Collectives: third party matters: exemptions - third party transfers
There are occasions in which units in a unit trust or shares in an Open-Ended Investment Company (OEIC) that are surrendered to a fund manager under a third party transfer arrangement, can be regarded as exempt for the purpose of a charge to stamp duty reserve tax (SDRT) under Schedule 19 Finance Act 1999.
Third party transfers are exempt if:-
- no consideration in money or money’s worth is provided by the purchaser (FA99/SCH19/PARA 6(2) );
- the transferee is established for charitable purposes only (FA99/SCH19/PARA6(3)(a));
- the transferee is trustees of a trust established for charitable purposes only (FA99/SCH19/PARA6(3)(b));
- the transferee is the Trustees of the National Heritage Memorial Fund (FA99/SCH19/PARA6(3)(c) ); or
- the transferee is the Historic Buildings and Monuments Commission for England (FA99/SCH19/PARA6(3)(d) ); or
the transfer, were there to be a written instrument, would be exempt from stamp duty (if stamp duty were otherwise chargeable) by virtue of:-
- FA30/S42 (or section 11 Finance Act (Northern Ireland) 1954 - transfers between associated companies; and
- Regulations under section 87(2) Finance Act 1985 - power to exempt instruments from stamp duty of fixed amount); and
- FA97/S96 - demutualisation of insurance companies i.e. the business of a mutual insurance company transferred to an acquiring company.
In such situations, both the surrender and issue of units/OEIC shares is to be excluded by a fund manager from a Schedule 19 Finance Act 1999 SDRT monthly charge notice. The fund manager, however, will need to be satisfied (and upon any enquiry from HM Revenue & Customs (HMRC)) about the facts behind any transfer where an exemption is alleged.
Managers will commonly continue to accept stock transfer forms (or its equivalent), as sufficient evidence where the reverse of the form has been completed to certify that the transaction falls within a certain category that qualifies for stamp exemption under the Stamp Duty (Exempt Instruments) Regulations 1987 (SI 1987/516), despite their no longer being relevant for stamp duty purposes. Such categories will typically include gifts and entitlements under the terms of a deceased’s will etc. Where these bear appropriate certificates, this will normally be accepted by HMRC as sufficient evidence.
While not forming part of the monthly FA99/SCH19 SDRT computations, a fund manager will, nevertheless, be required to declare and report to HMRC, on a monthly basis, the number of third party transfer units/OEIC shares surrendered where an exemption from SDRT has been claimed.
See STSM101020 for the meaning of a unit trust.
See STSM101050 for the meaning of an Open-Ended Investment Company.