FB 2018-19: Stamp Duty waived for failed banks’ creditors

Under new government legislation, Stamp Duty liabilities will be abolished for share capital transfers issued under the terms of the Banking Act 2009’s resolution stabilisation powers when a financial institution is danger of collapse

HMRC officials say the plans will make the stabilisation process fairer and mean no creditor is worse off than another.

Under the Act, the Bank of England has various resolution stabilisation powers to manage a failing financial institution which ensure that an institution’s operations can be maintained to protect financial stability, depositors and the taxpayer.

As part of these powers, the Bank of England may arrange a transfer of the failed institution’s issued share capital in exchange for temporary certificates issued to bondholders of the failed institution, or a transfer of securities and/or property held by the failed institution to a temporary holding entity appointed by the Bank of England or to a temporary public body.

Under current rules, all such transfers are liable to Stamp Duty, Stamp Duty Reserve Tax (SDRT) or Stamp Duty Land Tax (SDLT) charges.

‘When an institution is placed into resolution and a stabilisation power exercised, this [new] legislation will provide an exemption from a charge to Stamp Duty, SDRT and SDLT on certain transfers of securities and property from the failed institution to the appointed temporary holding entity, and on transfers of securities to bondholders following exercise of the bail-in stabilisation power. This reduces the need for specific regulations to be made under section 74 of the Banking Act 2009 to provide an exemption from a Stamp Duty, SDRT and/or SDLT charge,’ said HMRC in a statement.

‘Legislation will be introduced in Finance Bill 2018-19 providing an exemption from Stamp Duty, SDRT and SDLT. This will insert new sections 85A in FA1986 and 66A Finance Act 2003, which will apply where, following exercise of certain resolution stabilisation powers in the Banking Act 2009, UK securities and/or property (including land) are transferred by a share and/or property instrument/order to a temporary holding entity appointed by the Bank of England or to a temporary public body. The exemption will extend to transfers of securities in exchange for temporary certificates issued to bondholders that identify their entitlement to the securities.’

However, officials add that the new exemption will not apply to any transfers to a third party purchaser following exercise of a private sector purchaser resolution stabilisation power ‘where, under the terms of the resolution, the institution’s issued share capital and/or its assets are onward transferred from a temporary resolution holding entity or public body to a third party purchaser’.

The policy paper ‘Stamp Duty, Stamp Duty Reserve Tax and Stamp Duty Land Tax: exemption for financial institutions in resolution’ is here.

Report by Rob Munro

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