You pay Stamp Duty Reserve Tax (SDRT) on electronic 'paperless' share transactions. Most shares are bought and sold this way. When you buy shares using a paper stock transfer form you pay Stamp Duty rather than SDRT.
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You pay SDRT on paperless transactions when you buy:
Following the decisions in HSBC Holdings and Vidacos Nominees Ltd v HMRC and HSBC Holdings PLC and the Bank of New York Mellon Corporation V HMRC, the purchase of new issue of shares made in accordance with EU Council Directive 2008/7/EC is outside of the scope of the SDRT tax charge. The decisions will also apply to the new issue of a debt security which falls within the scope of Article 5(2)(b) of the Capital Duty Directive (for example, loan notes and corporate bonds - to the extent that these securities are not already exempt from charge under sections 79 and 99(5) FA 1986).
SDRT is still payable when you buy units in unit trusts or shares in open-ended investment companies - though how it is paid differs from shares, as explained below.
Most paperless share transactions that you pay SDRT on are carried out electronically through CREST, the electronic settlement and registration system administered by Euroclear.
CREST automatically collects the SDRT and sends it to HM Revenue & Customs (HMRC). Your stockbroker then settles up with CREST and bills you for the SDRT and their own fees.
You have to pay SDRT on 'off-market' transactions. These include shares that are transferred outside CREST and are held by a nominee like a bank. In most cases, a stockbroker deals with this type of transaction and pays the SDRT direct to HMRC. But if you deal with it yourself, you have to notify HMRC about the transaction and make the payment.
If you buy units in unit trusts from anyone other than a fund manager these are also treated as 'off market' transactions and you'll have to notify HMRC and make the payment.
When you buy shares or unit trust units off-market, you have to notify HMRC about the transaction and pay the SDRT by the 'due date' - this is the seventh day of the month after the month in which you bought them. For example if you buy shares or units on 18 April you have to notify HMRC and pay the SDRT on or before 7 May.
If you don't make your payment by the due date, you'll have to pay interest from the date the SDRT was due until the date when you pay it. You may have to pay a penalty as well.
Follow the link below to find out more about 'how to pay Stamp Duty Reserve Tax' for off-market purchases, including what information you need to supply with your payment, and the different payment methods available to you.
To find out more about penalties for late payment, follow the link below 'Penalties and appeals - Stamp Duty Reserve Tax'.
Unit trusts and OEICs are dealt with under special rules. When you buy units from a fund manager you're not charged SDRT. But when units are surrendered the fund manager is charged SDRT. The fund manager pays the SDRT directly to HMRC and usually passes this on to the unit holders through management charges.
If you buy units in unit trusts yourself you'll need to notify HMRC and pay any SDRT due. Read the later section 'Stamp Duty Reserve Tax on 'off-market' transactions' to find out more.
If you are a financial institution dealing with units in unit trusts or shares in an OEIC you'll need to send an SDRT notice along with the correct payment to HMRC by the 14th of the month. HMRC produces a calendar showing the relevant due date for payment - follow the link below.
Send your notice and payment to HMRC Birmingham Stamp Office. Mark your correspondence 'SDRT' and include any reference number.
Stamp Office contact details
You can read more about unit trusts and OEICs - including how to calculate SDRT payments - in Chapter 15 of the Stamp Taxes Manual.
The amount of SDRT you pay is worked out at a flat rate of 0.5 per cent (rounded up or down to the nearest penny) based on what you give for the shares, not what the shares are worth.
So if it's a cash transaction, the amount of SDRT is based on the amount of cash you pay. For example, if you buy shares for £1,000 you'll pay £5 SDRT whatever the value of the shares themselves.
If you give something else of value the SDRT is based on the value of what you give. But if you're given the shares for nothing and don't give anything for them in return you don't have to pay any SDRT.
You can use the HMRC calculator to help work out how much tax you'll need to pay.
If you have any queries about SDRT that aren't covered above, you can contact the HMRC Stamp Duty Reserve Tax Helpline.