When buying UK and Irish shares, nothing annoys investors more than stamp duty. The additional 0.5% tax in the UK and whopping 1.0% in Ireland make it even harder for a trade to be profitable and can make what looks like a bargain appear less so. Thankfully there are ways of avoiding stamp duty charges when trading Irish and UK shares. Below we look at how.

AIM Shares

The easiest way to acquire Irish and UK shares without paying stamp duty is to find eligible candidates from the High Growth Segment and LSE’s (London Stock Exchange’s) AIM (Alternative Investment Market). This is thanks to April 2014 seeing a long hoped for change in UK regulations and stamp duty abolished on High Growth Segment and AIM-listed shares with the aim of encouraging more UK and European smaller companies to list in London to reduce their cost of capital over the medium- to long-term. Since AIM’s launch in 1995 it has helped 3100 companies raise £67bn. For investors, removal of the tax reduces the cost of investing in securities, and provides an incentive to a wider audience to back a bigger group of high growth SMEs (Small and medium sized enterprises).

Which stocks are eligible?

Quite simply any shares that are traded on a recognised growth market such as LSE’s AIM, and are not also listed on another recognised stock exchange. A full list is available from clearing house Euroclear.

What constitutes a growth market?

Growth markets tend to include a majority of companies with market capitalisation of less than £170 million. While London’s High Growth Segment has criteria for inclusion such as EEA incorporation, demonstration annual revenue growth of at least 20% for 3 years and a 10% free float of shares worth at least £30m, AIM listings benefit from having no such restrictions.

Other exemptions

Trades which are settled with paper certificates attract stamp duty charges. However, you may notice that some shares are already exempt as they aren’t considered applicable, while others actually have their own specific exemption rules. Acquiring shares via the following methods attracts no stamp duty.

 Shares gifted to you or acquired free of charge

 Shares transferred into your name from a spouse when you marry

 Shares transferred between trustees

 Shares transferred as a settlement to shareholders when a business is wound up by HMRC

 Shares transferred into your name as a means of loan collateral or security

 Shares labelled specifically as a “loan”

 Shares transferred to the beneficiaries of a trust upon being wound up by HMRC. The following can also be free of stamp duty, but as always certain instances may see specific legislation prevent it.

 Shares left as a form of inheritance

 Shares transferred to you as the result of divorce proceedings or civil

partnership dissolution.

 Shares that make up a type of loan capital.

What happens if a trade is exempt?

Stamp duty exempt trades in UK or Irish shares mean there a few things you don’t need to do. Documentation does not need to be stamped or sent to HMRC. However, further documentation may be required should a chargeable consideration in excess of £1,000 be submitted for transfer in which a specific exemption exists. For more information speak to HMRC or a dedicated investment professional/tax advisor.

Don’t get caught out

Trading and acquiring shares free of stamp duty is all an well, however, you must always ensure that you are doing things correctly (read legally). If not, you could be liable for heavy penalties (fines, interest payments) by HMRC. However, if you feel you have been wrongly charged/penalized an appeals process can help you contest and prove that your trade is exempt/ does qualify for stamp duty.

Steering clear of Stamp Duty has never been easier

The changing landscape for investment charges (ever rising, desire for more transparency) means that stamp duty has become an issue for many. The fight to get it abolished on AIM was long but the issue is being addressed by HMRC and AIM trades are now more appealing and the market’s profile has been increased and more investors and companies are getting involved. When combined with other cost efficient ways of trading it is clear that trading for less is becoming easier for the masses.