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HMRC internal manual

Stamp Taxes on Shares Manual

Stamp duty and SDRT Administration: SDRT Administration: residual securities and takeovers

Residual securities

There are some transactions for which accounting for Stamp Duty Reserve Tax (SDRT) through CREST is not possible, or proves awkward. Deals in residual securities (shares without an exchange listing) are the most obvious example (see STSM131050 and STSM132050). Share trading in a residual security will normally be settled by the completion and stamping of a stock transfer form subject to ad valorem stamp duty. The transfer on sale of chargeable securities also represents an ‘agreement to transfer’ for the purposes of a charge to SDRT, but the SDRT charge is cancelled where stamp duty has been paid.

Purchasers handling residual securities transactions occasionally find it can be difficult for the paperwork to keep up with the rate at which the same security is being bought and sold and they cannot get stock transfer forms stamped before the SDRT accountable date. They are, nevertheless, confident that such a document will be stamped shortly thereafter (which will effectively cancel the SDRT charge). To ease the administrative burden of having to account for SDRT on or before the accountable date, only for the tax to be refunded shortly thereafter when a stock transfer form is completed and impressed with stamp duty, HMRC has published a practice on the subject of residual securities. This practice was introduced in October 1998 (Issue 37 of Tax Bulletin) and reiterated in October 1999 (Issue 43 of Tax Bulletin), from which the following is reproduced:

“Where a stock transfer form relating to residual securities (securities that cannot be settled in CREST) is stamped within 60 days of the date of the transaction, it remains the case that the Stamp Office will not seek interest on the SDRT in the meantime and no notice need be given. However, should a stock transfer form not in fact be duly stamped within this time then interest on the unpaid SDRT will still run from the accountable date. In addition, if a notice was not delivered by that date the penalties described above will apply.

It should be noted here, and more generally, that if a stock transfer form is presented for stamping more than 30 days after it is executed, and the duty is paid late, then interest will run on the Stamp Duty and there may be a penalty for late stamping.”

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Takeovers and offers for sale

Some takeover or offers for sale can also be tricky. The “blue book” (available on the website of Euroclear UK & Ireland) contains a market norm for handling these through CREST which was agreed with the receiving agents.