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HMRC internal manual

Stamp Taxes on Shares Manual

HM Revenue & Customs
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Financial markets: financial markets issues: settlement netting - SDRT implications

Under FA86/S87, a charge to SDRT can arise whenever a person A agrees with another person B to transfer ‘chargeable securities’ for consideration in money or money’s worth. Moreover, an accountable person for SDRT has to provide notice of each charge to tax to HM Revenue & Customs (HMRC) under Regulation 4 of the SDRT Regulations 1986 (SI 1986/1711) and, where appropriate, pay the relevant tax due.

A netting service operated by a provider means, however, that details of all the individual gross component trades that ‘make-up’ the resultant net instruction will not be reported to the CREST system and therefore not transparent to HMRC for SDRT purposes. In these circumstances, any financial organisation operating, or intending to operate, a settlement netting service must initially enter into an arrangement with HMRC Stamp Taxes whereby information, including gross transaction data, is to be made available to HMRC outside of CREST.

A SDRT accountable person must ensure that where gross transactions in chargeable securities have been successfully netted, details of each gross transaction are reported to HMRC along with payment of any tax due on or before the SDRT ‘accountable date’, unless a relief or exemption otherwise arises.

SDRT is to be calculated by reference to the consideration payable for each gross transaction.

Notification and payment of SDRT in respect of a gross transaction upon which netting was successfully undertaken can be made either:-

  • through the CREST system using a ‘Non Central (NC) Own Account Transfer (OAT) instruction, or
  • directly to HMRC Stamp Taxes, Birmingham

It is of importance both from a HMRC Stamp Taxes compliance perspective, and for parties using or providing settlement netting that there is a clear and logical link from the net transaction settled in CREST to the underlying gross constituents.

CREST Settlement Netting

Euroclear UK & Ireland, as the operator of the CREST settlement system, operates a similar netting service for, and on behalf of, a recognised clearing house which clears transactions undertaken on the London Stock Exchange SETS (Stock Exchange Trading System) system and which has membership of, and operates an account in, CREST as a CREST Central Counterparty Participant. In this situation, CREST nets all gross transactions reported by the clearing house and its counterparty. Details of settlement of the netted transaction along with details of each gross trade component is forwarded to HMRC for review.

See STSM142060 for the meaning of a SDRT ‘accountable person’

See STSM142070 for the meaning of ‘accountable date’

See STSM031090 for the meaning of ‘chargeable securities’