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HMRC internal manual

Stamp Taxes on Shares Manual

Introduction to Stamp Duty on shares and Stamp Duty Reserve Tax (SDRT): more about Stamp Duty and SDRT: interaction between Stamp Duty and Stamp Duty Reserve Tax

An agreement to transfer chargeable securities incurs a charge to Stamp Duty Reserve Tax (SDRT). The performance of that agreement by the execution of an instrument of transfer renders that instrument chargeable with stamp duty (SD). To avoid a double charge, legislation provides for the cancellation of the potential SDRT charge or, if the tax has already been paid, for the tax to be repaid.

For the majority of transactions, if SD is paid on an instrument giving effect to the agreement and no SDRT has been paid, then the SDRT charge is cancelled under the provisions of Section 92(3) Finance Act 1986 provided that the conditions in Section 92(1A) and (1B) Finance Act 1986 are met.

If SDRT has already been paid Section 92(2) Finance Act 1986 allows for repayment of the SDRT if an instrument is subsequently stamped with the appropriate SD or is relieved or exempt from SD. An earlier payment of SDRT cannot be used to discharge a payment of SD on an instrument that is sent to Stamp Taxes for stamping. A further payment of SD is required in order for the instrument to be stamped before a repayment of the earlier SDRT paid can be considered

It should be noted that the position is different with regard to transfers to depositaries and clearance services where a higher rate of both SDRT and SD applies. In these circumstances Sections 93(3) and 96(5) Finance Act 1986 allow for any SD paid to be offset against the SDRT liability and not to discharge it. So, if the SDRT liability is greater than the SD paid the difference will still be due.

Where SD and SDRT is paid on the same securities transaction or a SD relief/exemption applies, an application to Stamp Taxes for a refund of the SDRT must be sent within 6 years of the ‘relevant day’ as defined in FA86/S87(3). Where too much SDRT has been paid on a share transaction not requiring execution of an instrument, an application for a refund of the excess SDRT must be made under Regulation 14 of the Stamp Duty Reserve Tax Regulations (SI1986/1711), within 4 years beginning with the later of:

         (a) the date on which the payment was made, and

         (b) the relevant accountable date.

If a document is submitted for stamping but subsequently withdrawn by the applicant, whether because of a failure to reach agreement on the stamp duty liability, or for any other reason, the SDRT liability still exists and can be pursued using the SDRT compliance powers.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000) (This content has been withheld because of exemptions in the Freedom of Information Act 2000)