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HMRC internal manual

Stamp Taxes on Shares Manual

Exemptions and reliefs: reliefs: Intermediary Relief – key information to be provided in a direct application to HMRC

As noted in STSM042070, a direct application for recognition as an intermediary who can benefit from intermediary relief from Stamp Duty and/or Stamp Duty Reserve Tax (SDRT) may be made to HM Revenue and Customs (HMRC).

General

Those wishing to become an HMRC approved intermediary must apply in writing to HMRC’s Stamp Office in Birmingham. Applications must be by made by letter on company headed paper. Electronic copies can be accepted via email which should be sent to mailbox.sdrt@hmrc.gov.uk {#} but these should be followed up with an original signed hardcopy.

This should be sent to:

HMRC Stamp Taxes

SDRT Operations

9th Floor, City Centre House

30 Union Street

Birmingham

B2 4AR

 

The applicant should clearly set out in the letter of formal application a request to become a HMRC approved intermediary and state whether relief is required regarding securities trading and/or option trading, citing the relevant sections and sub-sections of Finance Act 1986 upon which intermediary relief from Stamp Duty and/or SDRT is sought.

In any HMRC direct application, the applicant must provide an indicative date from which intermediary relief is to apply. Upon any successful approval and recognition, HMRC will notify the applicant and also the operator of the CREST system, and/or the relevant recognised clearance service (operating under section 97A FA1986) so that Stamp Duty/SDRT relief will apply from the date of HMRC approval (which in the majority, if not all, cases, will be the original start date provided to HMRC by the applicant).

Business Activities

The application letter should contain a descriptive list and nature of all global business activities that are, or will be, undertaken by the applicant. In addition, while not intended to be exhaustive, the following information will be helpful to HMRC:

  • How long has the business been trading or intends to start trading?
  • Where an application is sent to HMRC under section 80A(6A) and/or 88A(6A) FA1986, a copy of the applicant’s relevant EEA authorisation, or the indicated target date authorisation will be granted. (Where the applicant is awaiting regulatory authorisation, a copy of their certificate of incorporation should be provided).
  • What types of financial instruments they trade in or intend to trade in e.g. stocks and marketable securities/chargeable securities / options etc.
  • Whether they operate solely on a proprietary basis and/or undertake client business. The applicant should provide a breakdown of:
    • Trading volumes and trading capacity where they are acting as:
      • Principal
      • Riskless Principal
      • Agent. (Where volumes are unknown because trading has not yet started, an estimate should be provided).

Provide an outline how the business seeks financial reward from dealing in securities / options e.g.

  • Does the business look to make its profit on the “turn” in the price i.e. by selling for more than he bought or vice versa?
  • Does the business charge commission? If so does the business operate purely on a commission only basis?
  • How is the financial reward gained from dealing in securities/options accounted for within their financial accounts, is it booked as profit or as income?

Excluded Business

The application letter must include a declaration from the applicant confirming they have read the relevant legislation in FA1986 regarding the conditions for relief, and that no ‘excluded business’ (as defined in sections 80A(5)/88A(5) FA1986), is, or will be undertaken.

The applicant will need to assure HMRC of the internal controls/procedures that are, or will be, in place to ensure that where any of its business activities change, such activities will not be considered ‘excluded business’ that will otherwise imperil its existing recognised intermediary status. Where any doubt exists regarding any changes to business activities that may affect its intermediary relief status, HMRC must be advised and clarification sought.

Settlement

The applicant will also need to provide information detailing how their trades in chargeable securities are intended to be settled. Where the settlement of securities is to occur within the CREST system, the applicant will need to provide their CREST participant ID and the full name of that CREST account. This is required so that where the intermediary application is approved by HMRC, HMRC will notify the operator of CREST so that intermediary relief status is applied to that participant account.

As intermediary relief in CREST is set at participant level, any dealing undertaken within a designated sub account operated under the CREST participant level must be used solely for the purpose of intermediary business. Where the applicant does not have its own participant or member account in CREST but instead uses the participant account of another CREST participant such as a settlement agent, then that account again must only be set up for use solely for intermediary business.

Where securities settlement is to occur outside of CREST, the applicant will need to provide information on how the relief will be claimed and how notice of ‘relevant transactions’ undertaken will be sent to HMRC.

Where securities settlement is to occur by a transfer and delivery to a recognised clearance service operating within the 0.5% Stamp Duty/SDRT regime (section 97A FA1986), the name of the relevant clearance service must be provided.

Inspection of Records

Where the applicant does not have a physical UK presence, they will need to provide a relevant UK address where HMRC can, on request, inspect the applicant’s trading records.