Tax repercussions of revoking Moscow Stock Exchange status

The term "recognised stock exchange" appears in a number of places in tax law. When the decision was taken to revoke the status from MOEX, HMRC issued a brief statement regarding certain tax reliefs. The most important points are that future investments in shares traded on MOEX will not be eligible for inclusion in ISAs, or the exemption from withholding tax on certain interest-bearing bonds. HMRC did confirm that existing investments would be protected though.

However, we believe there are other considerations not covered in the statement. MOEX is dominated by foreign investment. UK taxpayers that hold shares on MOEX will probably find they are blocked from selling them for the foreseeable future. They may therefore be seeking to make a negligible value claim, likely to be accepted due to the significant decrease in value of Russian shares. However, as the exchange is no longer recognised does this mean the resulting loss qualifies for income tax relief? Unfortunately, the answer is no - at least without amendments to the legislation. One of the qualifying conditions for share loss relief is that the shares were not listed on a recognised exchange “at the time they were subscribed for”, so the removal of status post-investment is irrelevant.

A further consideration is whether business property relief might now apply to MOEX shares if they form part of someone’s death estate. Unlike share loss relief, this condition is measured at the date of death rather than the time of subscription. In our opinion (and of course this is subject to any changes), this means MOEX shares will now count as “unquoted” and so likely to qualify for relief. However, due to the current low value of Russian shares, and the restrictions on non-Russian nationals being able to trade them this is likely to be of limited value in any case.