Stamp Duty Reserve Tax

Stamp Duty Reserve Tax (SDRT) was introduced in 1986 to deal with transactions in shares where no instrument of transfer was executed and which were therefore outside the scope of Stamp Duty. It is a transaction tax, charged on ‘agreements to transfer chargeable securities’ unlike Stamp Duty which is charged upon documents. The main provisions are in the FA 1986 and the supporting Regulations at SI 1986/1711. (See-: Stamp Taxes Manual, Chapters 1 for an overview of SDRT, Chapters 10-14 for general SDRT, including Transfers to Depository Receipt Schemes and Clearance Services and Chapter 15 for Unit Trusts and Open Ended Investment Companies).

SDRT now accounts for the majority of taxation collected on share transactions effected through the UK's Exchanges i.e. London Stock Exchange, LIFFE etc. The majority of this taxation is collected automatically through the *CREST system, although payments are also collected for transactions that are effected outside of CREST (referred to as 'Off Market Payments), or input incorrectly through CREST. This is done either by way of a cheque or CHAPS payment. This process eliminates the need for a document i.e. Stock Transfer form, to be drawn up. However, if a paper transaction is drawn up and duly stamped, the transaction will fall within the stamp duty regime (See-: Stamp Taxes Manual Chapters 1-10) and so the SDRT charge is cancelled.

*CREST is an electronic settlements system whereby its members can move shares and payments quickly thus keeping the stock market buoyant. SDRT is deducted by the system and sent to HMRC via a direct electronic link, providing that the members have correctly input the trade details into CREST (See-: CRESTCO for further information).