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HMRC internal manual

Stamp Taxes on Shares Manual

Exemptions and reliefs: reliefs: stock lending and repurchase relief - charge reinstated

Where the stock that is the subject of a stock lending or repo arrangement is not returned, either wholly or in part, the outward leg effectively becomes an outright sale that should have been chargeable to stamp duty or Stamp Duty Reserve Tax (SDRT). The legislation therefore enables that charge to be re-instated and recovered.

Where the outward leg was effected by an instrument of transfer, it will have been adjudicated as not chargeable with stamp duty (see STSM022010) and any potential SDRT charge will thus have been cancelled as per FA86/S92 (see STSM031170). However, where the return of the stock is not completed then the SDRT charge is not cancelled: FA86/S88(1C) provides that the instrument is disregarded for the purposes of the SDRT cancellation mechanism at FA86/S92 thereby re-instating the SDRT charge.

Where the outward leg was the result of an electronic transfer of stock, the condition for relief from SDRT under FA86/S89AA (2A(c) and 3(c)), namely that the stock be returned to the originator, is not fulfilled so that an SDRT charge arises in respect of the original transfer.

Care should be taken where, for reasons beyond the control of the parties, it is impossible for securities of the same kind and quantity to be returned e.g. a corporate action. A company consolidation may result in its shares being cancelled or substituted. We will deal with such situations on a case by case basis and areas of doubt must be referred to the Stamp Taxes Technical Adviser for assistance.