Duty reform on shares trade

STAMP duty on electronic transfer of shares is to be intro for the first time in the 1996 Finance Bill.

STAMP duty on electronic transfer of shares is to be intro for the first time in the 1996 Finance Bill.

An outline of the Bill, published yesterday, revealed that stamp duty arrangements on share transfers are being revised. Stamp duty on the transfer of shares generates between £20 million and £25 million a year.

But the present, paper based share transfer system will be replaced by the CREST paperless settlement system later this year. To avoid the loss of this stamp duty revenue, Department of Finance officials are now in discussions with the stock exchange to find a method of charging duty on paperless transfers.

Published as a preliminary list of measures to facilitate discussion and consultation before final publication of the Bill at the end of March, the outline includes more detail on measures announced in the January Budget as well as a number of new measures.

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Details were given of the new statutory certification requirements for industrial Business Expansion Scheme projects involving investment of over £250,000. Guidelines for certification of BES projects in the tourism, music and other areas are to be announced soon.

New measures include arrangements to remove anomalies in the treatment of foreign exchange gains and losses by trading companies on the payment of corporation tax and a number of measures aimed at promoting business at the International Financial Services Centre (IFSC).

Details of the treatment of foreign exchange gains and losses are not yet finalised. But the Department of Finance said the aim was to ensure that companies operating predominantly in foreign currencies did not suffer unintended tax costs. These could arise either because of adverse exchange rate movements between the computation of their Irish corporation tax liability and its payment six months later, or through their hedging arrangements.

At the moment, currency gains and losses on the tax bills of these companies are ignored for tax purposes. But gains on hedging transactions are taxed at the 40 per cent Capital Gains Tax rate and losses are allowable against tax. Arrangements under consideration include allowing companies to write off their hedging costs or exchange rate losses against tax and charging CGT on hedging profits.

IFSC companies will benefit from measures to extend the of securitisation business they can transact - currently only mortgage securitisation is allowed. Certain exemptions from withholding tax arrangements are to be extended to IFSC companies and IFSC companies will be allowed hold units in IFSC managed collective funs without affecting the tax status of these funds.

Other new measures include the removal of the £10 duty on both the memorandum an articles of association when a company is incorporated. The revenue loss to the Exchequer will be an estimated £300,000 year.

Under the Bill, stamp duty" will no longer be charged on transfers of American Depositary Receipts issued in the US in respect of unquoted Irish shares. This will benefit unquoted Irish companies who wish to raise funds in the US market.