STSM142100 - Stamp duty and SDRT Administration: SDRT Administration: transactions "cancelled" after settlement in CREST

Transactions which are “cancelled” after settlement in CREST

Some Stamp Duty Reserve Tax (SDRT) repayment claims concern trades which were “cancelled” (and reversed) after being matched and settled through CREST; or where it is claimed that the deal should have been cancelled. Some claims concern “duplicated” trades; others relate to failed deletions or re-booked trades.

If a customer demonstrates that a completed transaction was not made in pursuance of an agreement and provides a reasonable explanation, with good evidence to support it, then any SDRT paid should be repaid.

If a transfer is not made in pursuance of a valid enforceable agreement to transfer, then it may properly be cancelled (and reversed) and any SDRT refunded, whether or not the “cancellation” took place before or after CREST settlement (but see STSM142080).

Examples of transactions giving rise to repayment claims

Duplicated trades

Typically a “duplicated trade” repayment claim arises where there is a single agreement for the transfer of certain securities for a particular price; but, by mistake, the deal was settled twice in CREST, with two amounts of SDRT being paid.

Where such a claim is backed by good supporting evidence, including details of the reversing trade, HMRC should accept it. If, however, the “duplicate” trade is different in some significant way from the original deal (for example the number of shares, the price per share, or a party concerned is not the same) then the assumption is that the second trade is in pursuance of a second agreement, and HMRC should reject the claim.

Failed deletions

A typical “failed deletion” repayment claim concerns an agreement which was not legally enforceable but which was nevertheless matched and settled through CREST, the parties having failed to delete the instructions in time to stop settlement occuring.

The parties will then have to make a reversing trade later on to correct the position. Where such a claim is backed by good supporting evidence HMRC should accept it.

Re-booked trades

Re-booked trades and duplicated trades are similar in that a customer claims in effect that there was a single agreement for the transfer of shares, but two trades were settled in CREST.

Typically the customer claims that the original transaction was wrong in some respect, and so it was replaced by another transaction which is the same as the agreement to transfer. The “replacement” trade is therefore not identical to the original (replaced) trade.

The difference(s) between the two bargains may relate to the amount of the commission or the “shapes” of the transaction (e.g. the number of parcels of shares moved between different parties or the number of shares in such parcels), or some other matter.

Standard and description of evidence required

Before HMRC accepts a claim it needs to be satisfied that the claim is well founded by reference to the available evidence.

The facts of each case will vary and so each claim should be considered on its own particular merits. Similarly the actual evidence required in support of a claim may vary depending on the circumstances of the claim in question.

HMRC should always have a full explanation of what happened, and why.

HMRC should also have appropriate contemporaneous evidence (other than details of the actual transfers effected) to support this explanation. That might include, for example, copies of relevant internal records, original and cancelled contract notes, dealing slips and any instructions from the client concerned.