Section 115 and Schedule 24: Abolition of Stamp Duty and Stamp Duty Reserve Tax (SDRT): Securities on Recognised Growth Markets
Summary
1.This section introduces an exemption from stamp duty and stamp duty reserve tax (SDRT) for transfers of securities admitted to trading on recognised growth markets.
Details of the Schedule
Part 1.Stamp Duty Reserve Tax (SDRT)
2.Paragraph 1 introduces changes to Part 4 Finance Act 1986.
3.Paragraph 2 inserts new sub-sections (4B) and (4C) into section 99 Finance Act 1986 and amends the definition of chargeable securities for SDRT purposes to exclude securities admitted to trading on a recognised growth market but not listed on any market.
4.Paragraph 3 inserts new section 99A into Finance Act 1986.
5.New section 99A(1) provides that new section 99A is for the purposes of new sub-section (4B) of section 99.
6.New section 99A(2) provides that ‘listed’ means the same as it does in the Income Tax Acts.
7.New section 99A(3) defines what is meant by ‘recognised growth market’.
8.New section 99A(4) provides that HMRC will be responsible for recognising a market as a growth market on the basis of evidence provided by the market upon application for recognition.
9.New section 99A(5) sets out the criteria for qualification as a recognised growth market. The market must be a recognised stock exchange, where the majority of companies admitted to trading on the market have a market capitalisation of less than £170 million (new section 99A(5)(a)) and/or the market’s admission criteria require companies to demonstrate a recent record of growth in either gross revenue or employment over the three periods of account immediately preceding the date of the application (new section 99A(5)(b)).
10.New section 99A(6) defines ‘period of account’ and ‘recognised stock exchange’ for the purposes of new section 99A(5).
11.New section 99A(7) – (10) explain how a company’s market capitalisation for the purposes of new section 99A(5)(a)) is to be calculated.
12.New section 99A(11) – (12) sets out the formula by which compounded annual growth is to be demonstrated for the purposes of new section 99A(5)(b).
13.New section 99A(13) – (15) give the Treasury power, under regulations, to make provision for revocation of a market’s recognition, or to amend the rules under which HMRC can recognise a growth market.
14.New section 99A(16) provides that new section 99A is to be construed as one with the Stamp Act 1981.
15.Paragraph 4 brings into force the changes in Paragraph 2 for agreements to transfer securities that are made, or become unconditional, on or after 28 April 2014; brings into force the changes in Paragraph 3 as coming into force on 28 April 2014; and that where HMRC has formally recognised a market as a growth market before that date, the recognition will have effect from 28 April 2014.
Part 2.Stamp Duty
16.Paragraph 5 exempts from stamp duty transfers of stock or marketable securities admitted to trading on a recognised growth market but not listed on any market.
17.Paragraph 6 exempts from stamp duty a purchase of its own shares by a company where the shares are admitted to trading on a recognised growth market but not listed on any market.
18.Paragraph 7 provides that an Act of Parliament that vests stock or marketable securities does not attract stamp duty where the stock or securities are admitted to trading on a recognised growth market but not listed on any market.
19.Paragraph 8 provides that ‘listed’ and ‘recognised growth market’ in Paragraphs 5 – 7 are to be construed as set out in new section s99A.
20.Paragraphs 9 – 10 remove a stamp duty charge from instruments that transfer, to a depositary receipt regime or clearance service, stock or marketable securities admitted to trading on a recognised growth market but not listed on any market.
21.Paragraph 11 amends the rules for transfers of partnership interests in Schedule 15 to Finance Act 2003 to ensure that stamp duty is not chargeable to the extent that the partnership property includes stock or marketable securities admitted to trading on a recognised growth market but not listed on any market.
22.Paragraph 12 brings into force the stamp duty provisions in Paragraphs 5 – 11 with effect from 28 April 2014 but ensures that a transfer executed after 28 April 2014, but pursuant to an agreement made before that date, will not be exempt.
Background Note
23.This exemption has been introduced to support the Government’s policy of encouraging growth in smaller companies.
24.Transfers of shares and securities of UK registered companies on sale generally attract stamp duty or SDRT charges at the rate of 0.5 per cent. Stamp duty is charged if the transfer is effected by the execution of a written instrument. SDRT applies to transfers in respect of which no written instrument is executed.
25.The new provisions ensure that transfers of shares and securities admitted to trading on markets specifically designed for smaller companies, or for companies that can demonstrate a sustained record of growth, will no longer attract stamp tax charges.
