This decision follows extensive engagement by UK Finance with officials, policymakers, and other industry groups to clarify the government’s position and call for the existing 0 per cent charge to remain.

There had been growing industry concern that a 1.5 per cent stamp duty or stamp duty reserve tax charge would be re-applied, with effect from 1 January 2024, on the issuance of shares and marketable securities of UK incorporated companies into a clearance service or depositary receipt service once the supremacy of EU law and case law ceased under Section 2 of the Retained EU Law (Revocation and Reform) Act 2023 (“REUL Act 2023”).

We had made several representations to HM Treasury, HMRC, and the City minister to highlight the potential consequences for the UK’s markets should the 1.5 per cent charge be reintroduced – including limiting the ability of existing UK public companies to raise additional capital on non-UK markets, and creating a possible deterrent for growing companies that might be considering a UK listing.

Inaction would have been at odds with the government’s welcome programme of ongoing reforms aimed at strengthening the competitiveness and attractiveness of the UK’s capital markets.

Last week’s announcement by the government is therefore welcome news.    

New draft legislation will be subject to technical consultation

Draft legislation has been published for a four-week technical consultation ahead of its inclusion in the upcoming Finance Bill. The deadline for responses is 12 October 2023.

While the overall direction is positive, the draft legislation gives rise to questions.  For example, it defines “capital-raising arrangements” as “arrangements pursuant to which relevant securities are issued by a company for the purpose of raising new capital.”  “New capital” however is not defined, and could therefore lead to uncertainty as to how broadly HMRC may interpret the concept of capital raising.

It is therefore important for industry to highlight any concerns as part of the consultation process and members are encouraged to raise any technical considerations with UK Finance.

The draft legislation, explanatory note and TIIN published can be found at Stamp Taxes on Shares: Removal of 1.5 per cent charge on issues and certain related transfers - GOV.UK (www.gov.uk).