New measures being introduced
From 28 April 2014 stamp duty/SDRT will no longer be chargeable on transfers of any shares admitted to trading on a “recognised growth market”, unless the company issuing those shares is also listed elsewhere (more on that below). In order for its shares to benefit from the exemption, the issuer must confirm to Euroclear UK & Ireland Limited (‘EUI’) that it meets the relevant requirements (see section 2 below).
Just by way of background, a market will qualify as a “recognised growth market” if it is part of a “recognised stock exchange” and either (1) the majority of the companies on the market have market capitalisations of less than £170 million; or (2) the market’s rules of admission require companies to demonstrate at least 20 per cent. compounded annual growth in revenue or employment over the previous three financial years before admission. The LSE has applied for recognised growth market status for AIM, ISDX and the LSE’s High Growth Segment on the basis of these criteria.
The exemption has been introduced as part of the Government’s policy of encouraging growth in smaller companies.
Self-Certification – action may be required from you now
In order for EUI to correctly apply the exemption from stamp duty and SDRT to securities on AIM and the High Growth Segment from 28 April 2014, the LSE requires issuers on these markets to certify to EUI that their securities are admitted to trading on AIM or the High Growth Segment (as applicable) and that they are not also listed on any other “recognised stock exchange”. Issuers are also required to give not less than two business days’ notice in advance to EUI should their securities cease to be eligible for this stamp duty exemption in the future.
We have been notified that ISDX companies do not have to self-certify or file a form to be eligible for the stamp duty exemption.
If EUI does not receive a duly completed Growth Market Stamp Exemption Form from an issuer whose securities are admitted to trading on AIM or the LSE High Growth Segment whose status is changing as a result of the stamp duty exemption, EUI will continue to collect the stamp duty reserve tax on transactions in securities of that issuer.
A list of issuers with exempt securities will be available on EUI’s website with effect from 28 April 2014. Issuers are required to review this list and notify EUI immediately if it is incorrect.
A link to the LSE stamp duty exemption form can be found here: Stamp Duty Exemption form.
If this applies to you then the form should be completed as soon as possible and submitted to EUI.
Shares also listed on any other exchange
The stamp duty exemption does not currently apply to securities trading on AIM or High Growth Sector if the issuing company is “listed” on any other “recognised stock exchange”. Listed means admitted to the official list either in the UK or in a qualifying country outside the UK in accordance with provisions corresponding to those generally applicable in EEA states. If you have any questions or doubts here, we can help.
Other practical points to consider
Stamp duty/SDRT is not a huge cost usually, but if there are transfers of AIM shares planned on or around the end of this month, it may be worth noting that waiting until on or after 28 April may bring with it a stamp duty/SDRT saving. If you doing this, be careful not to create an unconditional agreement to transfer shares before 28 April as that will attract SDRT (even if the actual transfer of the shares is on or after 28 April). Where an agreement is conditional (and you should ask if you are unsure) and the conditionality extends beyond 28 April then you are also within the new exemption.