the end of 2023,’ Hogan Lovells noted in a client briefing. ‘If the draft measure is enacted in the form proposed, we expect that the treatment of shares and other securities issued or transferred to depositary receipt systems and clearance services (or their nominees) should, in effect, continue to be very similar to the treatment expected before the end of 2023.’
‘The proposed changes will also provide additional clarity compared with the pre-2024 position, in simplifying a disapplication of stamp tax charges which was previously spread across an EU Directive and various UK and EU case law decisions,’ the law firm said. ‘In particular, the draft legislation makes clear that no 1.5% stamp tax charges arise on (any) issues of shares or other securities, nor on transfers of such securities where they are made in the course of "capital-raising arrangements".’
However, a question remains over the timing for enactment of the proposed changes. ‘Under the commencement provisions in the draft legislation, the changes would have effect from 1 January 2024. However, they will not definitively become law until the legislation is enacted in the upcoming Finance Act 2023/24, which is likely to be after that date,’ Hogan Lovells observed. ‘Unless this changes, this would create a lacuna for taxpayers for any transactions taking place in the first part of 2024 before the Finance Bill 2023/24 is enacted (expected Q1 2024), plus potential administrative burdens for taxpayers and HMRC.’
‘It is [therefore] disappointing that there is currently no certainty of a seamless maintenance of the status quo,’ the firm said, adding that it would welcome clarification from the government that the proposed changes are intended to have temporary statutory effect from 1 January 2024.
Consultation on the draft legislation will close on 12 October 2023. Tax Journal will examine the detail of the draft legislation in next week’s edition.
The UK government has announced that it intends to legislate to ensure that the existing stamp tax 0% charge on the issue of UK shares (or other securities) to depositaries and/or clearance service operators or their nominees, and on certain exempt capital-raising transfers of shares and/or securities, will remain in place and be brought permanently into UK law.
UK legislation technically imposes a 1.5% charge on issue and capital-raising transfers, but the charge was found to be incompatible with the EU Capital Duties Directive and could not be enforced (or collected) by HMRC.
The Retained EU Law (Revocation and Reform) Act 2023 would have had the effect of reimposing the 1.5% charge. New draft legislation, expected to have effect from 1 January 2024, has now been published (together with explanatory guidance) for inclusion in a future Finance Bill (possibly Finance Bill 2023/24).
‘This development helps to provide welcome clarity on the expected treatment of such issues and transfers following the end of 2023,’ Hogan Lovells noted in a client briefing. ‘If the draft measure is enacted in the form proposed, we expect that the treatment of shares and other securities issued or transferred to depositary receipt systems and clearance services (or their nominees) should, in effect, continue to be very similar to the treatment expected before the end of 2023.’
‘The proposed changes will also provide additional clarity compared with the pre-2024 position, in simplifying a disapplication of stamp tax charges which was previously spread across an EU Directive and various UK and EU case law decisions,’ the law firm said. ‘In particular, the draft legislation makes clear that no 1.5% stamp tax charges arise on (any) issues of shares or other securities, nor on transfers of such securities where they are made in the course of "capital-raising arrangements".’
However, a question remains over the timing for enactment of the proposed changes. ‘Under the commencement provisions in the draft legislation, the changes would have effect from 1 January 2024. However, they will not definitively become law until the legislation is enacted in the upcoming Finance Act 2023/24, which is likely to be after that date,’ Hogan Lovells observed. ‘Unless this changes, this would create a lacuna for taxpayers for any transactions taking place in the first part of 2024 before the Finance Bill 2023/24 is enacted (expected Q1 2024), plus potential administrative burdens for taxpayers and HMRC.’
‘It is [therefore] disappointing that there is currently no certainty of a seamless maintenance of the status quo,’ the firm said, adding that it would welcome clarification from the government that the proposed changes are intended to have temporary statutory effect from 1 January 2024.
Consultation on the draft legislation will close on 12 October 2023. Tax Journal will examine the detail of the draft legislation in next week’s edition.
