STSM041270 | Exemptions and reliefs: exemptions: growth market shares - SDRT exemption

Section 99 (4B) FA1986 excludes securities admitted to trading on a recognised growth market (whether one or more than one recognised growth market) but not listed on that or any other market from the definition of chargeable securities (shares are not “listed” on recognised growth markets – they are admitted to trading). This means they are exempt from both the principal 0.5% and higher 1.5% charge to SDRT. The exemption was introduced on 28 April 2014.

‘Admitted to trading’ refers to the admission to trading of securities on a market in accordance with the rules of that market.

‘Listed’ is defined at s1005(3)-(5) Income Tax Act 2007 - broadly it means listed on a recognised stock exchange and included in an official list.

A list of recognised stock exchanges is published on gov.uk. Tables 1 and 2 show which exchanges are recognised stock exchanges, and which markets on those stock exchanges have “listed” and “not listed” status.

A list of recognised growth markets can be viewed at STSM041330.

Eligible securities qualify for the exemption wherever they are traded and will be designated as exempt for SDRT in CREST (the system that settles transactions and collects SDRT) at a static data level.

Euroclear UK & International Ltd (EUI), the company that operates CREST, maintains a list of securities which are eligible for the exemption.

To ensure its securities are correctly flagged in CREST, a company should complete and submit any self-certificate/notification required by the recognised growth market concerned or EUI.

It is possible that a customer purchased eligible securities, but was charged SDRT, for instance between a security becoming eligible for the exemption and the CREST settlement system being updated. A customer who purchased eligible securities and was charged SDRT incorrectly should apply to HMRC for a refund. There’s guidance on how to do this on the gov.uk website.

A customer may have purchased securities for which exemption was incorrectly claimed when inputting the details of the transaction into CREST. In such cases, a CREST member may be able to:

• cancel the transaction and re-instruct with the correct stamp payable flag, or

• pay on a non-settling own account transfer (NC OAT), or

• account for SDRT outside of CREST, making payment directly to HMRC.

Further details about paying SDRT are on the gov.uk website.

The SDRT growth market exemption extends to all chargeable securities under section 99 FA1986 – so, for example, interests in, and rights to acquire chargeable securities under section 99 (3)(b) and (c) FA1986 will be exempt provided the underlying security is admitted to trading on a recognised growth market, but not listed on any market.