The Finance Act 1986 (Stamp Duty and Stamp Duty Reserve Tax) (Amendment) Regulations 1992

Explanatory Note

(This note is not part of the Regulations)

These Regulations extend, with effect from 1st January 1993, the exemptions from stamp duty and stamp duty reserve tax for market makers in stock and securities contained in sections 81 and 89 of the Finance Act 1986 to European institutions within the meaning of the Banking Coordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) (“the 1992 Regulations”) which carry on certain investment business in the United Kingdom.

The 1992 Regulations come into force on 1st January 1993 and give effect to the Second Council Directive 89/646/EEC on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions (OJ No. L386, 30.12.89, p.1). Under the terms of the Directive, credit institutions incorporated in a member state and certain of their subsidiaries may conduct a wide range of banking and other financial services throughout the Community. This necessitates the widening of the exemption from stamp duty and stamp duty reserve tax for market makers in stock and securities to include such institutions and subsidiaries conducting financial services in the United Kingdom.

Sections 81(3) and 89(3) of the Finance Act 1986 contain definitions of “market maker” for the purposes of exemption from stamp duty and stamp duty reserve tax respectively. Sections 81(5) and 89(5) of the 1986 Act enable the Treasury by regulations to provide that for sections 81(3) and 89(3) there shall be substituted subsections containing different definitions of “market maker” for the purposes of those sections.

The Finance Act 1986 (Stamp Duty and Stamp Duty Reserve Tax) (Amendment) Regulations 1988 (S.I. 1988/654) (“the 1988 Regulations”) substituted subsections which extended the definitions of “market maker” to include an “authorised person” under Chapter III of Part I of the Financial Services Act 1986 in certain circumstances.

The present Regulations substitute subsections which, with effect from 1st January 1993, further extend the definitions of “market maker” to European institutions carrying on investment business in the United Kingdom in certain circumstances. The Regulations also revoke the 1988 Regulations which are superseded by these Regulations.

In relation to both stamp duty (by virtue of section 85(5) of the Finance Act 1986) and stamp duty reserve tax (by virtue of section 89(3)(b)(iv) and (3)(c)(iv) of that Act as substituted by these Regulations), a “recognised investment exchange” means such an exchange within the meaning of the Financial Services Act 1986.

Regulation 1 provides for citation and commencement.

Regulation 2 substitutes a new subsection (3) of section 81, and regulation 3 a new subsection (3) of section 89 of the Finance Act 1986 for the subsections substituted by the 1988 Regulations.

Regulation 4 revokes the 1988 Regulations.