STSM055010 - Depositary receipt and clearance services: scope of 1.5 per cent charge: 1.5 per cent Stamp Duty charge - transfer of securities
The higher 1.5% Stamp Duty charge applies to instruments that:
- Transfer relevant securities to a depositary receipt issuer or their nominee (section 67 FA1986)
- Transfer chargeable securities to a clearance service or their nominee (section 70 FA1986)
‘Relevant securities’ means shares in or stock or marketable securities of a United Kingdom incorporated company.
The 1.5% charge does not apply to exempt capital raising instruments (see STSM053100) and exempt listing instruments (see STSM053110).
No 1.5% charge arises on the issue of relevant securities to a depositary receipt issuer or clearance service.
Background of the 1.5% charge
Following EU (HSBC Holdings plc and Vidacos Nominees Ltd v HMRC) and UK (HSBC Holdings plc and The Bank of New York Mellon v HMRC) court decisions in 2009 and 2012, HMRC recognised that the 1.5% Stamp Duty and SDRT charges on the issue of securities and certain transfers were incompatible with the Capital Duties Directive (Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital, and the predecessor directive, Council Directive 69/335/EEC of 17 July 1969).
Following this, in a 2017 decision the Court of Justice of the European Union ruled in the Air Berlin case that no 1.5% charge applied on the transfer of legal title in chargeable securities in connection with the listing of shares on a stock exchange.
UK legislation providing for the 1.5% charge on transactions of the types covered in these cases was not originally amended as taxpayers were able to rely on the direct effect of EU law up to and including 31 December 2023. However, the changes in the Retained EU Law (Revocation and Reform) Act 2023 meant that this would no longer be the case, so UK legislation was amended to prevent the 1.5% charge being reintroduced for these transactions.
The 1.5% charge on the issue of UK securities into depositary receipt systems and clearance services and on certain transfers was removed from domestic legislation with effect from 1 January 2024. Guidance on these changes can be found at STSM053080 onwards.