The UK plans to strip Russia’s stock exchange of a status that allows investors to claim tax relief on trades, in a move aimed at further isolating Moscow from global financial markets.

HM Revenue & Customs said on Tuesday that it intended to revoke the Moscow Exchange’s status as a recognised exchange, removing investors’ ability to access UK tax benefits when trading securities on the bourse.

The announcement kicks off a two-week consultation period, which will determine if HMRC goes ahead with the proposal.

The move comes alongside the sanctions introduced by the UK government and other western allies on Russia in the wake of its invasion of Ukraine in late February.

“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,” said Lucy Frazer, financial secretary to the UK Treasury.

Stock exchanges can apply to become recognised by HMRC, a status that encourages investment on their platforms by allowing investors to benefit from tax relief. The reversal of this status would probably lead to a decline in activity on the platform and further reduce the amount of money channelled into Russian assets.

HMRC said it had drafted its proposal because in late February 2022 the Moscow Exchange banned the sale of assets by non-resident investors, “which means that it is no longer operating in line with the normal commercial standards expected of a recognised exchange”.

The UK authority said that it would withdraw the Russian exchange’s status as long as restrictions on foreign investors remained in place. Despite the curbs on foreigners selling shares, Moscow’s stock market has lost 40 per cent of its value this year in local currency terms, leaving it on track for the worst annual run since the global financial crisis in 2008.

“HMRC intends to take these actions alongside the sanctions that the UK is placing on Russia because of the illegal war on Ukraine. HMRC has acted in the interests of all those who value fair and open trading on global stock markets,” HMRC said.

The UK, US and EU have imposed severe sanctions on Russia, its biggest companies and dozens of individuals, as they seek to inflict pain on the country’s economy in retaliation for the war in Ukraine.

The country is at risk of defaulting on its debt for the first time since 1998 after the US stopped banks from handling dollar bond payments from Russia. Russia’s central bank said earlier on Tuesday that it was considering legal action over western governments freezing nearly half of its foreign exchange reserves.

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