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HMRC internal manual

Stamp Taxes on Shares Manual

From
HM Revenue & Customs
Updated
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Bearer instruments: bearer instrument duty: is a bearer instrument chargeable to Stamp Duty

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] (FTT) 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) accepts that where shares in a United Kingdom (UK) incorporated company are issued, the imposition of a 1.5 per cent stamp charge is incompatible with European Union law.

Implications

HMRC accepts that the ECJ and FTT decisions must equally be interpreted as applying to the charging of ad valorem stamp duty such as that imposed by FA99/SCH15/PARA1:

  • on the issue of a bearer instrument in the UK; and
  • on the issue of a bearer instrument outside the UK by or on behalf of a UK company, and

A UK company means a company that is formed or established in the UK, or a Societas Europaea i.e. a European company, that has its registered office in the United Kingdom.

In these circumstances and until such time as the provisions of Schedule 15 are amended, HMRC will not seek to collect 1.5 per cent stamp duty under FA99/SCH15/PARA1on the issue of a bearer instrument.

Stamp duty is, however, chargeable (at the rate of 1.5 per cent) by virtue of FA99/SCH15/PARA2 on the transfer in the UK of the stock constituted by or transferable by means of a bearer instrument, if stamp duty was not chargeable on issue of the above mentioned bearer instrument, and:

  1. duty would be due as a transfer on sale if the transfer were effected by an instrument other than a bearer instrument; or
  2. the stock constituted by or transferable by means of a bearer instrument consists of units under a unit trust scheme.

In the case of a deposit certificate in respect of a single non-UK company, or an instrument issued by a non-UK company that is a bearer instrument by usage (and is not otherwise within the definition of ‘bearer instrument as described in FA99/SCH15/PARA3 ), the duty is 0.2 per cent of the market value of the stock constituted by or transferable by means of the instrument.

Secondary trading and transfer of a UK bearer instrument is also not subject to stamp duty, but a charge to Stamp Duty Reserve Tax (SDRT) can arise under certain circumstances. For advice on SDRT charges applying to bearer securities, see STSM067000

The Bearer Instrument stamp duty rates of charge are described in STSM063010