Calls to Scrap Double Taxation on Investment Trusts to Revive the City of London

Experts in the investment sector are urging the British Government to eliminate the ‘double taxation’ that is currently impacting popular stock market investments. The focus is on investment trusts, such as Scottish Mortgage and Polar Capital Technology, which face a 0.5% stamp duty when shares are bought due to being listed on the UK stock market. Simultaneously, the trusts also incur the same levy when acquiring shares in companies the fund managers invest in.

This scenario has been labeled as ‘double-dipping’ and is considered unjust and harmful to the industry. In contrast, open-ended funds, which are not listed on the stock market, do not subject investors to stamp duty, creating an uneven playing field.

Industry leaders are advocating for the removal of this double taxation, emphasizing that it obstructs saving and investment and has negative repercussions on the broader stock market and economy. The Association of Investment Companies, represented by chief executive Richard Stone, has called for urgent action from the Government.

Richard Stone states that stamp duty on shares should ideally be eliminated entirely, as it directly impacts liquidity. However, if a complete removal is unattainable, Stone suggests at least eradicating the double-dipping practice. He highlights the unfairness that investors face, being 0.5% down at the outset compared to investing in open-ended funds.

A recent report from City broker Peel Hunt describes the stamp duty on share trading as a ‘pernicious tax’ that significantly affects equity markets. Meanwhile, Stephen Bird, the CEO of Abrdn, has criticized the tax, referring to it as ‘unpatriotic’ and economically damaging.