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HMRC internal manual

Stamp Taxes on Shares Manual

From
HM Revenue & Customs
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Depositary receipt and clearance services: 1.5 per cent higher rate charge: instalment arrangements - shares issued/transferred direct to a depositary receipt issuer or clearance service

Occasionally, where chargeable securities are issued or transferred on sale direct to a depositary receipt issuer (or its nominee) or clearance service (or its nominee) on terms that the subscription or purchase price of the shares is to be paid in instalments and for an issue of other chargeable securities.

For any of the instalments that become payable by a depositary receipt issuer (or its nominee) or clearance service (or its nominee), each instalment may give rise, by virtue of FA86/S93 (10) or FA86/S96 (8), to a charge to Stamp Duty Reserve Tax (SDRT) at the rate of 1.5 per cent, calculated by reference to the amount of each instalment paid. The depositary receipt issuer or clearance service liable to pay the instalment is liable for the tax. The SDRT implications are:

  1. Transfer on sale of existing registered shares in a United Kingdom incorporated company to a depositary receipt issuer or clearance service located anywhere in the world:

SDRT at the rate of 1.5 per cent is payable, calculated by reference to the amount of each instalment paid; or

  1. Issue of new United Kingdom incorporated company shares to a depositary receipt issuer or clearance service located anywhere in the world:

No SDRT at the rate of 1.5 per cent is accountable and payable in such circumstances.

This is because of the decisions by the European Court of Justice in October 2009 in the case of HSBC Holdings PLC and Vidacos Nominee Ltd v Commissioners for HM Revenue & Customs (HMRC) (C569/07), and the First-Tier Tribunal [Tax Chamber] in March 2012 in the case of HSBC Holdings PLC and the Bank of New York Mellon Corporation v Commissioners for HM Revenue & Customs (TC/2009/16584), which ruled that where shares in a UK incorporated company are issued, the imposition of a 1.5 per cent Stamp Duty Reserve Tax (SDRT) charge (under sections 93(4)(a) and 96(4)(a) Finance Act 1986 is incompatible with European Union law. In these circumstances, HMRC no longer seek to collect 1.5 per cent SDRT on the issue of UK company shares.

See STSM053030 for the meaning of chargeable securities.