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Today, the Economic Secretary to the Treasury, Ed Balls MP, brought representatives from the European Commission together with leading representatives of London's financial sector, while also announcing the implementation of tax measures to boost the competitiveness of the City of London.
The measures announced today will modernise the tax system to remove obstacles to competition and expand choice in trading financial instruments in the UK. They will allow firms to benefit from the new opportunities offered by liberalisation of financial regulation in the European Union, and specifically from the introduction of the Markets in Financial Instruments Directive (MiFID).
The announcement coincided with an informal meeting of the High Level Group on City competitiveness, during which senior figures from the UK-based financial services sector met European Commissioners Charlie McCreevy and Neelie Kroes to discuss the future direction of financial services policy in Europe, including developments in trading securities.
Speaking after the meeting, Ed Balls said:
"The opening up of financial markets in the EU is a great opportunity for the UK. I was grateful for the positive discussion this morning with City leaders and Commissioners McCreevy and Kroes on how we can, together, address some of the key policy challenges facing European financial services in the coming months. With the measures I am announcing today, the structure of the UK tax regime will reinforce the more open and competitive trading environment that we are creating in Europe."
Background:- Today's meeting is the second meeting of the Chancellor's High Level Group on City Competitiveness. The first meeting of the High Level Group (HLG) took place at No11 in October 2006. - see press notice 77/06
- The Government has supported the introduction of greater competition in the EU financial sector through the Markets in Financial Instruments Directive (MiFID). The UK is the only major financial centre in the European Union to transpose the Directive into domestic law. This gives UK-based financial firms the maximum time to prepare for the opportunities created by the new trading environment.
- The Government is also acting to ensure that other non-regulatory obstacles to greater competition in trading financial instruments are removed, including bringing the tax system closer into line with the liberalised regulatory environment.
- The details of the three measures announced today are as follows:
· First, from November 2007, the Government will no longer require transactions in shares admitted to trading on a regulated market under MiFID to be reported to that market, or those intermediaries to be members of that market, in order for intermediaries to benefit from stamp duty relief. Currently, relief from stamp duty is available for intermediaries that trade securities listed on the main market of the London Stock Exchange (LSE) only if they are members of the LSE and they report their trades to the LSE. This will allow new providers of transaction reporting services to enter the market more easily. The Government is today publishing draft clauses for consultation in advance of this year's Finance Bill;
·· Second, the Government is announcing that, in addition to shares admitted to trading on a regulated market, it also intends to extend this approach to include shares admitted to trading on a Multilateral Trading Facility (MTF). Currently, in order to benefit from stamp duty relief, intermediaries trading in such securities are required to report transactions to the market on which the securities are admitted to trade. The Government intends to remove this requirement, in order to further extend choice in transaction reporting. However, before proceeding with this proposal, the Government is providing time for the Financial Services Authority to consider fully any possible regulatory implications from this change and will provide an update on progress at the Pre-Budget Report; ·
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* Third, the Government also proposes to modernise the definition of a Recognised Stock Exchange for tax purposes to allow shares traded on other regulated markets under MiFID to benefit from the same tax arrangements that currently apply only to the LSE in the UK. For example, this will allow shares listed by the UK Listing Authority and traded on a regulated market under MiFID to be held in an Individual Savings Account or to meet the listing requirement to be a UK Real Estate Investment Trust. The Government will publish draft clauses in advance of this year's Finance Bill.- Taken together, these changes will help expand choice and increase competition in the provision of services to trade financial instruments in the UK. This is building on the already welcome signs of competition from new reporting facilities and Multilateral Trading Facilities such as Project Boat and Project Turquoise.
