Chapter STSM041170

Record NumberSTSM041170
Published date07 March 2016

Further information can be found in the publication ‘Stamp Duty Reserve Tax in CREST: a guide to market practice’, produced by Euroclear UK & Ireland.

See also STSM130000 - CREST

Where a charity buys chargeable securities, exemption from SDRT can be claimed. In practice, the exemption is secured by the exchange member or qualified dealer (as the ‘accountable person’ for SDRT purposes) who is purchasing the shares either directly on behalf of the charity, or on instructions from a fund/investment manager with an underlying client (or clients) who is a charity, and who would otherwise be accountable for the tax. When reporting the transaction to CREST, the exchange member or qualified dealer inputs the CREST Transaction Stamp Status (TSS) value ‘S’ and enters the HMRC Charities (formerly Inland Revenue FICO) or Charity Commissioners’ reference number in the Charity ID field.

HMRC needs to be able to verify that the exemption claimed in this way is properly due and will want to be satisfied on two matters. An accountable person must be able to demonstrate that:

  1. instructions to purchase shares have been received from a client that is a bona fide charity, or from a client acting for and on behalf of an underlying client that is a bona fide charity; and
  2. checks have been undertaken to verify that the charity is, and continues to be, a registered charity and eligible for exemption from SDRT.

The above two obligations placed upon an accountable person typically arise in the following scenarios:

  1. An accountable person with a direct contractual relationship with a charity client

On a first claim to exemption, the accountable person must obtain a copy of the certificate issued by the Charity Commissioners or HMRC Charities. Where, however, an original Charity Commissioners’ certificate has been lost or is unobtainable, HMRC will accept a letter on headed notepaper from the charity to the accountable person, giving the instruction to act and purchase the shares on its behalf, as satisfying this obligation.

The letter should also include the address and reference number of the charity. A letter of instruction from a charity registered outside England and Wales must, in addition, include the date of charity registration. The website of the Office of Scottish Charities Regulator does not provide this information for Scottish charities and as yet there is no governing body for charities established in Northern Ireland. The date of registration of...

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