STSM057010 - Depositary receipt and clearance services: exemptions/ reliefs: transfers between depositary receipt issuers and or unelected clearance services

The higher 1.5% Stamp Duty and SDRT charge applies to:

  • Transfers of securities to a depositary receipt issuer or their nominee (section 67 and 93 FA1986)
  • Transfers of securities to a clearance service or their nominee (section 70 and 96 FA1986)

The 1.5% charge does not apply to transfers related to exempt capital raising arrangements and exempt listing arrangements, or to issues of securities.

Exemption for transfers between depositary receipt issuers

Owing to sections 67(9) and 95(1) FA1986, a transfer of securities between two depositary receipt systems is exempt from the 1.5% Stamp Duty and SDRT charge.

Exemption for transfers between clearance services

Owing to sections 70(9) and 97(1) FA1986, a transfer of securities between two clearance services is exempt from the 1.5% Stamp Duty and SDRT charge.

This exemption to the 1.5% charge does not apply where securities are transferred from a clearance service which has elected under section 97A FA1986 into the alternative 0.5% charge on transfers within it (owing to section 97(5) and 97(13) FA1986). STSM058020 provides more information on the alternative 0.5% regime for clearance services.

Exemption for transfers between clearance services and depositary receipt issuers (and vice versa)

Owing to sections 72A and 97B FA1986, transfers of securities between an unelected clearance service and a depositary receipt issuer (and vice versa) is exempt from the 1.5% Stamp Duty and SDRT charge.

It does not apply where the clearance service has elected into the alternative 0.5% regime under section 97A FA1986 (owing to section 97B(3) FA1986).

Background of the 1.5% charge

Following EU (HSBC Holdings plc and Vidacos Nominees Ltd v HMRC) and UK (HSBC Holdings plc and The Bank of New York Mellon v HMRC) court decisions in 2009 and 2012, HMRC recognised that the 1.5% Stamp Duty and SDRT charges on the issue of securities and certain transfers were incompatible with the Capital Duties Directive (Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital, and the predecessor directive, Council Directive 69/335/EEC of 17 July 1969).

Following this, in a 2017 decision the Court of Justice of the European Union ruled in the Air Berlin case that no 1.5% charge applied on the transfer of legal title in chargeable securities in connection with the listing of shares on a stock exchange.

UK legislation providing for the 1.5% charge on transactions of the types covered in these cases was not originally amended as taxpayers were able to rely on the direct effect of EU law up to and including 31 December 2023. However, the changes in the Retained EU Law (Revocation and Reform) Act 2023 meant that this would no longer be the case, so UK legislation was amended to prevent the 1.5% charge being reintroduced for these transactions.

The 1.5% charge on the issue of UK securities into depositary receipt systems and clearance services and on certain transfers was removed from domestic legislation with effect from 1 January 2024. Guidance on these changes can be found at STSM053080 onwards.