In the research, Stamp Out Stamp Duty, Peel Hunt stated the removal of stamp duty would increase demand for UK shares, encourage companies to list in the UK, and increase the relative attraction of UK equities for pension funds.

Peel Hunt believes that stamp duty on small and midcap shares should be removed, and materially reduced for larger companies.

The small and midcap sector is particularly exposed to this trend as many investors no longer invest in this area due to the lack of liquidity.

This contributes towards driving lower valuations and is one of the reasons for the exodus of smaller companies from the UK combined with the lack of new IPOs.

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Whilst this would reduce tax in the very short term, it would materially raise tax due to enhanced economic activity and increases in other taxes.   

Additionally, stamp duty removal would increase capital gains tax and inheritance tax, and boost fund flow into UK markets which would, in turn, enable companies to access the market for growth investment.

While the paper acknowledged that removing or reducing stamp duty would have a “direct impact” on tax revenue, it argued this would be “more than offset” by increases in other taxes.

However, while there are benefits, the research noted stamp duty is a “significant amount of tax revenue” and so favoured a more “targeted approach”.