In the Chancellor's Mansion House speech on Thursday 14 November Rachel Reeves committed the government to establishing the Private Intermittent Securities and Capital Exchange System (PISCES), pitched as 'an innovative new stock market' in the UK, by May 2025.
PISCES marks a significant step in the UK government's efforts to rejuvenate its capital markets and compete amongst global financial ecosystems (and against, for example, the Nasdaq Private Market (NPM)). It sits as part of a broader governmental growth agenda to enhance the UK's financial markets, with involvement from the Treasury and regulatory bodies.
As the UK seeks to bolster its position as a global financial hub, this timely commitment builds on the tax exemptions announced by Rachel Reeves in the Autumn Budget 2024 and signals that it's full steam ahead with the regime.
Reviving the UK's IPO Pipeline
The UK has faced a challenging environment for initial public offerings (IPOs) in recent years, with a notable decline in fresh listings and a series of high-profile de-listings.
PISCES will operate as a regulated trading platform for the intermittent trading of private company shares, aiming to provide a regulatory framework for structured trading events accessible to broad pools of investors. It has been designed to act as a stepping stone to public market capital for innovative private companies who want to scale and grow and to boost the pipeline of future IPOs in the UK.
An initial consultation on the establishment and scope of PISCES was concluded in April 2024 under the previous government. Since their election in July, Labour ministers have maintained governmental support for the regime, including via the announcement of stamp duty exemptions in the Autumn Budget. The government published its official consultation response directly after the Chancellor delivered her speech committing to the May 2025 launch date. This response sets out further details of PISCES and refines the initial proposals.
Background
The government will use the powers granted by Financial Services and Markets Act 2023 to put PISCES in place, setting it up first as a Financial Markets Infrastructure (FMI) sandbox with a 5-year duration. The FMI sandbox regime allows the government to temporarily modify or disapply parts of the existing UK legislative framework (in this instance, legislation pertaining to market abuse and markets in financial instruments) to trial new or developing FMI technology or practices, such as PISCES, while maintaining appropriate regulatory oversight.
The response to the consultation confirmed that the level of regulation to be applied to PISCES will be 'proportionate' and reflect the features of PISCES and that this will mean a lighter touch than for public markets.
Key Features
After considering the consultation feedback, PISCES will have the following key features:
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PISCES will operate as a secondary market, facilitating the trading of existing shares in intermittent trading windows (e.g. ad hoc, quarterly, biannually, yearly etc). It will not facilitate capital raising through the issuance of new shares.
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Only shares in companies whose shares are not admitted to trading on a public market (in the UK or abroad) can be traded on PISCES. This includes UK private and public limited companies (PLCs) and overseas companies. PISCES operators will determine any admission requirements for their markets, including any minimum corporate governance requirements.
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Institutional investors, employees and officers of and agency workers engaged by participating companies (and, in certain circumstances, entities within the participating company's corporate group), certain trustees and investors who can meet the definition of high net-worth individuals and self-certified or certified sophisticated investors under the Financial Promotion Order (FPO), will be able to buy shares on PISCES. This is a significant broadening in scope from the consultation which had considered allowing only professional investors for the initial period. The tax implications of this are discussed further in the section below.
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Following feedback, the PISCES regime will not include a public market style market abuse regime. This is a change to what was proposed in the consultation due to feedback on the disproportionate costs and challenges it would pose. Instead, the FCA will be given rule-making powers to create a new and bespoke disclosure regime for PISCES. Under this regime, disclosures and pre- and post-trade transparency must be reported to all investors participating in a PISCES trading event but will not be required to be made public. This approach seeks to streamline the effort taken to undertake due diligence in bilateral private market transactions, without replicating the disclosure requirements for primary fundraising on public markets.
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As there is no market abuse regime, there will also not be transaction reporting requirements for PISCES. Again, this reflects a change from the initial proposal which contemplated a bespoke transaction reporting model. The FCA will consider whether to set rules related to record-keeping to support their supervision of the market.
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There will be a new FPO exemption to cover PISCES disclosures, based on the exemptions available for promotions included in mandated public market disclosures.
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PISCES operators will be able to decide whether or not shares must be recorded into a Central Securities Depository (CSD).
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Companies will not be able to carry out buybacks on PISCES. This aligns with what was in the original consultation but, on review of the feedback, the government leaves room for reconsideration after the initial launch of the PISCES sandbox.
The changes from the initial proposal reflect the government's efforts to balance regulatory requirements with the practical needs and feedback from stakeholders.
We set out below some comments on the tax considerations raised by the regime.
Stamp taxes and BPR relief
The Chancellor's announcement at the Autumn Budget 2024 that PISCES transactions will be exempt from stamp duty and stamp duty reserve tax (which mirrors the exemption for growth markets such as AIM and Aquis' growth market) was reconfirmed in the published response . These exemptions are a significant enhancement to PISCES and improve its competitiveness against non-UK markets such as the NPM.
At the same time as announcing the new stamp duty exemptions the Chancellor also introduced modifications to business property relief (BPR) from inheritance tax (which is levied at a rate of 40%) on qualifying shares not listed on the markets of a recognised stock exchange. These modifications, expected to take effect on 6 April 2026, propose to cut BPR to 50% for shares listed on AIM, while unquoted private shares will continue to benefit from 100% relief for the first £1 million of combined property. Consequently, it is expected that shares traded on PISCES may qualify for some level of BPR. However, how these shares will be classified and the specific rate at which they will benefit remains uncertain.
Employee shareholders
One of the key benefits of PISCES for participant companies would be to provide liquidity to their shareholders, which the government response now confirms may include employee shareholders (and other related parties as described above). However, it is exactly this liquidity which could trigger unintentional tax charges at shareholder and company level. This is on the basis that shares traded on PISCES as currently contemplated could be viewed by HMRC as readily convertible assets (RCAs) which could trigger pay-as-you-earn obligations at the employer company level, employer and employee national insurance contributions, and potentially additional Apprenticeship Levy charges on acquisition of shares (including on exercise of options).
The consultation response acknowledges that respondents had raised concerns regarding the potential tax implications of PISCES transactions, particularly the characterisation of shares traded on PISCES as RCAs. Additionally, the consultation highlights that respondents have sought clarity on the interaction between PISCES and tax-advantaged employee share schemes, such as Enterprise Management Incentives (EMI). However, the response does not provide further commentary on these issues.
In light of the broader scope of potential investors it will be key to understand the extent to which any employee option holders will be able to exercise their options and sell their shares through PISCES. Any ability to exercise and sell would need to be established in the option terms, particularly for UK tax-favoured options which have limited flexibility to use discretion or introduce exercise triggers post-grant. A further fundamental consideration for participating companies and employee shareholders and option holders will also be the interaction between any share transfer restrictions and the PISCES regime. Specifically, it is unclear whether buyers can be required to adhere to underlying shareholder or investment agreements. The government response states that it would expect shares to be free of restrictions affecting transfer at the time of a PISCES trading event to ensure fair, orderly, and efficient trading but does not clarify the position further.
The government has indicated that it is actively considering the feedback related to employee shareholders and will provide additional guidance in due course. The response also expressed a willingness to engage further with stakeholders to address the interaction between PISCES and EMI. Consequently, we can anticipate further updates as these discussions evolve.
Conclusion
As we count down to the anticipated launch of PISCES in May 2025, it is essential that further clarification and refinement of the scheme, particularly concerning the tax treatment of shareholders, is addressed promptly. The government's commitment, highlighted by the stamp tax exemptions and the proportionate regulatory framework outlined in its consultation response, reflects a progressive approach to market development. However, maintaining an ongoing dialogue with stakeholders, especially regarding the tax implications for employee shareholders, will be essential to ensure certainty for all participants. If these challenges are effectively addressed by the government in the coming six months, PISCES could significantly enhance the UK's position as a leading global financial hub.
