Taxation of securitisations and insurance-linked securities
Published 27 October 2021
© Crown copyright 2021
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/taxation-of-securitisations-and-insurance-linked-securities/taxation-of-securitisations-and-insurance-linked-securities
Who is likely to be affected
Taxpayers, investors, advisers and tax professionals concerned with securitisations or insurance-linked securities.
General description of the measure
The measure will introduce a power enabling HM Treasury to make Stamp Duty and Stamp Duty Reserve Tax (SDRT) changes in relation to securitisation and insurance-linked securities (ILS) arrangements by secondary legislation. There is currently no power to make such changes in secondary legislation.
Policy objective
The government is keen to ensure that the UK’s Stamp Duty and SDRT rules contribute to maintaining the UK’s position as a leading financial services centre.
Technical changes to allow UK securitisation and ILS arrangements to operate more effectively, for example by reducing cost and complexity, may be more appropriately made by secondary legislation than by primary legislation. This measure will increase the flexibility of the government in responding to the evolving nature of the securitisation and ILS markets.
Background to the measure
In March 2021 the government published a consultation on reform of the taxation of securitisation companies. The consultation explored the benefits and potential difficulties of making changes to clarify and/or reform certain aspects of the Corporation Tax regime for securitisations, and of the Stamp Duty loan capital exemption as it applies to securitisations and to ILS. The government will publish a summary of responses to the March 2021 consultation in due course.
The government considers that it is appropriate to have the power to make any suitable Stamp Duty and SDRT changes arising from the March 2021 consultation, or any future consultation, by secondary legislation. The government has not consulted on this power as it does not make any policy change and therefore has no impact on stakeholders. The taking of a power by the government does not represent an intention to make any particular changes in relation to the March 2021, or any future, consultation.
Detailed proposal
Operative date
The measure will have effect from Royal Assent to Finance Bill 2021-22.
Current law
Schedule 13 to Finance Act 1999 provides for the standard rate for Stamp Duty at 0.5% on a transfer of stock or marketable securities.
Sections 67 and 70 of Finance Act 1986 provide for a higher 1.5% Stamp Duty where securities are transferred to a person who provides a clearance service or who issues depositary receipts.
The main charging provisions and scope of SDRT are contained within sections 86 to 99 of Finance Act 1986.
Section 87 of Finance Act 1986 provides for the standard rate of SDRT at 0.5% on agreements to transfer chargeable securities.
Sections 93 and 96 of Finance Act 1986 provide for a higher 1.5% SDRT charge where securities are transferred to a person who provides a clearance service or who issues depositary receipts.
There is currently no power in the Stamp Duty and SDRT legislation to make changes in relation to securitisation and ILS arrangements by secondary legislation.
Proposed revisions
Legislation will be introduced in Finance Bill 2021-22 providing a power that enables the government to make Stamp Duty and SDRT changes relating to securitisations and ILS by secondary legislation.
The power will be a freestanding provision. It will allow HM Treasury to make regulations to provide that Stamp Duty or SDRT is not chargeable on transfers of securities issued or raised by a securitisation company or a qualifying transformer vehicle. It will also allow HM Treasury to make regulations to provide that Stamp Duty or SDRT is not chargeable on transfers of securities to or by a securitisation company.
Summary of impacts
Exchequer impact (£m)
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
The terms used in this section are defined in line with the Office for Budget Responsibility’s indirect effects process. This will apply where, for example, a measure affects inflation or growth. You can request further details regarding this measure at the email address listed below.
Impact on individuals, households and families
The proposed changes are expected to have no impact on individuals.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Impact on business including civil society organisations
The proposed change is expected to have no impact on businesses and civil society organisations.
Operational impact (£m) (HMRC or other)
It is not anticipated that implementing this change will incur any additional costs or savings for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact the Stamps Taxes Policy Team. Email: stamptaxes.budgetfinancebill@hmrc.gov.uk.