UK Tax Law On Recognised Stock Exchanges To Be Clarified

by Amanda Banks, Tax-news.com, London

01 May 2001

Following the transfer of the UK Listing Authority (UKLA) from the London Stock Exchange (LSE) to the Financial Services Authority (FSA) last year, the UK's Inland Revenue department has released proposals to clarify the tax law on recognised stock exchanges because the move had complicated the issue of 'listed terms'.

The Revenue says the UKLA transfer focused attention on the meaning of the listed terms. Under the new arrangements, the FSA is responsible for assessing compliance with UK requirements for admission of shares and securities to the 'official list' whilst the LSE is responsible for deciding which securities to admit to trading on its markets. The Revenue has now reviewed the legislation and is proposing a revised interpretation of the listed terms which include phrases such as: "listed on a recognised stock exchange", "listed in the official list of a recognised stock exchange" and "officially listed on a recognised stock exchange."

The Revenue says that the phrases are frequently used in the Tax Acts as a convenient test to help define the application of tax provisions, for instance to exclude listed shares from the benefits of incentives offered through Venture Capital Trusts in the UK. Shares and securities admitted to trading on the Stock Exchange Alternative Investment Market (AIM) are unlisted, but until now it has regarded those shares and securities on most semi-official and junior markets of overseas exchanges as listed and it has become clear that the terms employed must be clarified in order to avoid any confusion.

In a statement, the Revenue explained that its proposed interpretation covers all recognised stock exchanges to reflect new listing arrangements in the UK. If adopted, this interpretation would preserve the treatment of AIM shares and securities as unlisted but it would represent a change of view for some EU markets whose shares and securities have, until now, counted as listed.

The government said that before confirming the position, it is inviting consultations on the interpretation and on the measures that might be taken to ensure that taxpayers are not disadvantaged should the revision go ahead.

Details of the Revenue's proposed interpretation and suggested protective measures can be found at: http://www.inlandrevenue.gov.uk/news/press.htm

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