Stamp Duty help please...

[Getafix]

Hi,

I have read here:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/DG_10013514

that stamp duty is not chargeable on share purchases under £1000, however when looking to buy shares with www.iii.co.uk they are still trying to charge 0.5% for amounts under £1000. I contacted their online (iii) staff and they say the government website is wrong?! Which is it? Maybe I need to contact someone higher at iii else maybe I have misunderstood?

 

[Jack o'Clubs]

Hi,

I have read here:
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnSavingsAndInvestments/DG_10013514

that stamp duty is not chargeable on share purchases under £1000, however when looking to buy shares with www.iii.co.uk they are still trying to charge 0.5% for amounts under £1000. I contacted their online (iii) staff and they say the government website is wrong?! Which is it? Maybe I need to contact someone higher at iii else maybe I have misunderstood?

i think you may be confusing stamp duty (which is for paper transactions, ie share certificates) and stamp duty reserve tax which is for CREST / electronic transactions. As far as I know, SDRT has no lower limit. It's to do with whether it's cost effective to collect the tax for paper transactions when the tax is less than a fiver.

 

[Getafix]

Thanks Jack, your help is much appreciated. What confused me was that it was displayed as Stamp Duty and not "Stamp Duty Reserve Tax" (SDRT) like you mention. Thanks again.

 

[Getafix]

Though to be honest I hadn't known the difference anyway before you mentioned (my re-reading of government website a little embarrassing as seems clear now )

 

[TheBramble]

It's only payable on shares in companies that are incorporated in the UK or foreign companies who maintain a share register in the UK.

I presume CFDs don't meet your investment requirements as these are free of stamp duty.

 

[Getafix]

Unforunately I can't use CFDs as want to buy specifics shares (not indexes/funds). iii offer a £1.50 commission charge on stocks but the downside is they have to be bought on specific days (4 slots a month)...so I was thinking to keep costs low to use the £1.50 per share commission and break up the purchase into £999 over the month so as to avoid SD... was a good plan until I learned of difference between SD and SDRT! So now there is 0.5% charge and the £1.50. Proves quite expensive. A £3k investment incorporating a total charge of £16.5! No wonder people moving away from investing over here. Having said that...when I was first looking to invest I looked at overall performance of S&P versus ftse and found s&P better overall (albeit small) but a "better pond to fish from"...well that was first impression until I learned on 15% US tax on dividend payments which are difficult to get back when using an ISA etc... Swings and roundabouts... Makes the game so much more difficult having to incur losses (unnecessary charges imo) upfront!

 

[TheBramble]

Makes a pleasant change to see someone even considering transaction/tax/commissions costs in their trading endeavours. Sorry I can offer any suggestions. Mind you, trade FX on a 5 min chart and you won't have to worry about any tax implications.....

 

[Jack o'Clubs]

Unforunately I can't use CFDs as want to buy specifics shares (not indexes/funds). iii offer a £1.50 commission charge on stocks but the downside is they have to be bought on specific days (4 slots a month)...so I was thinking to keep costs low to use the £1.50 per share commission and break up the purchase into £999 over the month so as to avoid SD... was a good plan until I learned of difference between SD and SDRT! So now there is 0.5% charge and the £1.50. Proves quite expensive. A £3k investment incorporating a total charge of £16.5! No wonder people moving away from investing over here. Having said that...when I was first looking to invest I looked at overall performance of S&P versus ftse and found s&P better overall (albeit small) but a "better pond to fish from"...well that was first impression until I learned on 15% US tax on dividend payments which are difficult to get back when using an ISA etc... Swings and roundabouts... Makes the game so much more difficult having to incur losses (unnecessary charges imo) upfront!

FWIW, you can buy individual stocks with CFDs, although if you want to go too far down the market cap scale it's likely to be tricky. Also retail CFDs are really designed to provide leverage which you end up paying for in interest costs whether you want it or not, so in any case might not suit what you're doing.

As Bramble says, nice to see someone taking costs into account, although not sure that around 0.55% on your £3k is going to be particularly material over the time frame you appear to be investing over.

 

[Getafix]

Thanks again guys, I really need to be more careful when reading/interpreting your responses. For some reason when I was reading CFD I was thinking ETF... I must be dyslexic! I will look at CFDs as don't really know much about them and they could be useful now or some point in the future? I am looking to invest in a company for a minimum of around 6 months - hopefully around 3 years average in an ISA. The companies I am looking to invest in will not be as low as being AIM companies but higher on LSE (I believe the market name according to LSE is "UK Main Market'?). I have placed an order for tomorrow for:

BWNG BROWN (N)
FXPO FERREXPO
IPF INTERNATIONAL PERSONAL FINANCE

(based on a Ben Graham modified selection strategy)

Would these ("UK Main Market") be available in a CFD? Maybe you could kindly point me somewhere where I could check listings?

 

[Getafix]

"Mind you, trade FX on a 5 min chart and you won't have to worry about any tax implications....." Lol... I don't know whether this would be good or bad advice lol, just shows how novice I am to this game!

 

[Jack o'Clubs]

CFD's aren't ideal for that period of investing, given the interest charges (unless you want to gear up). Do some reading up, but I think you'll find them unsuitable.

I run a medium-term long/short UK equity portfolio which typically has three to six month holding periods and quite happily absorb a dealing cost (comms both ways and stamp duty) of about 0.6%. There's the bid/ask spread on top of that of course, although that's usually minimal for anything with liquidity.

In terms of costs, have you thought about how efficient it is to leave the broker with discretion over what day and time the trades are made, rather than placing the orders yourself? Might cost you more than the 0.55%...

 

[Getafix]

CFD's aren't ideal for that period of investing, given the interest charges (unless you want to gear up). Do some reading up, but I think you'll find them unsuitable.

Thanks, yes, from your description it does sound unsuitable, but I will read up on, so much to learn.

I run a medium-term long/short UK equity portfolio which typically has three to six month holding periods and quite happily absorb a dealing cost (comms both ways and stamp duty) of about 0.6%. There's the bid/ask spread on top of that of course, although that's usually minimal for anything with liquidity.

Do you post them here (journal perhaps) I would be interested having a look.

In terms of costs, have you thought about how efficient it is to leave the broker with discretion over what day and time the trades are made, rather than placing the orders yourself? Might cost you more than the 0.55%...

Yes, I have considered this, I am in two minds about it as feel this will be more a case of learning from experience. One part of me says the price must be pretty decent due to financial regulations etc on best price execution. Another part of me says if many people all wanting same share (using same iii supermarket) there is a liklihood of bad price due to short lived high demand? Then again iii could have more sellers?! I think I'll just have to get a feel for it. Regardless I don't think I will be able to get a better price myself - more so the benefit of being able to buy/sell as and when necessary instead of waiting for one of the 4 slots during the month!? I'll go for "instinctive" cheaper option for now.

 

[Jack o'Clubs]

Do you post them here (journal perhaps) I would be interested having a look.

No, because they'd not be of much interest to the 5-min forex chart brigade, but I did once start a thread on methodology:

http://www.trade2win.com/boards/equ...od-trader-strategy-longer-term-investors.html

Current longs are: ELTA, ELM, WICH, SDY, MOR, AV., METP, ICP, NWR, HOIL, BBA, AME, UEM, LLPC and SYT (US ADR), shorts are AGR, ASC, HIK, TT and RMV.

Yes, I have considered this, I am in two minds about it as feel this will be more a case of learning from experience. One part of me says the price must be pretty decent due to financial regulations etc on best price execution. Another part of me says if many people all wanting same share (using same iii supermarket) there is a liklihood of bad price due to short lived high demand? Then again iii could have more sellers?! I think I'll just have to get a feel for it. Regardless I don't think I will be able to get a better price myself - more so the benefit of being able to buy/sell as and when necessary instead of waiting for one of the 4 slots during the month!? I'll go for "instinctive" cheaper option for now.

It's not so much whether iii take you for a ride (I doubt it too), more the control you have in timing your buys: simply put if you're buying for the long term, I'd rather buy on a day the market is off 1% than up 1%. I also like to buy using a limit order so i get the best possible price on the day if I can. Doing that, I'd certainly hope to be able to compensate for my trading costs.

 

[Getafix]

Thanks for the link, I'll read through that first thing tomorrow. Interesting your comments on buying when market is up/down 1% - how do you gauge this and presumably you can miss your trade if you are waiting for a lull that doesn't happen?

 

[Jack o'Clubs]

Thanks for the link, I'll read through that first thing tomorrow. Interesting your comments on buying when market is up/down 1% - how do you gauge this and presumably you can miss your trade if you are waiting for a lull that doesn't happen?

yes, so if you feel the market is in a sustained rally rather than wobbling around a range you'd want to get in. I guess my point is that you give away the opportunity to think about all that by handing over complete discretion in trading to a discount broker, and it may cost you more than the half-percent that you've been focussing on in this thread (although focussing on those costs is certainly no bad thing).

 

[Getafix]

Thanks for all the help so far. I read your other thread and found it very interesting - I will get hold of the Zulu Principle book as looks my cup of tea.

Interestingly or should I say disappointingly my fill prices today were at the high end of the market. Though I only bought into 3 shares it has left a bad taste in my mouth as seems they were all matched at the high of the day! So it proved quite expensive! Though the £1.50 portfolio commission is very cheap I think I will go for the £10 option instead in future. I may not beat the average traded price for the day but at least I can only then blame myself if I get it wrong! I am pretty sure I could have done better but then hindisght is such a wonderful thing! I much prefer having control. Another lesson learnt! I'll probably write more about this in my journal on here.

I appreciate that I only bought 3 shares and such a small sample size warrants no merit with regards an analysis to the effects of the benefit of £1.50 commission, but for me the lack of control is just not worth it! I was probably just unlucky?

This may sound a silly question and perhaps I need to read the information at iii for the answer but if for example I had placed a limit order and it was only partially matched today, would this incur an extra commission charge tomorrow if remainder matched then?

 

[Getafix]

Btw, the P&L figure in the attachement does include the commission and SDRT so for example the loss for FXPO was -£1.28 (plus a -£18.41 for the sum of commission and SDRT)
= -£19.69

 

[Jack o'Clubs]

Thanks for all the help so far. I read your other thread and found it very interesting - I will get hold of the Zulu Principle book as looks my cup of tea.

Interestingly or should I say disappointingly my fill prices today were at the high end of the market. Though I only bought into 3 shares it has left a bad taste in my mouth as seems they were all matched at the high of the day! So it proved quite expensive! Though the £1.50 portfolio commission is very cheap I think I will go for the £10 option instead in future. I may not beat the average traded price for the day but at least I can only then blame myself if I get it wrong! I am pretty sure I could have done better but then hindisght is such a wonderful thing! I much prefer having control. Another lesson learnt! I'll probably write more about this in my journal on here.

I appreciate that I only bought 3 shares and such a small sample size warrants no merit with regards an analysis to the effects of the benefit of £1.50 commission, but for me the lack of control is just not worth it! I was probably just unlucky?

This may sound a silly question and perhaps I need to read the information at iii for the answer but if for example I had placed a limit order and it was only partially matched today, would this incur an extra commission charge tomorrow if remainder matched then?

yes, if not filled over the day - and you need to be careful that the small print doesn't allow them to charge you multiple commissions anyway if a limit order gets filled over the day.