Finance Act 1986

The principal charge

87 The principal charge

(1) This section applies where a person (A) agrees with another person (B) to transfer chargeable securities (whether or not to B) for consideration in money or money's worth.

(2) There shall be a charge to stamp duty reserve tax under this section on the expiry of the period of two months beginning with the relevant day, unless the agreement is to transfer the securities to B or his nominee and the first and second conditions mentioned below have been fulfilled by the time that period expires.

(3) In subsection (2) above "the relevant day" means—

(a) in a case where the agreement is conditional, the day on which the condition is satisfied, and

(b) in any other case, the day on which the agreement is made.

(4) The first condition is that an instrument is (or instruments are) executed in pursuance of the agreement and the instrument transfers (or the instruments between them transfer) to B or, as the case may be, to his nominee all the chargeable securities to which the agreement relates.

(5) The second condition is that the instrument (or each instrument) transferring the chargeable securities to which the agreement relates is duly stamped in accordance with the enactments relating to stamp duty if it is an instrument which, under those enactments, is chargeable with stamp duty or otherwise required to be stamped.

(6) Tax under this section shall be charged at the rate of 50p for every £100 or part of £100 of the amount or value of the consideration mentioned in subsection (1) above.

(7) For the purposes of subsection (6) above the value of any consideration not consisting of money shall be taken to be the price it might reasonably be expected to fetch on a sale in the open market at the time the agreement mentioned in subsection (1) above is made.

(8) In this section "the enactments relating to stamp duty" means the [1891 c. 39.] Stamp Act 1891 and any enactment which amends or is required to be construed together with that Act.

(9) This section applies where the agreement to transfer is made on or after the day on which the rule of The Stock Exchange that prohibits a person from carrying on business as both a broker and a jobber is abolished.

(10) This section has effect subject to sections 88 to 90 below.

88 Section 87: special cases

(1) An instrument on which stamp duty is not chargeable by virtue of—

(a) section 127(1) of the [1976 c. 40.] Finance Act 1976 (transfer to stock exchange nominee), or

(b) section 84(2) or (3) above,

shall be disregarded in construing section 87(4) and (5) above.

(2) Subsection (3) below applies where the chargeable securities mentioned in section 87(1) above are constituted by or transferable by means of an inland bearer instrument, within the meaning of the heading "Bearer Instrument" in Schedule 1 to the Stamp Act 1891, which—

(a) is exempt from stamp duty under that heading by virtue of exemption 3 in that heading, or

(b) would be so exempt if it were otherwise chargeable under that heading.

(3) In such a case section 87 above shall have effect as if the following were omitted—

(a) in subsection (2) the words from "unless" to the end;

(b) subsections (4), (5) and (8).

89 Section 87: exceptions for market makers etc.

(1) Section 87 above shall not apply as regards an agreement to transfer securities if the agreement is made by B in the ordinary course of his business as a market maker in securities of the kind concerned.

(2) Section 87 above shall not apply as regards an agreement to transfer securities to B or his nominee if—

(a) the agreement is made by B as principal in the ordinary course of his business as a broker and dealer in relation to securities of the kind concerned, and

(b) before the end of the period of 7 days beginning with the day on which the agreement is made or (in a case where the agreement is conditional) the day on which the condition is satisfied, B enters into an unconditional agreement to sell the securities to another person.

(3) For the purposes of this section, a person is a market maker in securities of a particular kind if he—

(a) holds himself out at all normal times in compliance with the rules of The Stock Exchange as willing to buy and sell securities of that kind at a price specified by him, and

(b) is recognised as doing so by the Council of The Stock Exchange.

(4) For the purposes of this section, a person is a broker and dealer in relation to securities of a particular kind if he is a member of The Stock Exchange who carries on his business in the United Kingdom and is not a market maker in securities of that kind.

(5) The Treasury may by regulations provide that for subsection (3) above (as it has effect for the time being) there shall be substituted a subsection containing a different definition of a market maker for the purposes of this section.

(6) The Treasury may by regulations provide that for subsection (4) above (as it has effect for the time being) there shall be substituted a subsection containing a different definition of a broker and dealer for the purposes of this section.

(7) For the purposes of subsection (2) above, if the securities which B sells cannot be identified (apart from this subsection) securities shall be taken as follows—

(a) securities of the same kind acquired in the period of 7 days ending with the day of the sale (and not taken for the purposes of a previous sale by B) shall be taken before securities of that kind acquired outside that period;

(b) securities of that kind acquired earlier in that period (and not taken for the purposes of a previous sale by B) shall be taken before securities of that kind acquired later in that period.

(8) For the purposes of subsection (7) above—

(a) securities are acquired when B enters into an agreement for them to be transferred to B or his nominee or (in a case where the agreement is conditional) when the condition is satisfied;

(b) B sells securities when he enters into an unconditional agreement to sell them to another person.

(9) The power to make regulations under this section shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.

90 Section 87: other exceptions

(1) Section 87 above shall not apply as regards an agreement to transfer a unit under a unit trust scheme to the managers under the scheme.

(2) Section 87 above shall not apply as regards an agreement to transfer a unit under a unit trust scheme if at the time the agreement is made—

(a) all the trustees under the scheme are resident outside the United Kingdom, and

(b) the unit is not registered in a register kept in the United Kingdom by or on behalf of the trustees under the scheme.

(3) Section 87 above shall not apply as regards an agreement to transfer securities constituted by or transferable by means of—

(a) an overseas bearer instrument, within the meaning of the heading "Bearer Instrument" in Schedule 1 to the [1891 c. 39.] Stamp Act 1891;

(b) an inland bearer instrument, within the meaning of that heading, which does not fall within exemption 3 in that heading (renounceable letter of allotment etc. where rights are renounceable not later than six months after issue).

(4) Section 87 above shall not apply as regards an agreement which forms part of an arrangement falling within section 93(1) or 96(1) below.

(5) Section 87 above shall not apply as regards an agreement to transfer securities which the Board are satisfied are held, when the agreement is made, by a person whose business is exclusively that of holding chargeable securities—

(a) as nominee or agent for a person whose business is or includes the provision of clearance services for the purchase and sale of chargeable securities, and

(b) for the purposes of such part of the business mentioned in paragraph (a) above as consists of the provision of such clearance services (in a case where the business does not consist exclusively of that).

91 Liability to tax

(1) Where tax is charged under section 87 above as regards an agreement, B shall be liable for the tax.

(2) But where B is acting as nominee for another person, that other person shall be liable for the tax.

92 Repayment or cancellation of tax

(1) If, as regards an agreement to transfer securities to B or his nominee, tax is charged under section 87 above and it is proved to the Board's satisfaction that at a time after the expiry of the period of two months (beginning with the relevant day, as defined in section 87(3)) but before the expiry of the period of six years (so beginning) the conditions mentioned in section 87(4) and (5) have been fulfilled, the following provisions of this section shall apply.

(2) If any of the tax charged has been paid, and a claim for repayment is made within the period of six years mentioned in subsection (1) above, the tax paid shall be repaid; and where the tax paid is not less than £25 it shall be repaid with interest on it at the appropriate rate from the time it was paid.

(3) To the extent that the tax charged has not been paid, the charge shall be cancelled by virtue of this subsection.

(4) In subsection (2) above "the appropriate rate" means 11 per cent, per annum or such other rate as the Treasury may from time to time specify by order.

(5) The power to make an order under this section shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.