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HMRC internal manual

Stamp Taxes on Shares Manual

Exemptions and reliefs: exemptions: sales of Bearer securities - general

Bearer securities are comprehensively covered in chapter 6, STSM060000. The main statute for bearers is found at FA99/SCH15 ‘Stamp Duty: Bearer Instruments’.

Introduction to bearers

Bearer shares are similar in function to registered shares, giving the holder an entitlement to profits of the company (dividends). Equally, bearer and ordinary shares share the same market price.

But unlike registered share certificates, bearer securities do not show the name of the holder, so whoever possesses a bearer certificate is considered to be the beneficial owner. As the ownership of bearer shares is not registered on the books of the issuing company, the shares are traded by physical delivery and therefore without the need for a formal instrument of transfer upon which ad valorem stamp duty would be chargeable.

Consequently, the issue of a bearer instrument by a UK company inside or outside the UK relating to UK securities and denominated in sterling is subject to a special stamp duty charge of 1.5% (FA99/SCH15 PARA 1 and PARA 4) Subsequent trading of the bearer instrument is exempt from stamp duty and SDRT.

Although bearer instrument stamp duty of 1.5% arises on the issue of a UK bearer share, no stamp duty will arise where the stock is expressed in currency other than sterling (FA99/SCH15/PARA17), or, where the securities (which includes units in a unit trust or shares in an open-ended investment company) represent unsecured loan stocks, gilts, bonds etc (FA99/SCH15 PARAS 14 & 15).

The effect of section FA86/S99(5) is to disapply a charge to Stamp Duty Reserve Tax (SDRT) where transfers of chargeable securities, which include bearer securities denominated in pounds sterling and non-sterling currency, are exempt from stamp duty.

The provisions of FA86/S90(3A) affirm the SDRT exemption in section 99(5) in the case of agreements to transfer UK bearers. But the terms of section 90(3A) go further, by clarifying and confirming that the general exemption afforded to a transfer of a bearer security does not extend to specific situations described in section 90(3B), (3C) or (3E).