Overview of taxes on financial transactions within the EU - UK

Financial transactions - UK

An overview of the UK, one of nine EU Member States considered to apply a tax on financial transactions

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Status

In force 

Introduced

1986

Legislative reference

FA 1986, Section 87

Type of tax

Stamp duty reserve tax

In scope instruments

Equities and certain equity derivatives and also some loans which have equity like features (e.g. convertibles).

Taxable event (transaction)

Agreement to transfer or to put securities into a depository receipt or clearance service facility.

Territorial connection for liability – condition for taxability is:

Residence of issuer?

Yes

Location of transaction (e.g. traded on local stock exchange)?

N/A

Location of party (e.g. at least one party to the transaction is resident)?

N/A

Residence of financial intermediary?

N/A

Other relevant conditions for taxability

N/A

Exempt transactions

Cash settled derivatives are outside the scope of the tax.

Certain recognized intermediaries (financial sector traders) are given an exemption for transactions in securities to promote liquidity where a transaction takes place on a recognized market or takes place in relation to a share which is normally dealt with on a recognized market.

Person responsible for collecting/remitting tax

The transferee or the intermediary

Liable persons

The transferee 

Person who in practice bears the tax

The transferee 

How enforced

As a rule, the transferee is liable for declaring and paying the tax. However, the professional intermediary (e.g. broker) may have an obligation to act as an "accountable person" on behalf of such a transferee; meaning that such a professional intermediary will have to account for the tax due and notify the tax authorities of the charge. 

Penalties in case of failure to file/pay

If one notifies HMRC and pays within 12 months after the deadline, the penalty is the lower of 100 pound sterling (GBP) or the amount of tax that is due. Interest will also be charged on the outstanding tax.

If one notifies HMRC and pays more than 12 months after the deadline, the penalty above is payable as well as an additional penalty, which could be as much as the total amount of tax due. This extra amount can be reduced depending upon the reasons for the delay in payment, the level of co-operation with HMRC and the seriousness of the issue.

Failing to pay stamp duty reserve tax (SDRT) on-time does not affect the legal enforceability of the transactions.

Tax base

The value is determined according to transfer agreement.

Tax rate(s)

0.5 percent and 1.5 percent on transfers to non-EU depositary receipt and clearance services systems.

Cap/Floor/Threshold/Allowance

N/A 

Other comments

N/A

Contact

Chris Morgan

KPMG in the UK

+44 20 7694 1714

Sarah Lane

KPMG in the UK

+44 20 7311 2483

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