- Investment trusts subject to ‘pernicious’ UK stamp duty regime
- This means that savers pay a 0.5% tax when they buy shares in these trusts.
- Trusts also charge 0.5% when they buy company shares
Britain must scrap “double taxation” blighting popular stock market investments to help revive the City of London.
Investment funds – such as Scottish Mortgage and Polar Capital Technology – are listed companies and are therefore subject to the UK’s “pernicious” stamp duty regime.
This means savers pay a 0.5 per cent tax when they buy shares in the trusts.
At the same time, trusts are charged 0.5 per cent when they buy shares in companies in which the fund managers invest.
By contrast, savers do not pay stamp duty when they invest in so-called “open” funds that are not listed on the stock exchange.
“Pernicious”: experts say double taxation (or “double dipping”) on listed trusts is “unfair” for the sector
Experts said double taxation (or “double dipping”) on listed trusts is “unfair” to the sector. They said it also curbs savings and investment and hampers the stock market and the broader economy.
Ministers are facing growing calls for stamp duty on share trading to be scrapped to level the playing field with countries like the United States.
Leading industry figures told the Mail that if this is not considered possible then the Government should at least get rid of this in investment trusts.
Richard Stone, chief executive of the Association of Investment Companies which represents the sector, said: ‘Stamp duty on shares should not be there at all. It is a tax on liquidity. But if you can’t get rid of it completely, they should get rid of double dipping.
The biggest unfairness is that you’re losing 0.5 per cent before you even start, compared to investing in an open-ended fund.’
He added: ‘The current approach taxes investors twice. Ending this injustice should be a priority.”
Investors pay 0.5 per cent stamp duty on the price of UK-listed shares they buy, but the tax does not apply to the purchase of shares in foreign companies.
A report by municipal broker Peel Hunt describes it as “a pernicious tax that is having a material impact on stock markets.”
Meanwhile, Abrdn boss Stephen Bird has branded the tax “as unpatriotic as it is economically destructive”.