Russia in new financial blow as Moscow faces 11 percent GDP fall
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To revoke the status of the MOEX, means investors will not be able to access certain UK tax benefits in the future when trading securities on MOEX. However, HMRC clarified that existing investments will remain protected.
The measure comes after a set of financial sanctions have been imposed against Moscow, in condemnation of the war in Ukraine, significantly striking Russia’s economy.
In an announcement, the Governmental organisation noted the move comes “alongside the unprecedented sanctions the UK Government has placed upon Russia because of their illegal invasion of Ukraine.”
Financial Secretary to the Treasury, Lucy Frazer, said: “As we continue to isolate Russia in response to their illegal war on Ukraine, revoking Moscow Stock Exchange’s recognised status sends a clear message – there is no case for new investments in Russia.”
Recognised stock exchange status is a classification given by HMRC for tax purposes, on application, to qualifying stock exchanges.
According to the HMRC, securities traded on a recognised stock exchange are eligible for certain tax treatments and reliefs.
By removing MOEX’s recognised stock exchange status, the body limits access to certain UK treatments and reliefs for future investments in securities traded on MOEX.
However, access to those treatments and reliefs for existing investments will remain unaffected, the HMRC said.
The body added the measure is in response to restrictions the Bank of Russia has placed on foreign investors on 28 February 2022.
MOEX has banned brokers from selling assets at the instruction of non-residents of Russia, which means it is “no longer operating in line with the normal commercial standards expected of a recognised exchange.”
A draft revocation order will follow a two-week consultation on the measure.
In the announcement, the HMRC added it “has acted in the interests of all those who value fair and open trading on global stock markets.”
Revoking recognised stock exchange status is expected to limit the ability of people who have invested in assets traded on the MOEX to access certain UK tax reliefs which are contingent on that status.
For example, investors will lose an exemption from withholding tax on interest-bearing Qualifying Eurobonds, as well as eligibility for inclusion in an Individual Savings Account.
However, pre-existing investments on MOEX will not be affected by the measure, in what the HMRC called “a fair approach that protects the interests of current UK taxpayers.”
But the UK tax reliefs contingent on recognised stock exchange status will not be able to be accessed in respect of future investments in securities traded on MOEX, unless and until the exchange is once again recognised, the HMRC said.
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