Modernisation of stamp tax on UK shares
It is always laudable when HMRC consults on proposed changes to legislation. This enables taxpayers, industry bodies and advisers to provide their insights and input into new laws and how they will best operate in practice. Modernising taxes is also a goal we should strive towards, especially when the tax in question is centuries old and was no longer fit for purpose in the modern age of electronic share trading: stamp duty on shares. Most stamp tax on UK shares is paid by stamp duty reserve tax (SDRT) in any event, which is collected on transactions in electronically traded shares, but exists as a parallel tax alongside stamp duty. So a consultation on modernising stamp tax on UK shares ought to constitute veritable nirvana for tax advisers – especially for me as I author a book on stamp tax on UK shares[1]!
For various reasons, the modernisation of UK stamp taxes on shares has been trundling on for the best part of a decade, kickstarted by a report in 2017 by the Office of Tax Simplification (remember them?). A call for evidence was published in 2020 and 2021 saw the establishment of a joint HMRC and industry working group (which ADE Tax participated in).
A consultation in 2023 seemed another positive step on the journey, but silence since then (and a change in government) had raised questions about whether this initiative would be quietly abandoned. Pleasingly, in April 2025 HMRC published a summary of responses to that consultation. Not all the proposed changes are welcome, such as abolishing the de minimis whereby stamp duty is only payable on transactions greater than £1,000. But it is welcome news that the UK government is planning to implement the proposal to introduce a single stamp tax on UK securities, taking account of many of the responses to the consultation and doing away with stamp duty as a separate charge altogether.
The 1.5% charge
One key element initially excluded from the scope of modernising stamp tax was the triple charge exit tax when UK shares leave the UK’s settlement and clearance service, also known as CREST, to trade outside the UK, whether in a non-UK clearance service in Europe or the US, for example, or a dual listing market, or in depositary receipt form.
This triple charge, sometimes referred to as a ‘season ticket’, is one of the most complex and controversial aspects of the charge to stamp tax on UK shares. The charge in connection with issuing new shares was held unlawful by the Court of Justice of the European Union and general confusion reigned for a while as to the impact of Brexit on whether the charge remained unlawful in the context of a capital raising. Happily, the legal status of the charge has since been clarified to mirror the pre-Brexit position: broadly, the charge does not apply on the issuance of shares in the context of raising new capital, but it continues to apply to transfers. This means, broadly, the 1.5% charge applies to transfers between different venues on which UK securities trade (including on a no change in beneficial ownership basis). While there are nuances and exemptions in certain circumstances, it is not always clear to taxpayers whether the facts giving rise to those circumstances apply.
A consultation on this 1.5% charge to stamp tax was published on the same day as the responses to the 2023 consultation. This is undoubtedly a step in the right direction. The stated goals are simplicity, ease of use and clarity and certainty of the charge.
But the 8 aspects of the charge that HMRC are consulting on are granular in the extreme: not so much a case of not seeing the wood for the trees, rather not seeing the forest due to wondering whether to chop down specific types of tree which are either dead or dying out. 3 of the 8 questions relate to securities or transaction types that are either obsolete or unlawful. It is undoubtedly worthy to shave off aspects of the rules which are no longer applicable, removing unnecessary legislation.
But what a missed opportunity. Why not be bold and consult on whether the 1.5% charge to stamp tax on UK shares should exist at all or be replaced by charging the normal 0.5% tax on transfers of UK shares which trade and settle outside the UK. Countries which have introduced financial transaction taxes this century have generally adopted this latter approach. Why not think big and make it easier for taxpayers to know whether their transfer of UK shares is subject to 0.5% or 1.5%, which can be a bit of a mystery currently with the relevant details often not publicly available. Why not consult on whether exemptions would be appropriate for market makers who provide liquidity to different markets on which the same UK securities trade, to the benefit of investors and UK issuer companies by reducing spreads and frictional costs?
The consultation on the higher rate charge to stamp tax on UK shares is a tiptoe in the right direction. If implemented, the changes will reduce some frictions in the operation of the charge around the margins. But, nearly 10 years through the modernisation process, what a missed opportunity to reshape the 1.5% charge to make it fit for purpose in the 21stcentury.
[1] Monroe & Nock on the Law of Stamp Duties
