Stamp Duty and Stamp Duty Reserve Tax: stock lending and repurchases in cases of insolvency

Section 83 and Schedule 37 Finance Act 2009 provide relief from Stamp Duty and Stamp Duty Reserve Tax (SDRT) where one of the parties to a stock lending or sale and repurchase (repo) arrangement becomes insolvent before the arrangement is completed by the return of the securities originally lent or sold. Relief is available where the insolvency occurred on or after 1 September 2008.

Normally, the non-return of securities under a stock lending or repo arrangement triggers an SDRT charge on the party that borrowed or bought them. Finance Act 2009 modifies this rule so that, where the non-return of the securities is attributable to one of the parties to the arrangement having become insolvent:

  • no SDRT charge arises on the recipient of the securities (the relief also covers any securities provided as collateral that are retained by the lender under a stock loan arrangement)
  • purchases of securities by the solvent party to replace those that are not returned by the insolvent party will not incur a Stamp Duty or SDRT charge

Relief is conditional upon the parties to the arrangement not being connected persons within the meaning of section 839 Taxes Act 1988.

Because the new rules have effect for insolvencies occurring on or after 1 September 2008, anyone who has subsequently paid Stamp Duty or SDRT in either of the circumstances set out above is entitled to repayment.

How to claim a repayment

Send your claim headed 'Stock Lending - Insolvency' to

Birmingham Stamp Office
9th Floor
City Centre House
30 Union Street
Birmingham
B2 4AS

Your claim must include the information set out below.

1. Repayment of SDRT - original stock loan or sale

  • the name of the insolvent party and the date of insolvency
  • the CREST ID for the original stock loan or sale transaction (or a copy of the stock transfer form if the original transfer was effected by a written instrument)
  • the amount and type of stock originally lent or sold
  • the amount of SDRT paid that is being reclaimed

You should send your reclaim in the format detailed in Stamp Duty Reserve Tax newsletter - issue1

Stamp Duty Reserve Tax newsletter - issue1

2. Claims for relief for purchase of replacement securities

SDRT
  • the CREST transaction ID for the replacement purchase
  • the trade date (NB the replacement purchase(s) must be made within a period of 30 days from the date of insolvency)
  • the name of the insolvent party and the date of insolvency
  • the CREST ID for the original stock loan or sale transaction
  • the amount and type of stock originally lent or sold
  • the amount of that stock that was replaced
  • the amount of SDRT paid on the replacement purchase
  • confirmation that any collateral provided by the insolvent party, or realised proceeds from its sale, has been utilised in making the replacement purchase
  • the information and format required for claims is set out at Annex A of this document

Stamp Duty

  • the name of the insolvent party
  • the amount and type of stock originally lent or sold
  • the date(s) the replacement securities were acquired (NB the replacement purchase(s) must be made within a period of 30 days from the date of insolvency)
  • the amount of that stock that was replaced
  • the original instrument(s) of transfer showing the duty stamps (required so that the duty stamps can be blocked out)
  • The information and format required for claims is set out at Annex B of this document

Repayment is available for purchases of replacement securities up to but not exceeding the amount originally lent or sold. To assist HMRC in processing claims, if the replacement purchase was effected by more than one transaction in the market, please provide the relevant information for all transactions in a single letter of claim.

General information about submitting SDRT repayment

If you have any questions about the reclaim process please contact Adam Shooter, Birmingham Stamp Office at the address above or on Tel 0121 616 4588.

Annex A

SDRT - claims for relief for purchase of replacement securities

Please provide information in the format outlined below:

Original CREST Transaction ID - XX123456
Number of Shares on that Transaction - 500
Number of Shares on Reclaimed Transaction - 500
Reclaim CREST Transaction ID - ZZ123456
SDRT to be reclaimed - £2500.05
Trade Date - 18/09/08
Reclaim Reason Code - 5

Annex B

Stamp Duty - claims for relief for purchase of replacement securities

Please provide information in the format outlined below:

Number of Shares on Original Transaction - 500
Trade Date of Original Transaction - 01/09/2008
Customer or reference of Original Transaction - XR14
Number of Shares on Reclaimed Transaction - 500
SD to be reclaimed - £2600.25
Date of Instrument of Transfer - 30/09/2008