STSM107060 - Collectives: contributions, mergers and other matters: amalgamation of an authorised unit trust with an Open-Ended Investment Company

Where an Authorised Unit Trust (AUT) is amalgamated or merged with an Open-Ended Investment Company (OEIC), the provisions of Regulations 9 & 10 of the Stamp Duty & Stamp Duty Reserve Tax (Open-Ended Investment Companies) Regulations 1997 (SI1997/1156) allow an exemption from Stamp Duty and Stamp Duty Reserve Tax (SDRT) on the transfer of property held by the AUT to the OEIC.

In order to qualify for exemption, all of the following conditions, have to be fulfilled:-

  • The transfer forms part of an arrangement for the amalgamation or merger of an AUT trust to an OEIC whereby the whole property of the trust fund becomes part (but not whole) of the property of the existing OEIC;
  • Under the arrangement, all of the units in the trust fund are cancelled and extinguished;
  • New shares are issued as consideration by the OEIC to the former unit holders proportionate to their interest held in the trust fund; and
  • The consideration under the arrangement does not include anything else other than an obligation by the OEIC to assume or discharge the liabilities of the unit trust trustees.

While not subject to Stamp Duty, an instrument which is executed to transfer stocks or marketable securities from the AUT to the OEIC, is not regarded as being duly stamped, unless:

  • It is stamped with the duty to which it would be liable but for the exemption; or
  • It has, in accordance with SA1891/S12, been ‘adjudicated’ and stamped with a particular stamp denoting that it is not chargeable with duty.

So the exemption only applies if the instrument has been sent to HMRC for adjudication and HMRC is satisfied that exemption is available.

Units which are cancelled and extinguished as part of an amalgamation/merger arrangement undertaken prior to 30 March 2014 are not subject to a SDRT FA99/SCH19 charge. This is because the units are not regarded as being ‘surrendered’ by the unit holders to the manager of the unit trust upon which a charge may otherwise arise.

The exemption does not extend to an AUT which is amalgamated / merged with a non-UK OEIC or other foreign collective investment scheme. This is because an OEIC is defined, for the purposes of stamp duty and SDRT, as being a UK incorporated company.

See STSM101030 for the meaning of an AUT.

See STSM101050 for the meaning of an OEIC.

See STSM021040 for the meaning of stock or marketable securities.

See STSM103005 for information on the abolition of FA99/SCH19.