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HMRC internal manual

Stamp Taxes on Shares Manual

Exemptions and reliefs: reliefs: stock lending and repurchase relief - insolvency of one party

Where one of the parties to stock lending or repo arrangement becomes insolvent, the arrangement automatically terminates with the result that the securities are not returned as envisaged in the arrangement. Provisions in Finance Act 2009 were introduced so that where the insolvency occurs on or after 1 September 2008 any resulting Stamp Duty Reserve Tax (SDRT) charges on the borrower (or purchaser under a sale and repurchase arrangement) will be disapplied (see FA09/S83 and FA09/SCH37).

Under stock lending arrangements, the borrower normally provides collateral that becomes available to the lender in the event of default. Where the lender uses that collateral to replace the stock originally lent and that will not be returned because of the borrower’s default owing to insolvency occurring on or after 1 September 2008, the replacement purchase will be relieved from any stamp duty or SDRT charges. Relief will also be available where the seller under a sale or repurchase arrangement acquires stock or securities to replace those that the purchaser under the arrangement is unable to return owing to insolvency.

Similarly, where the lender becomes insolvent holding collateral securities provided by the borrower, no SDRT charge will arise upon the acquisition of those securities by the lender, and a purchase made by the borrower to replace the collateral securities will be relieved from stamp duty and SDRT charges.