On April 26, I wrote about the clarification that I did with SCB online trading that from Apr 1st 2014, investors seeking to invest in LSE traded exchange traded funds (ETF) should not be charged with a 0.5% stamp duty.
I attempt to carry out the transaction and was disappointed to see that the Stamp Duty was still in effect.
It turns out that a reader MoMo have probed and garnered more information than me:
It would seem that ETFs on LSE with ISIN starting with GB and IE are exempted from stamp duty.
The fees shown when placing order is only indicative. To look at the actual cost, you have to look at the contract note.
As SCB online trading have no minimum commission payable (which is why they are so attractive), and that you can purchase 1 share of any stock instead of 1000 shares on the LSE exchange that are listed, I went about purchasing 1 share of VWRD, which is the USD version of the All World ETF.
The difference this time is that I executed the transaction. In the summary you can see that $0.34 of UK stamp duty or 0.5% is charged.
When I received the Securities Contract Note in the letter box it reads the following:
- US$ 68.15
- Brokerage US$ 0.17
- UK PTY Levy US$ 0.00
- Client GST US$ 0.01
- Total US$ 68.33
As you can see, the UK Stamp Duty wasn’t levied (but there is an additional of GST). In addition, UK have 0% dividend withholding tax compared to US whose withholding tax is 30% (Singapore is also 0%)
However, UK does have an inheritance tax which behave more like a death tax. If an investor passes away with 500k pounds, the amount in excess of 325k pounds currently (subject to change in the future), which is 175k will be taxed 40%, in this case 70k pounds.
Reader MoMo does cite the advantage of VWRD over VWRL on SCB Online Trading, by virtue of a more favorable conversion from SGD to USD versus SGD to GBP on the platform (although it is still rather bad)
One quick note: You cannot find the quote query for VWRD on SCB. As I have shown, you can still select and bid for it. You are likely to see this no quotes found.
Is SCB the cheapest platform? Not quite. Rather it depends on the quantity and frequency of purchase.
If you have a large sum that you can split to 4 investments a year, other brokerage platforms might be worth it. The downside of most platform is that they have an inactivity fee, which forces you to execute more transactions than you would like (SCB do not have that)
The upside is that they have slightly better currency conversion rates than SCB.