STSM057080 - Depositary receipt and clearance services: exemptions/ reliefs: United Kingdom sterling denominated bearer instruments

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).

HMRC also accepted that the decisions extended to sterling denominated bearer securities issued by a company incorporated in the UK and/or to bearer instruments issued outside the UK by, or on behalf of a UK company. Therefore, notwithstanding the previous provisions of part 1 of Schedule 15 FA1999, HMRC did not seek to collect 1.5% Stamp Duty on the issue of a bearer instrument.

In addition, the issue and immediate depositing of a sterling denominated bearer security to a depositary receipt issuer or clearance service located anywhere in the world was not regarded by HMRC to be chargeable to 1.5% SDRT under section 93 and 96 FA1986.

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.

The charge on the issue of bearer instruments was also removed from domestic legislation with effect from 1 January 2024. See STSM061060 for more information.