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HMRC internal manual

Stamp Taxes on Shares Manual

Depositary receipt and clearance services: clearance services

Although not defined in statute, a clearance service is, typically, a system for holding securities and offering a facility to trade and settle those securities within the system by book entry. Once deposited in a clearance service, securities can remain in the system indefinitely and can be traded without a change in the underlying company share register, as the legal title of the underlying securities remains in the name of the clearance service or that of its nominee. Interests in securities can therefore be traded and settled between members of the clearance service without using paper instruments i.e. Stock Transfer forms.

Clearance services are operated worldwide but are particularly common in Europe.

Clearance services are popular with companies that offer and issue shares in the form of bearer certificates, as the system provides physical security of the certificate whilst allowing trading and settlement between clearance service members. See STSM060000 for guidance on bearer instruments.

While securities that are transferred to a clearance service may be subject to a 1.5 per cent stamp duty or Stamp Duty Reserve Tax (SDRT) charge on entry, there is no further SDRT charge on subsequent trading of those securities held in the system between members of the clearance system by virtue of FA86/S90 (4)-(6).

The operator of a clearance service can elect, however, that the 1.5 per cent clearance service charge on transfers of securities into the system does not apply, by entering into appropriate arrangements with the Commissioners for HM Revenue & Customs, under which the operator undertakes to account for 0.5 per cent charges arising on transfers to, and within, the clearance service. See STSM058000.