Stamp duty reserve tax

Stamp Duty Reserve Tax (‘SDRT’) is paid on the purchase of shares and unit trusts. It is paid at a flat rate of 0.5 per cent based on what was paid for the shares, not on what the shares are worth.

UK equities

Charities and certain other charitable organisations are exempt from UK stamp taxes on the purchase of chargeable securities. Where a stock transfer form or other transfer document (for example, a Letter of Direction) is used, this must be submitted to HMRC together with a formal claim for relief. Where a purchase is settled through CREST, then Flag ‘S’ should be used and the HMRC Charities (formerly Inland Revenue FICO) or Charity Commission reference number should be entered in the Charity ID field.

Overseas equities

Certain overseas jurisdictions apply transfer taxes similar to SDRT. These include Ireland (1 per cent), Hong Kong (0.2 per cent), South Africa (0.25 per cent) and Greece (0.3 per cent). There is no specific relief from stamp duties on purchase by a charity of Irish, Hong Kong or Greek shares.

Common Investment Funds

Common Investment Funds (CIFs) are open to investors which are charities in the UK

A CIF is treated as a charity in its own right; and therefore an in-specie contribution of UK chargeable securities (that is to say, a contribution in its actual form rather than first transferring it into cash) to a CIF attracts no liability to SDRT. Nor will a cash contribution attract any SDRT liability; and the corresponding issue of units in exchange for the cash will have no implications as a result of an exemption from the Schedule 19 SDRT regime that is applicable to Open Ended Investment Companies (OEICs) and certain unit trusts.

In-specie distributions of UK chargeable securities from a CIF to an investor will be exempt from SDRT since the relevant ‘purchasing’ investor would necessarily be a charity. As above, given that CIFs are outside the scope of Schedule 19 SDRT, cash distributions have no UK SDRT implications.

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