Stamp taxes on the purchase of most shares admitted to trading on “recognised growth markets” such as the London Stock Exchange’s AIM market have been abolished. UK Stamp duty and stamp duty reserve tax (SDRT) are normally chargeable at the rate of 0.5% of the purchase price of chargeable securities.
Finance Act 2014
The new stamp taxes exemption is set out in Clause 108 (Abolition of stamp duty and SDRT: securities on recognised growth markets) and Schedule 20 of the Finance Act 2014. The exemption took effect from 28 April 2014 and stamp taxes on the purchases of securities listed on “recognised growth markets”, which includes the London Stock Exchange’s AIM market, were abolished provided that those securities are not also listed on a “recognised stock exchange”.
Recognised Growth Market
To qualify as a “recognised growth market”, a market must be an HMRC “recognised stock exchange” and satisfy one of the following two requirements:
- A majority of companies traded on that market must have a respective market capitalisation below £170mn;or
- The market’s rules require that companies seeking admission demonstrate at least 20% compounded annual growth in revenue or employment over the 3 years prior to admission.
At present, five markets have been recognised by HMRC; AIM, ISDX and the "LSE High Growth Sector" in the UK, and the Dublin ESM and GXG Markets. HMRC will publish and maintain a list of recognised growth markets.
The LSE has released an exemption form to be certified by the issuer for Euroclear to enable settlement in CREST to occur without deducting stamp duty. Companies whose securities will no longer be eligible for the exemption are required to give at least 2 business days’ notice of the same in advance to Euroclear.
Dual Listed AIM Companies
The exemption will not be available in relation to securities which are also listed on a “recognised stock exchange”, a list of which is maintained by HMRC and includes many overseas stock exchanges such as the TSX and TSXV (Tiers 1 & 2). It is likely that most overseas companies on AIM will not benefit from this new exemption if they are dual listed. However, this will not disadvantage such companies where they are dual listed on a “recognised stock exchange” transactions in the depositary interests representing their shares (which are what is technically traded through CREST are already exempt from stamp taxes.
As a result, in practice only UK incorporated AIM companies who are dual listed on an overseas recognised stock exchange will remain within the scope of the stamp taxes.