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Overview of taxes on financial transactions within the EU - UK 

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

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


Chris Morgan

KPMG in the UK

+44 20 7694 1714


Sarah Lane

KPMG in the UK

+44 20 7311 2483

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EU Financial Transaction Tax draft directive

Text from the original EU financial transaction tax draft directive that has been adapted to include related referenced content.

KPMG's EU Tax Centre

EU direct tax practice
KPMG member firms have set up an EU Tax Centre to help you understand the implications of EU tax law and how it can help your business.