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HMRC internal manual

Stamp Taxes on Shares Manual

HM Revenue & Customs
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Exemptions and reliefs: reliefs: stock lending and repurchase relief - the relief

Stock lending relief

Relief from the 0.5% stamp duty or Stamp Duty Reserve Tax (SDRT) charge is afforded to any person who enters into a ‘stock lending arrangement’ including repos (FA86/S80C and FA86/S89AA respectively). As with intermediary relief, the object of the relief is to provide liquidity in the financial markets. The relief is not restricted to market makers but is available in relation to all on-exchange activity.

Essentially, the provisions of sections 89AA state that the principal 0.5% SDRT charge shall not apply where a person (P) has entered into an arrangement with another person (Q) whereby (Q) transfers chargeable securities of a particular kind to (P) or his nominee and then (at a later date) chargeable securities of the same kind and amount are transferred back by (P) or his nominee to (Q) or his nominee. There are equivalent provisions in section 80C for stamp duty.

Relief is limited to cases where securities are in fact transferred in the way envisaged (STSM042150).

Sections 80(C)(4) and 89AA(4) exclude arrangements if they are not such as would be entered into by persons dealing with each other at arm’s length or if any market risk is taken by P.

It is common for transfers under stock lending arrangements to be collateralised by the movement of other stock in the opposite direction. If the stocks used in this way are themselves within the scope of stamp duty or SDRT then these movements will also be capable of falling within the terms of the stock lending relief in their own right as a separate matter.