STSM041530 - Exemptions and reliefs: exemptions: Financial institutions in resolution - stamp duty exemption on certain transfer instruments and orders

When a failed institution is placed into resolution and a stabilisation power is exercised under the Banking Act 2009 (‘the Act’), section 85A Finance Act 1986 (FA86) provides an exemption from Stamp Duty on certain transfers of shares and property from the failed institution to the appointed temporary holding entity, and on transfers of securities to former creditors. A similar exemption applies in respect of Stamp Duty Land Tax (SDLT) under section 66A Finance Act 2003.

Stamp Duty exemption from a 0.5% charge

A Stamp Duty exemption from a 0.5% charge under paragraph 3, Schedule 13 to Finance Act 1999 applies by virtue of section 85A FA86 to:

  • A mandatory reduction instrument or an instrument made under a mandatory reduction instrument which transfers stock or marketable securities:
    1. from the shareholders of the failed institution to the former holders of subordinated loans, or
    2. from the shareholders of the failed institution to a temporary holding depositary bank (appointed by the Bank of England (BoE)) to be held on trust for the benefit of the former holders of subordinated loans (section 85A (2) (a) FA86).
  • A share or property transfer instrument, or a supplemental share or property transfer instrument, or an ancillary instrument made under the original or supplemental instrument which transfers stock or marketable securities from the failed institution to a temporary bridge bank (section 85A(2)(b), (f) (i) and (j) FA86).
  • A share or property transfer instrument, or a supplemental share or property transfer instrument, or an ancillary instrument made under the original instrument which transfers stock or marketable securities from the failed institution to an Asset Management Vehicle (section 85A(2)(c) and (i) FA86).
  • A bail-in resolution instrument, property transfer instrument, a supplemental resolution instrument or supplemental property transfer instrument, or an ancillary instrument made under the original instrument or an ancillary instrument made under the original instrument which transfers stock or marketable securities from the failed institution to a temporary holding depositary bank (section 85A (2)(d), (h), (i) and (l) FA86).
  • A share transfer order or instrument, or supplemental share transfer order or instrument, or an ancillary instrument made under the original instrument (under section 13(2) and 27 of the Act) which transfers stock or marketable securities issued by the failed institution to temporary public ownership. A failed institution in these circumstances includes a failed central counterparty (section 85A (2) (e), (f) and (g) FA86).
  • An order which transfers stock or marketable securities from a failed building society to temporary public ownership (section 85A (2) (n) FA86).
  • A property transfer order which transfers stock or marketable securities held by a failed central counterparty to temporary public ownership (section 85A (2) (k) FA86).
  • Recognising a third country resolution - A third country instrument which transfers stock or marketable securities held by, say, a UK branch of a non-UK incorporated institution which has been placed in resolution outside of the UK, to a temporary holding firm (section 85A(2)(o) FA86).

Stamp Duty exemption from a 1.5% charge

A Stamp Duty exemption from a 1.5% charge under section 67(2) and section 70(2) FA86 applies by virtue of section 85A(2)(m) and (3) FA86 to:

  • An exercise of a bail-in resolution power.
  • An onward transfer resolution instrument or an ancillary instrument made under the original resolution instrument, which transfers stock or marketable securities from the temporary holding depositary bank to a recognised depositary receipt issuer (or its nominee) or recognised clearance service (or its nominee) as compensation to a creditor of the failed institution.
  • The execution of a mandatory reduction instrument or an ancillary instrument made under the original instrument which transfers stock or marketable securities from the shareholders of the failed institution to a recognised depositary receipt issuer (or its nominee) or recognised clearance service (or its nominee) as compensation to a creditor of the failed institution.

Reverse transfer instrument

Where, following exercise of a stabilisation option and during a resolution process it is determined, for example, that part of the original transfer of securities (or land) to a temporary holding entity or to a creditor of the failed institution contained more securities (or land) than required to be included in the resolution process, a reverse transfer instrument(s) may be executed to return the excess to the former owner.

In these circumstances, unless there is any amount or value of consideration (in money, other stocks or securities, or to which section 57 Stamp Act 1891 applies) given for the return of the property, the transfer is regarded as outside the scope of charge to Stamp Duty. Similarly, no Stamp Duty Reserve Tax (SDRT) charge under section 87 FA86 will arise if no consideration in money or money’s worth is given for the return of the securities to the former owner.

STSM021040 gives the meaning of stocks or marketable securities