Ex-EU share transfers not subject to SDRT

HMRC will not appeal against a decision by the first-tier tax tribunal that it was unlawful to charge stamp duty reserve tax (SDRT) on a transfer of shares between HSBC and the Bank of New York Mellon.

This means that the taxman will no longer impose SDRT at a rate of 1.5% on issues of UK shares to depositary receipt issuers and clearance services outside the EU. The decision not to appeal the tribunal decision also opens the door for companies to make repayment claims of SDRT of issues of UK shares to non-EU depositary receipt systems and clearance services.

In a June 2011 appeal hearing - HSBC Holdings plc and the Bank of New York Mellon Corporation v HMRC  [2012] UKFTT 163 (TC) - the first-tier tribunal rejected HMRC’s arguments that article 12 of the Capital Duty Directive permitted the transfers to be taxed.

The tribunal ruled that because the transfer was integral to the raising of new capital by HSBC, charging tax under section 93 FA 1986 amounted to a tax on the issue of the HSBC shares contravened articles 10 and 11 of the directive and was unlawful. The Tribunal therefore upheld the company’s appeal.

As well as companies, people who have paid SDRT on an issue of shares in a UK-incorporated company to a depositary receipt issuer - or a clearance service located within or outside the European Union – can also make claims (under regulation 14 of the Stamp Duty Reserve Tax Regulations 1986). Claims must be made within four years from the date when the tax was paid.

For repayments of £25 or more, interest is calculated at the rate under section 178 Finance Act 1989. An HMRC briefing on the topic gives more information about making claims.