The Stamp Duty and Stamp Duty Reserve Tax (LCH SA) Regulations 2022
Published 8 February 2022
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1. Who is likely to be affected?
LCH SA, a clearing house which intends to clear securities (stocks and shares) within the scope of Stamp Duty (SD) and Stamp Duty Reserve Tax (SDRT).
2. General description of the measure
The measure will introduce regulations which prescribe relief from SD and SDRT for transactions which are cleared by LCH SA, its clearing participants or its nominees, where the purpose of the transfer is the onward clearing of those securities to the end purchaser.
3. Policy objective
Clearing houses play a crucial role through the clearing of financial transactions. By acting as a middle person (central counterparty) between buyers and sellers they help provide transparency and reduce the risk of default.
HM Treasury has powers to make regulations providing relief for transactions involving specified clearing houses. This ensures that multiple charges to SD or SDRT do not apply within the clearing chain before the securities are delivered to the end purchaser, helping to safeguard liquidity within the financial markets.
4. Background to the measure
LCH SA meets the eligibility requirements to be specified in regulations and has requested the relief as it intends to clear securities which fall within the scope of SD and SDRT.
5. Detailed proposal
5.1 Operative date
The measure will come into effect from 28 February 2022 and for the purposes of SD will apply to instruments executed on or after that date.
For SDRT the measure will apply from 28 February 2022 on agreements to transfer made on or after that date where the agreement is unconditional, and also on agreements to transfer which are conditional, where the condition in relation to the agreement is satisfied on or after that date.
6. Current law
Sections 116 and 117 of Finance Act 1991 and Regulation 17 of The Central Counterparties (Amendment, etc., and Transitional Provision) (EU Exit) Regulations 2018.
6.1 Proposed revisions
Secondary legislation will be introduced in the form of ‘The Stamp Duty and Stamp Duty Reserve Tax (LCH SA) Regulations 2022’, which will afford relief from SD and SDRT for certain transfers which are part of the LCH SA clearing chain.
7. Summary of impacts
7.1 Exchequer impact (£m)
| 2021 to 2022 | 2022 to 2023 | 2023 to 2024 | 2024 to 2025 | 2025 to 2026 | 2026 to 2027 |
|---|---|---|---|---|---|
| Empty | Empty | Empty | Empty | Empty | Empty |
The final costing will be subject to scrutiny by the Office for Budget Responsibility and will be set out at the next fiscal event.
7.2 Economic impact
This measure is not expected to have any significant economic impacts.
7.3 Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses that are involved in the clearing of securities.
This change is not expected to impact on family formation, stability or breakdown.
7.4 Equalities impacts
This change concerns the relieving of a specific business entity and its clearing participants from charges to SD and SDRT when UK securities are transferred to them for the sole purpose of onward clearing those securities.
It is not anticipated that there will be impacts for those in groups sharing protected characteristics.
7.5 Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses, with the number expected to be small as the main impact will be on the clearing house and its clearing participants by providing relief from SD and SDRT when they clear UK securities.
One-off costs will include familiarisation for those businesses, including the operator of CREST (the UK’s Central Securities Depositary system on which share transactions are settled), which also collects SDRT. They may have a one-off cost to update their IT system records to take account of the specific company being relieved from UK stamp taxes on shares.
There are not expected to be any continuing costs. There is expected to be no customer experience impacts overall for businesses dealing with HMRC. The relief afforded to clearing houses is well established and has already been afforded to several other clearing houses. The relief is understood within the financial industry.
This measure is not expected to impact civil society organisations.
7.6 Operational impact (£m) (HMRC or other)
There are no changes required to HMRC systems or processes with this measure. Therefore, there are no financial or operational impacts to HMRC.
7.7 Other impacts
Other impacts have been considered and none have been identified.
8. Monitoring and evaluation
The measure will be monitored through information collected from tax notices provided to HMRC.
9. Further advice
If you have any questions about this change, please contact Rob Read by email: sts.consultation@hmrc.gov.uk.
10. Declaration
John Glen MP, Economic Secretary to the Treasury, has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.