Collectives: exemptions: exempt investments - interests other than in collective investment schemes
Where the terms of a collective investment scheme (such as a unit trust or Open-Ended Investment Company (OEIC)) permit investment by the scheme in the holding only of ‘exempt investments’, FA86/S99(5A)(b) provides that no charge to Stamp Duty Reserve Tax (SDRT) arises under FA99/SCH19 or FA86/S87 when units or OEIC shares in the scheme are surrendered or otherwise transferred.
Section 99(5B) Finance Act 1986 provides rules for determining when an investment is regarded as exempt and differ for:-
- direct investments held other than an interest under a collective investment scheme, and
- investments that are holdings in other collective investments schemes (such as unit trusts and OEICs). (See STSM105050 )
Investment holdings other than interests held in a collective investment scheme
An investment is an exempt investment for the purposes of FA86/S99(5B)(a) if, and only if -
(i) it is not an investment on the transfer of which ad valorem stamp duty would be chargeable.
So, for example, transfers of gilts, commercial paper and most forms of unsecured loan capital as defined in FA86/S78(7), are not chargeable to stamp duty and these therefore can be regarded as an exempt investment. The holding, however, of any United Kingdom (UK) registered convertible loan capital that falls within the provisions of FA86/S79(5) and FA86/S79(6) is to be classified as a non-exempt investment.
(ii) it is not an investment on the acquisition of which stamp duty land tax would be chargeable under Part 4 of the Finance Act 2003; and
(iii) it is not a ‘chargeable security’ (within the meaning of FA86/S99) for the purposes of SDRT.
Cash or other funds held for day to day management are not regarded as investments (FA86/S99(5B)(d)).
See STSM101010 for the meaning of a collective investment scheme.
See STSM101020 for the meaning of a unit trust.
See STSM101050 for the meaning of an open-ended investment company.
See STSM021220 for information on convertible loan capital.