Stamp duty reserve tax

By Tolley in association with Grant Thornton's stamp taxes team

The following Corporation Tax guidance note by Tolley in association with Grant Thornton's stamp taxes team provides comprehensive and up to date tax information covering:

  • Stamp duty reserve tax
  • Basic rules
  • Chargeable securities
  • Administration and compliance
  • Interaction between SDRT and stamp duty
  • Common issues for non-financial market transactions
  • Share registers
  • Definition of consideration

Stamp duty reserve tax (SDRT) was introduced by Finance Act 1986 (subscription sensitive) to ensure that a charge equivalent to stamp duty would apply on the transfer of uncertificated securities. As there is no document transferring the shares in a paperless transaction, and therefore no document to stamp, without SDRT there would be no mechanism to collect the stamp duty.

In practice, the majority of SDRT is paid automatically on stock exchange transactions dealt with electronically via the UK Central Securities Depository (CREST). Analysis of the application of SDRT to financial market trading is not outlined further in this guidance note.

Transfers of securities outside CREST are normally effected by a transfer document on which stamp duty is paid. This generally has the impact of cancelling any SDRT liability (see below). Nevertheless, taxpayers and advisers need to be aware of the potential application of SDRT where there are agreements to transfer securities, in particular looking out for situations where there is an agreement to which SDRT applies but no corresponding document which is subject to stamp duty. Without further planning, the SDRT liability would not be extinguished in such circumstances.

Basic rules

SDRT applies where there is an unconditional agreement, whether documented or otherwise, to transfer 'chargeable securities' (see the definition below) for consideration in 'money or money's worth' (see the commentary below). For conditional agreements, no SDRT liability arises until the agreement becomes unconditional.

The tax payable is generally 0.5% of the consideration for ordinary transfers of chargeable securities. As with stamp duty, there are certain transactions that may attract a higher rate of 1.5%. In principle, these include the transfer or issue of securities to a depositary receipts issuer or clearance service under FA 1986, ss 93 or 96 (subscription sensitive) respectively. The position is now more complex following the decisions of the Court of Justice of the

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