STSM116030 - Derivatives: introduction to covered warrants: issue or grant of a covered Warrant

Stamp Duty

A document under which a covered warrant is issued or granted is chargeable with Stamp Duty on the amount of the consideration paid for the issue or grant. (George Wimpey & Co Ltd v IRC [1975] 2 All ER 45).

However due to section 125 Finanace Act 2003 Stamp Duty now only applies to a document issuing or granting a warrant over ‘stock or marketable securities’. For the meaning of ‘stock or marketable securities’ - see STSM021040.

Transactions undertaken by members of an investment exchange are, however, usually agreed verbally and the covered warrant contracts confirming the verbal agreements are not regarded as stampable documents upon which Stamp Duty is payable.

Stamp Duty Reserve Tax (SDRT)

As the issue or granting of a covered warrant represents an agreement to grant rights rather than an agreement to transfer existing rights in an underlying equity or security, no SDRT charge arises under section 87 Finance Act 1986.