STSM041280 | Exemptions and reliefs: exemptions: growth market shares - SDRT exemption - depositary interests/CREST depositary interests

What is a depositary interest?

A UK depositary interest (DI) is a UK registered security that enables trading and settlement of non-UK incorporated/registered shares to be carried out in the UK.

Essentially, a UK ‘wrapper’ is put around another security (generally non-UK shares) and the UK wrapper, or DI (or CREST depositary interest (CDI), which allows settlement to take place within CREST) is traded instead of the underlying security.

Can depositary interests benefit from the growth market exemption?

DIs/CDIs are ‘chargeable securities’ under section 99(3)(b) FA1986 and are, therefore, chargeable to SDRT.

A DI/CDI will qualify for the growth market exemption if the underlying security (or the DI/CDI that represents that underlying security) is admitted to trading on a recognised growth market (shares are not “listed” on recognised growth markets – they are admitted to trading) and not listed on any market.

Should the growth market exemption not apply DIs/CDIs in foreign securities that are listed on a recognised stock exchange may instead be exempt under SI 1999/2383. See STSM041180 for more information.

Further Information

• ‘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 seen at STSM041330.