STSM041540 - Exemptions and reliefs: exemptions: Financial institutions in resolution - stamp duty reserve tax (SDRT) 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 securities issued by and property (in the form of securities (and/or land)) held by the failed institution to an appointed resolution temporary holding entity. It also applies to transfers of securities to former creditors where that transfer is effected by a paper written instrument or order. A similar exemption applies in respect of Stamp Duty Land Tax (SDLT) under section 66A Finance Act 2003 (FA03).

The transfer of stocks and marketable securities (within the meaning of section 125 FA03) pursuant to the Act is exempt from Stamp Duty under section 85A(1) FA86. Similarly no Stamp Duty Reserve Tax (SDRT) charge at the rate of 0.5% or 1.5% arises where the agreement and transfer of such securities is undertaken and settled electronically (i.e. without a paper instrument), by virtue of sections 99(5) and 99(5ZA) FA86.

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 was 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 or money’s worth given for the return of the property, the agreement to transfer is regarded as outside the scope of a charge to SDRT under section 87 FA86.

Similarly, if no money, other stocks or securities, or to which section 57 Stamp Act 1891 applies is given, no Stamp Duty charge arises on an executed written instrument which effects the transfer, and the execution of such a written instrument will also, under section 92 FA86, cancel any SDRT charge that may otherwise arise.