The Chancellor announced in his Budget Statement that he is “abolishing altogether stamp duty on shares traded on growth markets such as AIM”. However, the Budget document reveals there is some process to get through before this takes effect – the Government will first consult on the abolition of stamp duty on shares quoted on growth markets such as AIM and the ISDX Growth Market, with a view to its abolition in 2014.
As acknowledged by the Chancellor, many people, including The Quoted Companies Alliance, have for some time argued that the UK tax system favours debt financing over equity investment as a result of the imposition of stamp duty on transfers of shares.
This announcement comes shortly after the release of a consultation by HM Treasury on amending the rules for ISAs to allow AIM and other growth market shares to be held in a Stocks and Shares ISA. At present, only shares listed on the London Stock Exchange (and the main markets in other countries) can be held through an ISA.
The combined effect of these proposals, if taken forward, should improve the financing conditions for AIM-listed companies and may encourage other unlisted companies to float on AIM.
It is a shame that this measure is not currently proposed to be wider and apply to unquoted companies as well as those on the Official List (London is one of only three major stock exchanges where a transfer tax is still in place).