Guidance

Stamp Duty and Stamp Duty Reserve Tax: stock lending and repurchases in cases of insolvency

Published 14 August 2009

Introduction

Section 83 and Schedule 37 Finance Act 2009 provide relief from Stamp Duty and Stamp Duty Reserve Tax (SDRT) where one of the parties to a stock lending or sale and repurchase (repo) arrangement becomes insolvent before the arrangement is completed by the return of the securities originally lent or sold. Relief is available where the insolvency occurred on or after 1 September 2008.

Normally, the non-return of securities under a stock lending or repo arrangement triggers an SDRT charge on the party that borrowed or bought them. Finance Act 2009 modifies this rule so that, where the non-return of the securities is attributable to one of the parties to the arrangement having become insolvent:

• no SDRT charge arises on the recipient of the securities (the relief also covers any securities provided as collateral that are retained by the lender under a stock loan arrangement)
• purchases of securities by the solvent party to replace those that are not returned by the insolvent party will not incur a Stamp Duty or SDRT charge

Relief is conditional upon the parties to the arrangement not being connected persons within the meaning of section 839 Taxes Act 1988.

Because the new rules have effect for insolvencies occurring on or after 1 September 2008, anyone who has subsequently paid Stamp Duty or SDRT in either of the circumstances set out above is entitled to repayment.

How to claim a repayment

Repayment of SDRT - original stock loan or sale

Your claim must include:

• the name of the insolvent party and the date of insolvency
• the CREST ID for the original stock loan or sale transaction (or a copy of the stock transfer form if the original transfer was effected by a written instrument)
• the amount and type of stock originally lent or sold
• the amount of SDRT paid that is being reclaimed

Claim relief for purchase of replacement securities

SDRT

For SDRT claims you should include:

• the CREST transaction ID for the replacement purchase
• the trade date (the replacement purchase(s) must be made within a period of 30 days from the date of insolvency)
• the name of the insolvent party and the date of insolvency
• the CREST ID for the original stock loan or sale transaction
• the amount and type of stock originally lent or sold
• the amount of that stock, that was replaced
• the amount of SDRT paid on the replacement purchase
• confirmation that any collateral provided by the insolvent party, or realised proceeds from its sale, has been utilised in making the replacement purchase

Please provide your information for SDRT claims in the following format:

	Details
Original CREST transaction ID	XX123456
Number of shares on that transaction	500
Number of shares on reclaimed transaction	500
Reclaim CREST transaction ID	ZZ123456
SDRT to be reclaimed	£2500.05
Trade date	18/09/08
Reclaim reason code	5

Stamp Duty

If you’re claiming for relief involving Stamp Duty you should include:

• the name of the insolvent party
• the amount and type of stock originally lent or sold
• the date(s) the replacement securities were acquired (the replacement purchase(s) must be made within a period of 30 days from the date of insolvency)
• the amount of that stock, that was replaced
• the original instrument(s) of transfer showing the duty stamps (required so that the duty stamps can be blocked out)

You should give your information for Stamp duty in the format below:

	Details
Number of shares on original transaction	500
Trade date of original transaction	01/09/2008
Customer or reference of original transaction	XR14
Number of shares on reclaimed transaction	500
Stamp Duty to be reclaimed	£2600.25
Date of instrument of transfer	30/09/2008

Repayment is available for purchases of replacement securities up to but not exceeding the amount originally lent or sold. If the replacement purchase was effected by more than one transaction in the market, please provide the relevant information for all transactions in a single letter of claim.

Send you claim for repayment or relief headed ‘Stock Lending - Insolvency’ to:

Birmingham Stamp Office
9th Floor
City Centre House
30 Union Street
Birmingham
B2 4AS

If you have any questions about the reclaim process please write to Adam Shooter at the address above, or telephone: 03000 570325.