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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: scope of 1.5 per cent charge: Stamp Duty Reserve Tax - issue and transfer of securities

The scope of the 1.5 per cent charge to Stamp Duty Reserve Tax (SDRT) is similar to stamp duty, being a tax on a transfer of chargeable securities of a company that is incorporated in the United Kingdom to a depositary receipt issuer (or to its agent or nominee) or to an operator of a clearance service (or to its agent or nominee). See FA86/S93 (4)(b)-(c) and FA86/S96 (2)(b) - (c).

While the provisions of FA86/S93 (4)(a) and FA86/S96 (2)(a) also extend a 1.5 per cent SDRT charge to an issue of chargeable securities in a company that is incorporated in the United Kingdom to a depositary receipt issuer or to an operator of a clearance service, 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 the charging of 1.5 per cent on share issues is incompatible with European Union law. In these circumstances, HMRC do not seek to collect 1.5 per cent on UK company share issues to a depositary receipt issuer or to a clearance service located anywhere in the world.

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

As rights to allotment of, or to subscribe for, shares, are regarded as being separate chargeable securities, various SDRT obligations can arise when rights and shares (following payment of all subscription monies under the terms of an allotment letter or renounceable letter of allotment) are traded and transferred to a depositary receipt issuer or clearance service. The SDRT obligations are explained in STSM055060, STSM055070, STSM055080 and STSM055090.

See STSM055030 for the meaning of an allotment letter and a renounceable letter of allotment.