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STSM041285 | Exemptions and reliefs: exemptions: growth market shares – SDRT and Stamp Duty exemption – Depositary Receipts

From HM Revenue & Customs · Stamp Taxes on Shares Manual

What is a depositary receipt?

Depositary receipts (DRs), allow overseas investors to invest in UK companies via the DR. Detailed information on DRs can be found at STSM051010.

Can depositary receipts benefit from the growth market exemption?

DRs are not chargeable securities for SDRT purposes, as they are specifically excluded by section 99(6) FA1986. For Stamp Duty purposes, they are not regarded as stock or marketable securities under section 122 Stamp Act 1891.

Therefore, they do not need to rely on the growth market exemption, as they are outside the scope of SDRT and Stamp Duty.

If depositary receipts in a UK company are listed on a market, does this affect the availability of the growth market exemption?

The growth market exemption is available where chargeable securities or stock or marketable securities are admitted to trading on a recognised growth market, but not listed on that or any other market.

If, under an DR programme, DRs are listed on a market this, in itself, will not prevent the growth market exemption from being available where the shares of the company are admitted to trading on a recognised growth market but not listed on any market.

Example

  • Shares in a UK company (Growthco) are admitted to trading on AIM, which is a recognised growth market. Its shares are not listed on any market.

  • American Depositary Receipts (ADRs) in Growthco are listed on the Nasdaq Global Market. Nasdaq is a recognised stock exchange, and all its markets have “listed” status.

As ADRs are not chargeable securities or stock or marketable securities, then:

  1. For SDRT purposes the conditions of section 99(4B) FA1986 will be met, as no chargeable securities in Growthco will be listed.

  2. For Stamp Duty purposes, the conditions of paragraph 5 of Schedule 24 to FA2014 will be met, as no stock or marketable securities in Growthco will be listed.

Therefore, the growth market exemption will be available on agreements to transfer Growthco shares (SDRT) or on any instrument of transfer effecting a transfer on sale of Growthco shares (Stamp Duty).

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.