Clearance services – stamp duty and SDRT changes

Hartley Foster, Tax Partner, Olswang

Finance Bill 2010 will block a potential stamp duty and SDRT avoidance arrangement that arose following the taxpayer’s victory in the HSBC Holdings case in the ECJ (reported here – click here to view) HMRC can no longer apply the 1.5% stamp duty or SDRT charge on new shares first being issued into an EU clearance service or depositary receipt system.  However, transfers of shares between clearance services and/or depositary receipt systems (whether or not EU) are exempt from stamp duty and SDRT.  This is intended to avoid a double charge.

The HSBC decision coupled with the exemption provided the opportunity to avoid stamp duty and SDRT by routing shares intended for a non-EU clearance service or depository receipt system through an EU clearance system or depository receipt system.

This exemption on transfers between clearance services and depositary receipt systems will now not apply.  where there is a scheme between an issuing company and a clearance service or depository receipt issuer under which shares are issued to an EU clearance service or depositary receipt system (without the payment of the 1.5% charge) and subsequently transferred to a non-EU clearance service or depositary receipt system.  This change was first announced on 1 October 2009 and will be effective as of that date.

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