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HMRC internal manual

Stamp Taxes on Shares Manual

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HM Revenue & Customs
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Depositary receipt and clearance services: calculation of 1.5 per cent Stamp Duty/Stamp Duty Reserve Tax charge: 1.5 per cent Stamp Duty Reserve Tax - calculation

When chargeable securities are transferred (on sale or otherwise than on sale) to a depositary receipt issuer (or to its agent or nominee) or clearance service (or to its agent or nominee), a stamp duty reserve tax (SDRT) charge may arise, under the provisions of FA86/S93 (4), FA86/S96 (2) and FA86/S99 (13), at the rate of 1.5 per cent, rounded to the nearest penny taking any 0.5p as nearest to the next whole penny above.

Where UK securities are transferred on sale to a depositary receipt issuer or to an operator of a clearance service, the 1.5 per cent SDRT charge is to be calculated by reference to the consideration in money or money’s worth paid (FA86/S93 (4)(b) & FA86/S96 (2)(b) );

Where UK securities are transferred otherwise than on sale, the 1.5 per cent SDRT charge is calculated by reference to the open market value of the securities at the time of transfer or appropriation to a depositary receipt issuer or to an operator of a clearance service ( FA86/S93 (4)(c) & FA86/S96 (2)(c) ).

Following the decisions by the European Court of Justice (ECJ) in October 2009 in the case of HSBC Holdings PLC and Vidacos Nominees Ltd v Commissioners for HM Revenue & Customs (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), HM Revenue & Customs (HMRC) accept that where shares in a UK incorporated company are issued to a clearance service or to a depositary receipt issuer located anywhere in the world, the imposition of a 1.5 per cent SDRT charge (under sections 93(4)(a) and 96(4)(a) Finance Act 1986) is incompatible with European Union law. HMRC therefore no longer seek to collect 1.5 per cent SDRT on issues of UK company shares.

For the meaning of ‘chargeable securities’, see STSM053030.