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HMRC internal manual

Stamp Taxes on Shares Manual

From
HM Revenue & Customs
Updated
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Derivatives: introduction to futures and forwards: settlement of a futures or forwards contract

Stamp Duty & Stamp Duty Reserve Tax (SDRT)

If the holder (i.e. the buyer) of the:

  1. futures contract (relating to ‘stocks and marketable securities’ that is capable only of physical delivery of securities upon settlement of the futures contract) does not secondary trade the future (see STSM117090), the SDRT charge which may have arisen on the original agreement i.e. the futures contract, can be cancelled (by virtue of FA86/S92 ) on settlement of the contract by ad valorem Stamp Duty being paid at the rate of 0.5% and impressed on a completed instrument that transfers the underlying securities i.e. stock transfer forms.

If the futures contract is secondary traded, the SDRT falling on the original futures contract issue remains in place, as do the SDRT charges on subsequent secondary trading of the future. The Stamp Duty payable on the eventual transfer will not cancel any SDRT charges arising in respect of secondary trading of the future.

Where no instrument of transfer is or will be executed in respect of the transfer of securities following settlement of the futures contract, the charge to SDRT (under FA86/S87) which may have arisen on the date when the futures contract is entered into becomes final.

See STSM021040 for the meaning of ‘stocks or marketable securities’.

  1. forwards contract (relating to ‘stocks and marketable securities’ that is capable only of physical delivery of shares upon settlement of the forwards contract) completes and executes an instrument of transfer to settle the transaction upon which ad valorem stamp duty at the rate of 0.5% is paid and impressed, the SDRT charge which may otherwise arose on the original agreement i.e. the forwards contract, can be cancelled.
     

Where no instrument of transfer is, or will be, executed in respect of the transfer of securities following settlement of the forwards contract, the charge to SDRT (under FA86/S87) which may have arisen on the agreement to transfer ‘chargeable securities’ on the ‘relevant day’ when the forwards contract is entered into, becomes final.

See STSM012040 for the meaning of ‘relevant day’.

See STSM031090 for the meaning of ‘chargeable securities’