Bearer instruments: bearer instrument duty: depositary receipt schemes and clearance services
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), 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.
HMRC accepts that the ECJ and FTT decisions also apply to prohibit 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.
In these circumstances and until such time as, and when, the provisions of Schedule 15 are amended, HMRC will not seek to collect 1.5 per cent stamp duty under FA99/SCH15/PARA1 on the issue of a sterling denominated bearer instrument.
Similarly, no 1.5 per cent stamp duty charge under the provisions of FA86/S67 and FA86/S70 will apply if, following subscription payment, the bearer shares/instrument is delivered to a depositary receipt issuer or clearance service.
Moreover, the issue of a UK bearer instrument denominated in currency other than sterling is outside the scope of both a charge to bearer instrument stamp duty by virtue of FA99/SCH15/PARA17 , and a 1.5 per cent depositary receipt or clearance service stamp duty charge under FA86/S67 or FA86/S70, as no instrument of transfer is required to be completed.
While, in broad terms, bearer instruments are also excluded from a 1.5 per cent Stamp Duty Reserve Tax (SDRT) depositary receipt or clearance service charge, a charge to SDRT can be re-instated in specific circumstances. See STSM067000 .