Stamp Duty Reserve Tax
Aside from an exemption for 'qualifying intermediaries' such as market makers at large banks, Stamp Duty Reserve Tax (SDRT) was introduced under the Finance Act 1986 to ensure that a form of tax equivalent to stamp duty would continue to be payable on the transfer of uncertificated shares. At that time, it was expected that the TAURUS share trading system would come into operation. In the event, SDRT was adapted for the change to trading in uncertificated shares in CREST, and is charged on agreements to transfer shares and other securities. SDRT is not a stamp tax, but a self-assessed transfer tax which is usually collected automatically by stock market participants (such as brokers) when a transaction takes place.
Stamp duty remains in force for shares and securities that are held in certificated form which can only be transferred by using a physical stock transfer form, and runs in parallel to SDRT on agreements to transfer shares. Since 1986, both stamp duty and SDRT have been charged at a rate of 0.5% of the consideration for the transfer of shares (in the case of stamp duty, rounded up to the nearest £5). The same transaction may include an agreement to transfer shares which may trigger a liability to SDRT, and the agreement may later be completed by a transfer of the shares which is liable to stamp duty. Provided that the transfer is stamped within 6 years, the charge to SDRT is cancelled to avoid a double charge. Stamp duty on repurchases of shares with a value of less than £1000 was abolished from 13 March 2008.
A higher rate of SDRT at 1.5% is charged for the issue or transfer of shares to a person who operates a depositary receipt scheme or a clearance service (other than CREST, which is exempted). The higher charge compensates for the fact that later transfers of depositary interests or through the clearance services will not attract SDRT. This type of SDRT is by nature paid almost exclusively by offshore (i.e. non-UK) investors, primarily US fund managers and amounts to approx. 25% of the total SDRT collected annually.
A unique feature of SDRT, compared to other purely domestic taxes in the United Kingdom, is that more than 40% of the annual intake is collected from outside the UK, thus creating an annual inflow of approx. £1.5 billion pounds from foreign investors to the UK government.
Read more about this topic: Stamp Duty In The United Kingdom
Famous quotes containing the words stamp, duty, reserve and/or tax:
“The man whose action habitually bears the stamp of his mind is a genius, but the greatest genius is not always equal to himself, or he would cease to be human.”
—Honoré De Balzac (1799–1850)
“I wish either my father or my mother, or indeed both of them, as they were in duty both equally bound to it, had minded what they were about when they begot me.”
—Laurence Sterne (1713–1768)
“Her face had the seamed reserve of the old in this country [Japan]. It was a neighborhood poignantly rich in old ladies.”
—Angela Carter (1940–1992)
“The government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
—Ronald Reagan (b. 1911)