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HMRC internal manual

Stamp Taxes on Shares Manual

HM Revenue & Customs
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Stamp duty and SDRT Administration: SDRT Administration: error dealing

Error dealing

Error dealing (the purchase by mistake of unwanted securities) as principal often gives rise to additional Stamp Duty Reserve Tax (SDRT) charges. Normally if a business transacts in the capacity of agent on behalf of clients then, provided the business has sufficient authority to undertake such transactions, these are correctly analysed as purchases by the client even if they are incorrect. It is sometimes argued, particularly in the case of discretionary clients, whether such an authority exists but to date we have normally found that the client agreement usually does provide sufficient authority.

The question which then arises is how the firm involved corrects the error. If the securities are sold from the client’s account, or as agent for the client (and any loss was paid to the client by way of compensation) then there would be no extra SDRT charge (other than those on the erroneous purchase and on the sale back to the market). But if the securities are sold to the firm as principal and the firm sells them into the market then the intervening transaction will generate an additional SDRT charge (in such cases it is normal for any profit or loss involved to be part of the profit or loss of the business). One likely indication of this is if the securities are rebooked from the client account into an internal error and omissions account or error dealing account before subsequently being sold.

See also STSM142090.