Stop penalising investors who back Britain, says interactive investor

We broaden the campaign to stamp out stamp duty on UK shares.

interactive investor, the UK’s second-largest investment platform for private investors, has contributed to HMRC’s consultation for the potential modernisation of stamp taxes on shares, which closes today.

While ii welcomes efforts to modernise and simplify the tax regime for share purchases, the current proposals are not sufficiently ambitious in their scope. The investment platform has questioned why stamp duty/Stamp Duty Reserve Tax (SDRT) on UK shares is applied at all.

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interactive investor’s proposals come at a time when the government is reportedly encouraging pensions to invest in UK plc, and when pension schemes are increasingly conscious of the costs they pass on to investors. It also comes at a time when the government and regulator is keen to make the UK a more attractive place for investors.

interactive investor has built on and broadened its recommendations earlier in the year for the removal of stamp duty on investment trusts, which it continues to maintain is unfair and anti-competitive. That’s because investors in funds and ETFs do not pay stamp duty on purchases, placing investment trust investors at a clear disadvantage.

ii customers tend, on average, to have similar exposure to investment trusts as they do funds, and appetite for them is not waning. In 2022, the average interactive investor customer investing in investment trusts paid £100 in stamp duty. We are only halfway through 2023 and these customers have already paid an average of £100 in stamp duty on investment trust purchases. This is an issue that’s really hitting customers’ pockets, and penalising them for choosing one product over another.  

Richard Wilson, CEO, interactive investor, says: “As the UK grapples to maintain its competitiveness as a place to list, stamp duty feels increasingly outdated. UK shares have a real part to play in powering private investor portfolios, and many are reliant on the income. But we should not be penalising people for backing Britain.

“The UK has a proud history of retail share ownership, but this must be protected and nurtured. Pension companies are increasingly cost conscious and stamp duty is another unnecessary barrier to investing in UK shares.

“And it’s absolutely baffling to see investors in investment trusts being taxed for supporting a proud and crucial part of the collective investment landscape. This sector is a jewel in the crown of the UK financial services industry, having innovated for over 150 years, supporting both listed companies and long-term assets, and funding infrastructure investment since 1868.”

From a UK competitiveness perspective, interactive investor has also highlighted the operating models employed by firms involved in spread-betting and contracts for difference (CFDs), where it can be unclear whether such services offer an underlying equity dealing service or contracts for difference service (or a combination of both).

In combination with active marketing campaigns, those customers could find themselves caught in a rather opaque relationship, inadvertently investing in complex derivative products. They might feel pleased they have avoided stamp duty, unaware that they have just invested with a firm which bears more of the hallmarks of a casino than an investment company.