The Budget Resolutions published following the Autumn Statement 2023 give temporary statutory effect to provisions intended to remove the UK’s 1.5% stamp duty charge in many circumstances where it would have previously been disapplied under EU law and to an extension of the growth market exemption.   

The 1.5% stamp duty charge: revival averted?

As you may recall, the Retained EU Law (Revocation and Reform) Act 2023 had raised the spectre of a resurrection of the 1.5% stamp duty (or stamp duty reserve tax) charge in circumstances where it had been disapplied for being incompatible with the Capital Duties Directive following the HSBC line of cases. We first discussed this here.

In September 2023, HMRC published draft legislation for inclusion in the next Finance Bill that would have prevented the charge from arising in respect of a share issue or transfer in the context of a capital raising. In our post on the draft legislation, we raised two points: that the draft legislation did not go as far as the CJEU decisions on the Capital Duties Directive (which also prohibit a tax charge on transfers “to a clearance service for the sole purpose of listing those shares on a stock exchange” where there is no change of beneficial ownership) and that there could be a timing issue (as the Revocation and Reform Act would apply from the start of 2024, so likely before the Finance Bill had been enacted). How have these been addressed? 

The provisions in the Budget Resolutions have been expanded (when compared to the draft legislation) to include new concepts of “exempt listing instrument” (in respect of stamp duty) and “exempt listing transfer” (in respect of SDRT) to cover transfers in the context of a first listing on the relevant stock exchange where there is no change in beneficial ownership and that stock exchange is part of HMRC’s extensive list of “recognised stock exchanges”. This goes towards addressing the first point. 

The fact that the provisions are included in Budget Resolutions should resolve the timing issue because these give the changes temporary statutory effect until the legislation can be enacted as part of the Autumn Finance Bill 2023 (to be published before the end of this year). There are certain limitations to this temporary statutory effect, including that a “resolution ceases to have statutory effect, however, if a bill varying or renewing the taxes to which it relates is not read a second time by the House within the next 30 days on which the House sits after the resolution is agreed to” (see Erskine May), but it should be within the government’s power to ensure that these limitations are not tripped. In practice, however, it remains to be seen what approach will be taken by major clearance service providers as regards reliance on the Budget Resolutions.

There is one additional point to note in respect of the 1.5% charge: the Budget Resolutions also make provision to exempt transfers of treasury shares from the charge which seems intended to ensure that “issues” out of treasury are treated in the same way as fresh issues. 

Extension of the growth market exemption

On a related note, the Autumn Statement 2023 also announced an extension of the exemption from stamp duty and SDRT in respect of shares traded on a recognised growth market. A “recognised growth market” is a market approved as such by HMRC – see the current list here. At present, only recognised stock exchanges can be approved if they meet certain conditions, including that the majority of companies whose shares are admitted to trading have a market capitalisation of less than £170 million. The measure would extend the exemption so that FCA-regulated multilateral trading facilities could qualify, and the market capitalisation threshold is raised to £450 million. It is included in the Budget Resolution so as to have temporary statutory effect from 1 January 2024 until it is enacted as part of the Autumn Finance Bill 2023.