STSM101320 - Introduction to Collective Investment Schemes: Reserved Investor Funds: Stamp Duty and Stamp Duty Reserve Tax (SDRT)
The Co-ownership Contractual Schemes (Tax) Regulations 2025 (SI 2025/200) came into force on 19 March 2025, and contain provisions relating to SDRT and Stamp Duty.
SDRT
Regulation 50 of SI 2025/200 introduced certain SDRT exemptions for Reserved Investor Funds (RIFs), by amending existing legislation within section 90 FA1986.
The following RIF transactions are exempt from SDRT:
Agreements to transfer chargeable securities to a RIF in consideration solely for the issue of units in the RIF – Section 90(7B) (a)(i) FA1986
Agreements to transfer securities between sub-schemes of an umbrella RIF scheme - Section 90 (7B) (a)(ii) FA1986
Agreements to transfer units in a RIF – Section 90 (7B) (b) FA1986.
The legislation refers to “co-ownership contractual scheme” and “co-ownership umbrella scheme”, rather than to RIFs or umbrella RIFs. This is because section 90 (7BA) FA1986 defines a co-ownership contractual scheme as meaning both (a) an authorised contractual scheme (see STSM101200) and (b) a Reserved Investor Fund (Contractual Scheme).
Section 90 (7B) FA1986 is disapplied (by subsection 90(7D)) where the agreement forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of Stamp Duty or SDRT.
Stamp Duty
Regulation 51 of SI 2025/200 introduced certain Stamp Duty exemptions for Reserved Investor Funds (RIFs), by amending existing legislation within paragraph 25A of Schedule 13 to FA1999.
The following RIF transactions are exempt from Stamp Duty:
An instrument that transfers securities to a RIF in consideration solely for the issue of units in the RIF - paragraph 25A(1)(a) of Schedule 13 to FA1999.
An instrument that transfers securities between sub-schemes of an umbrella RIF scheme – paragraph 25A(1)(b) of Schedule 13 to FA1999.
An instrument that transfers units in a RIF – paragraph 25A(1)(c) of Schedule 13 to FA1999.
The legislation refers to “co-ownership contractual scheme” and “co-ownership umbrella scheme”, rather than to RIFs or umbrella RIFs. This is because paragraph 25 (1A) of Schedule 13 to FA1999 defines a co-ownership contractual scheme as meaning both (a) an authorised contractual scheme (see STSM101200) and (b) a Reserved Investor Fund (Contractual Scheme).
Paragraph 25A of Schedule 13 to FA1999 is disapplied (by sub-paragraph 25A (3)) where the transfer forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of Stamp Duty or SDRT.
Status of RIF units
HMRC does not consider co-ownership scheme units fall within the definition of “stock or marketable securities” in section 122 Stamp Act 1891 for Stamp Duty purposes, or within the definition of “chargeable securities” in section 99 (3) FA1986 for SDRT purposes.
Due to this, RIF units will not be chargeable consideration for Stamp Duty purposes but will be for SDRT purposes as they represent “money’s worth” consideration.
Ceasing to be a RIF
If failure to meet one or more qualifying conditions means that the scheme ceases to be a RIF, then the relevant Stamp Duty and SDRT RIF exemptions will not apply to any further transactions undertaken by the scheme.