Client Alert

Advocate - General Advises that UK Stamp Duty Reserve Tax Charges for Entry of Shares into a Clearance System are Illegal

April 16, 2009

Arun K. Birla and Jiten Tank

In the recent case of HSBC Holdings plc and Vidacos Nominees Limited v The Commissioners of HM Revenue & Customs, Advocate-General Mengozzi (the "AG") opined that the UK's imposition of stamp duty reserve tax ("SDRT") on issues of shares into a clearance service breaches EU law. If the opinion of the AG is followed by the European Court of Justice ("ECJ"), taxpayers who have paid SDRT in such circumstances would have the opportunity to claim for the repayment of the SDRT from HM Revenue and Customs ("HMRC"). Repayments of SDRT may also be available in other circumstances.


Broadly, the entry of shares into a clearance service gives rise to a charge to SDRT of 1.5% - the so called "season ticket" charge as subsequent transfers of shares held in the same clearance service will not be chargeable to SDRT.

Article 11 of the Directive on Indirect Taxes on the Raising of Capital (the "Capital Duty Directive") prohibits the imposition of taxes on the issue of securities by a company. Article 56 of the EC Treaty prohibits the imposition of restrictions on the free movement of capital.

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Image: Jiten Tank
Jiten Tank

Partner, Tax Department

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