Collectives: exemptions: exempt investments - interests other than in collective investment schemes - Depositary Interests and non-UK incorporated companies
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 FA86/S87 (or FA99/SCH19 where units or OEIC shares are surrenderedback to the fund before 30 March 2014) when units or OEIC shares in the scheme are transferred.
Section 99(5B) Finance Act 1986 provides rules for determining when an investment (other than an interest held in a Collective Investment Scheme) can be regarded as an exempt investment.
Investments in Depositary Interests
Depositary Interests are UK registered securities that enable trading in non-United Kingdom (UK) incorporated and registered company shares to be undertaken and settled in the UK in electronic/paperless form (such as within the CREST system operated by Euroclear UK & Ireland Ltd).
A UK depositary interest in foreign securities is not a chargeable security for the purposes of a charge to SDRT under FA86/S87 (or FA99/SCH19) if the underlying ‘foreign security’ meets all of the conditions in The Stamp Duty Reserve Tax (UK Depositary Interests in Foeign Securities) Regulations 1999 (SI 1999/2383) of being a foreign security.
Shares in a non-UK incorporated and registered company and depositary interests of the same class of security in the underlying company are generally identified by a common ISIN (International Securities Identification Number), so care is required to ensure that holdings are correctly classified.
Investment in non-UK incorporated companies with a UK register
Securities issued or raised by a company incorporated outside the UK that are registered in a register that is kept in the UK by the company are ‘chargeable securities’ for SDRT purposes. Accordingly, interests in, or other rights in, such an investment held by a fund rank as non-exempt investments for the purposes of FA99/SCH19.
Conversely, an investment held by a fund of shares in a non-UK incorporated company which does not hold its share register in the UK is accepted by HM Revenue & Customs (HMRC) as being an exempt investment as such an investment is not of a type that would generally attract Stamp Duty or SDRT on its transfer.
Cash or other funds held for day to day management are not regarded as investments (FA86/S99(5B)(d)).
The FA99/SCH19 charge applies only to units and OEIC shares which are surrendered and transferred prior to 30 March 2014. See STSM103005.
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 OEIC.