- Stamp duty at risk – AstraZeneca’s proposal to move from ADRs to directly listed shares on the NYSE is set to reduce stamp duty by c.£200m pa. Other UK companies are likely watching with interest, which could put a big hole in a tax that generates £4.5bn.
- Global competition – There is a global battle for capital, talent and companies. We believe losing our companies to the US due to stamp duty would be a massive own goal.
- Action required – Government has to respond. The obvious answer in our view is to scrap stamp duty, as it would trigger a material improvement in UK equity valuations, drive higher CGT receipts, enhance activity in UK capital markets, and increase spending power.
Harmonisation. AstraZeneca announced on 29 September that it intended to harmonise its listing structure, which requires moving its US listing from an ADR to a direct listing on the NYSE (resulting in all the shares being transferred into DTC, the US clearance service, and those shares listed on London being held through a Depositary Interest). The next step is a shareholder vote on 3 November, with likely implementation on 2 February 2026. See the circular and FAQ.
The legal title of Depositary Interests (DI) is held by a nominee in Crest (the electronic settlement system). Transfers of DIs are not subject to Stamp Duty Reserve Tax (SDRT) if the underlying shares they relate to are held in a clearance services such as DTC. Over 90% of SDRT is now collected through Crest.
AstraZeneca provides information relating to stamp duty in its circular. The most relevant paragraphs are:
“No UK stamp duty will be payable in respect of transfers of AstraZeneca Shares or AstraZeneca DIs following the implementation of the Harmonised Listing Structure, provided that no written instrument of transfer is used to effect the transfer (such an instrument of transfer should not be necessary in respect of AstraZeneca Shares held within the DTC clearance system).
While the AstraZeneca Shares are held within the DTC clearance system, agreements to transfer such shares should not be subject to SDRT (provided DTC continues to satisfy various conditions specified in UK legislation). AstraZeneca has received HMRC clearance confirming that agreements to transfer AstraZeneca DIs which represent AstraZeneca Shares held within the DTC clearance system will also not be subject to SDRT.
Transfers of, or agreements to transfer, AstraZeneca Shares from the DTC clearance system into another clearance system (or into a depositary receipt system) should not be subject to UK stamp duty or SDRT, provided that the other clearance system or depositary receipt system satisfies various conditions specified in UK legislation.”
AstraZeneca also announced that it would remain UK headquartered and continue to be included in the FTSE 100 and OMX 30. A company needs to have a primary listing in the UK to be included in the FTSE 100, whereas inclusion in the OMX 30 can be through a primary or secondary listing (assuming sufficient liquidity). Retaining the primary listing in the UK means that the company would not be eligible for the S&P 500.
We note that Indivior used the same structure, with its shares held in DTC and DIs traded in Crest, and as a result the shares were no longer subject to SDRT, even while it had its primary listing in the UK. The company subsequently moved its primary listing to the US and cancelled its secondary listing in the UK. In its 20F filing Indivior stated;
“No UK stamp duty will be payable in respect of transfers of the ordinary shares, provided that no written instrument of transfer is entered into (which should not be necessary, while the ordinary shares are held within the DTC clearance system).
While the ordinary shares are held within the DTC clearance system (and provided the DTC satisfies various conditions specified in UK legislation), agreements to transfer such shares should not be subject to stamp duty reserve tax (“SDRT”). The Group has received HMRC clearance confirming that agreements to transfer ordinary shares which are held by way of DIs which will represent ordinary shares held within the DTC clearance system . . . will not be subject to UK SDRT.”
Indivior announced on 1 October that it intends to move its corporate domicile from the UK to the US in order to:
- Expand its US capital markets presence
- Simplify corporate governance and reduce complexity
- Increase potential US equity indexationFurther align with US health policy stakeholders and position itself as a US-based treatment innovator
- UK to US.
Liquidity in AstraZeneca’s shares is likely to shift to the US once the direct listing is enacted, whereas it is currently broadly split equally between London and New York, with c.3% traded in Stockholm. Assuming that liquidity materially increases in the US, and given that the majority of shares are owned by international investors, we believe it is highly likely that in time the company may consider moving its primary listing from London to the US. This would result in a move to a secondary listing in the UK and the loss of the largest constituent of the FTSE 100. This should be considered a real risk in our view, given the company’s shift in emphasis to the US. CRH provides a precedent on the shift in liquidity, with c.96% of its shares now traded in the US since moving its primary listing there, despite having a secondary listing in the UK.
Impact on SDRT. The majority of the £4.5bn of stamp duty on shares (in the 12M to September 2025) is collected through Crest, and the key companies that generate it are in the FTSE 100 (given scale and liquidity). AstraZeneca’s move is therefore set to reduce stamp duty receipts c.5%, a figure that would increase if other companies follow its lead. Assuming AstraZeneca has a positive experience, we believe it likely that other companies will follow. In fact, boards would be negligent if they did not consider this.
Material risk to the UK. The US has a strong pull given the scale of its markets (economic, financial and political), as well as the requirement to demonstrate investment and activity in the US.
Companies that shift listings to the US are likely to shift talent and tax revenues as well. It would be incredibly complacent for policy makers to take our largest companies for granted. They may have historic ties to the UK, but increasingly they have international management and shareholders. They are no longer locked in to their home country, but assess domicile and listing through the lens of shareholder value, rather than patriotic duty.
Equally, boards study moves by other companies and assess the impact and opportunity. AstraZeneca’s changes are likely to drive an increase in liquidity and valuation, which would improve shareholder value and drive competitive advantage. In addition, investors gain from lower transaction costs. As a result, we expect this move will be closely followed and other companies will be encouraged to consider similar steps.
Options for government
We see three key options for government to consider:
Changing the tax treatment so that DI shares relating to UK shares held in clearance services are subject to SDRT. We are not tax experts, so do not know how simple this would be to enact. However, the point is that this would only delay the issue, as other companies are likely to follow AstraZeneca’s lead, resulting in the UK losing companies, talent and tax.
FTSE to change listing rules to allow the inclusion of secondary listings (similar to the OMX 30). Although this would keep companies in the FTSE 100, it would be a pyrrhic victory, as it would encourage them to move to the US.
Remove stamp duty. The government could pre-empt this threat by proactively removing SDRT. After all, you cannot tax what is not there.
The good news
There is a large silver lining in removing stamp duty, as the tax take would increase, for the following reasons:
Having a transaction tax is a major strategic disadvantage in an increasingly global capital market, particularly when the dominant trading venue in the world does not.
Removing stamp duty would be a major boost to London equity markets, resulting in a step-change in market cap, valuations and liquidity. A 5 10% boost to the London market would add £140-280bn to the value of equity holdings.
Capital Gains Tax (CGT) receipts would increase materially. If we exclude the holdings in ISAs (which are CGT free), a reasonable assumption is that CGT receipts would increase by >£5bn per annum (albeit with a delay). The recent changes in CGT allowance (from £12,300 in 2022/23 to £3,000 now) mean that the CGT tax take from an increase in equity values has risen materially.
UK investors hold c.40% of the UK equity market, so a 5-10% increase in market values would add £56-112bn to the wealth of UK savers. A material increase in equity value would translate into greater spending power, as well as appetite to spend.
Removing stamp duty would enhance the attraction of London as a listing venue. This is particularly relevant for the leading Fintech companies, many of whom (eg Revolut) have been particularly vocal on this issue. There are numerous high-growth companies that are likely to list in the next few years. If they list in London, it would transform the view of investors (domestic and international) as to the UK’s attractiveness. It would also drive material economic activity for UK financial service companies.
Action required
We have highlighted in a number of reports the pernicious nature of stamp duty and the long-term damage it has been causing to a vital part of the UK’s financial ecosystem.
The proposed changes from AstraZeneca mean that this shifts from being a niche topic to an essential item for the government to address. The challenge is clear – do we want to have one of the leading equity markets in the world, and retain our largest companies, or are we prepared to let the revenues leave, lose our key companies, and all the considerable value that they provide to the UK?
There is a precedent in making changes to Stamp Duty, such as the measure to abolish SDRT in collective investment schemes in 2014, which was expected to have a negligible cost to HMRC but a positive effect on investments and employment.
