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HMRC internal manual

Stamp Taxes on Shares Manual

HM Revenue & Customs
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Derivatives: introduction to futures and forwards: issue of a futures or forwards contract

Stamp Duty

A document under which an equity futures or forwards contract is issued or granted is chargeable with Stamp Duty on the amount paid for the issue or grant. (George Wimpey & Co Ltd v IRC [1975] 2 All ER 45).

But following FA03/S125 Stamp Duty now only applies to an instrument issuing or granting a future or forward 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 verbal and the futures and forwards contracts confirming the verbal agreements are not regarded as stampable documents upon which stamp duty is payable.

Stamp Duty Reserve Tax (SDRT)

The issue of an equity futures or forwards contract relating to underlying ‘chargeable securities’ (as defined in sections 99(3) and 99(4) Finance Act 1986) which is capable of being settled only by the delivery of the underlying securities, can represent an agreement to transfer for the purposes of a charge to SDRT under FA86/S87. The charge on the contract/agreement arises irrespective of when and how settlement occurs.

In respect of an equity forwards contract, a charge to SDRT may arise when the contract/agreement becomes unconditional which is normally the date, under the terms of the contract, when the share price of the underlying securities is fixed.

See STSM999999 (Glossary) for the meaning of ‘equity’.