STSM062020 - Bearer instruments: bearer instrument duty: ascertaining the market value

Following the decisions by the European Court of Justice (ECJ) in October 2009 in the case of HSBC Holdings PLC and Vidacos Nominees Ltd v Commissioners for HM Revenue & Customs (C569/07), and the First-Tier Tribunal [Tax Chamber] in March 2012 in the case of HSBC Holdings PLC and the Bank of New York Mellon Corporation v Commissioners for HM Revenue & Customs (TC/2009/16584), HM Revenue & Customs (HMRC) accepts that where shares in a United Kingdom (UK) incorporated company are issued, the imposition of a 1.5 per cent stamp charge is incompatible with European Union law. HMRC therefore no longer seek to collect 1.5 per cent stamp duty and Stamp Duty Reserve Tax (SDRT) on issues of UK company shares.

HMRC accepts that the ECJ and FTT decisions must equally be interpreted as applying to prohibit the charging of ad valorem stamp duty such as that imposed by FA99/SCH15/PARA1. In these circumstances and until such time as the provisions of Schedule 15 are amended, HMRC will not seek to collect 1.5 per cent stamp duty on the issue of a bearer instrument under FA99/SCH15/PARA1 or 0.2 per cent stamp duty under FA99/SCH15/PARA5 on the issue of a bearer instrument.

But stamp duty is chargeable ( FA99/SCH15/PARA2 ) at the rate of 1.5 per cent in instances where stock constituted by or transferable by means of a bearer instrument is transferred and

  2. the stock constituted by or transferable by means of a bearer instrument consist of units under a unit trust scheme.

In these circumstances, and for the purposes of calculating a charge to stamp duty

( FA99/SCH15/PARA8 ) the market value of the stock constituted by or transferable by means of the instrument is ascertained as follows:

  • in the case of a transfer pursuant to a contract for sale, the market value is to be taken as the value of the stock on the date the contract was made;
  • in any other case, the market value is to be taken as the value of the stock on the day preceding that on which the instrument is presented for stamping or, if it is not presented, on the date of the transfer.

Where stock represented by or transferable by means of a bearer instrument, is in the form of a deposit certificate in respect of a single non-UK company, or is an instrument issued by a non-UK company that is a bearer instrument by usage (and is not otherwise within the definition of ‘bearer instrument as described in FA99/SCH15/PARA3 ) is transferred, the duty is 0.2 per cent of the market value of the stock constituted by or transferable by means of the instrument.