STSM041230 - Exemptions and Reliefs: Exemptions: amalgamation of an authorised unit trust with an open-ended investment company

Regulations 9 and 10 of the Stamp Duty and Stamp Duty Reserve Tax (Open-Ended Investment Companies) Regulations 1997 (SI 1997/1156) exempt, from stamp duty and Stamp Duty Reserve Tax (SDRT) respectively, the amalgamation of an authorised unit trust (AUT) with an Open-Ended Investment Company (OEIC) where:

• the whole of the property of the AUT is transferred and becomes part, but not the whole, of the property of a new OEIC;
• the units in the unit trust are extinguished, and consideration shares are issued in proportion to holdings of the extinguished units; and
• the consideration for the conversion does not include anything else other than the assumption or discharge by the acquiring OEIC of liabilities of the trustees of the target trust.

To take advantage of the stamp duty exemption, the relevant instrument(s) must be adjudicated (STSM022010).

Where the stamp duty or SDRT exemption applies, Regulation 10(3) provides a further exemption from SDRT on agreements to transfer a unit to a fund manager in order that the unit may be extinguished.

For the purposes of these Regulations, the OEIC must be a UK OEIC. Regulation 2 SI 1997/1156 defines an OEIC by reference to Regulation 10(4) SI 1997/1154. In turn Regulation 10(4) SI 1997/1154 defines an OEIC as meaning an ‘open-ended investment company within the meaning given by section 75(8) of the Financial Services Act 1986 [now section 236 Financial Services and Markets Act 2000] which is incorporated in the United Kingdom’.

HMRC confirmed in its SDRT Customer Newsletter Issue No. 7, that units or OEIC shares held as an investment by an AUT or OEIC are ‘property’ or ‘securities’ for the purposes of this exemption and that, accordingly, the exemption applies where the transferring fund’s investments include such units or OEIC shares.