Finance Act 1986

Loan capital, letters of allotment etc.U.K.

78 Loan capital.U.K.

F1(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(7)In this section “loan capital” means—

(a)any debenture stock, corporation stock or funded debt, by whatever name known, issued by a body corporate or other body of persons (which here includes a local authority and any body whether formed or established in the United Kingdom or elsewhere);

(b)any capital raised by such a body if the capital is borrowed or has the character of borrowed money, and whether it is in the form of stock or any other form;

(c)stock or marketable securities issued by the government of any country or territory outside the United Kingdom.

F1(8). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)In this section “designated international organisation” means an international organisation designated for the purposes of section [F2324 of the Taxes Act 1988] by an order made under subsection (1) of that section.

F1(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(12). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(13). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F1(14). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79 Loan capital: new provisions.U.K.

F3(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2)Stamp duty under [F4Schedule 15 to the Finance Act 1999 (bearer instruments)] shall not be chargeable on the issue of an instrument which relates to loan capital or on the transfer of the loan capital constituted by, or transferable by means of, such an instrument.

(3)Stamp duty shall not be chargeable on an instrument which transfers loan capital issued or raised by —

(a)the financial support fund of the Organisation for Economic Co-operation and Development,

(b)the Inter-American Development Bank, or

(c)an organisation which was a designated international organisation at the time of the transfer (whether or not it was such an organisation at the time the loan capital was issued or raised).

(4)Subject to subsections (5) and (6) below, stamp duty shall not be chargeable on an instrument which transfers any other loan capital.

(5)Subsection (4) above does not apply to an instrument transferring loan capital which, at the time the instrument is executed, carries a right (exercisable then or later) of conversion into shares or other securities, or to the acquisition of shares or other securities, including loan capital of the same description.

(6)Subject to subsection (7) below, subsection (4) above does not apply to an instrument transferring loan capital which, at the time the instrument is executed or any earlier time, carries or has carried —

(a)a right to interest the amount of which exceeds a reasonable commercial return on the nominal amount of the capital,

(b)a right to interest the amount of which falls or has fallen to be determined to any extent by reference to the results of, or of any part of, a business or to the value of any property, or

(c)a right on repayment to an amount which exceeds the nominal amount of the capital and is not reasonably comparable with what is generally repayable (in respect of a similar nominal amount of capital) under the terms of issue of loan capital listed in the Official List of The Stock Exchange.

(7)Subsection (4) above shall not be prevented from applying to an instrument by virtue of subsection (6)(a) or (c) above by reason only that the loan capital concerned carries a right to interest, or (as the case may be) to an amount payable on repayment, determined to any extent by reference to an index showing changes in the general level of prices payable in the United Kingdom over a period substantially corresponding to the period between the issue or raising of the loan capital and its repayment.

[F5(7A)Subsection (4) above shall not be prevented from applying to an instrument by virtue of subsection (6)(b) above by reason only that the loan capital concerned carries a right to interest which—

(a)reduces in the event of the results of a business or part of a business improving, or the value of any property increasing, or

(b)increases in the event of the results of a business or part of a business deteriorating, or the value of any property diminishing.]

[F6(8)Where stamp duty is chargeable under Part I of Schedule 13 to the Finance Act 1999 (conveyance or transfer on sale) on an instrument which transfers loan capital, the rate at which duty is charged under that Part shall be 0.5% of the amount or value of the consideration for the sale to which the instrument gives effect.]

F3(9). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F3(11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(12)Subsections (7), (9) F7. . . of section 78 above shall apply as if references to that section included references to this.

F880. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

[F980A Sales to intermediaries.U.K.

(1)Stamp duty shall not be chargeable on an instrument transferring stock of a particular kind on sale to a person or his nominee if—

(a)the person is a member of an EEA exchange, or a recognised foreign exchange, on which stock of that kind is regularly traded;

(b)the person is an intermediary and is recognised as an intermediary by the exchange in accordance with arrangements approved by the Commissioners; and

(c)the sale is effected on the exchange.

(2)Stamp duty shall not be chargeable on an instrument transferring stock of a particular kind on sale to a person or his nominee if—

(a)the person is a member of an EEA exchange or a recognised foreign options exchange;

(b)options to buy or sell stock of that kind are regularly traded on that exchange and are listed by or quoted on that exchange;

(c)the person is an options intermediary and is recognised as an options intermediary by that exchange in accordance with arrangements approved by the Commissioners; and

(d)the sale is effected on an EEA exchange, or a recognised foreign exchange, on which stock of that kind is regularly traded or subsection (3) below applies.

(3)This subsection applies if—

(a)the sale is effected on an EEA exchange, or a recognised foreign options exchange, pursuant to the exercise of a relevant option; and

(b)options to buy or sell stock of the kind concerned are regularly traded on that exchange and are listed by or quoted on that exchange.

(4)For the purposes of this section—

(a)an intermediary is a person who carries on a bona fide business of dealing in stock and does not carry on an excluded business; and

(b)an options intermediary is a person who carries on a bona fide business of dealing in quoted or listed options to buy or sell stock and does not carry on an excluded business.

(5)The excluded businesses are the following—

(a)any business which consists wholly or mainly in the making or managing of investments;

(b)any business which consists wholly or mainly in, or is carried on wholly or mainly for the purpose of, providing services to persons who are connected with the person carrying on the business;

(c)any business which consists in insurance business;

(d)any business which consists in managing or acting as trustee in relation to a pension scheme or which is carried on by the manager or trustee of such a scheme in connection with or for the purposes of the scheme;

(e)any business which consists in operating or acting as trustee in relation to a collective investment scheme or is carried on by the operator or trustee of such a scheme in connection with or for the purposes of the scheme.

(6)A sale is effected on an exchange for the purposes of subsection (1) or (2) above if (and only if)—

(a)it is subject to the rules of the exchange; and

(b)it is reported to the exchange in accordance with the rules of the exchange.

(7)An instrument on which stamp duty is not chargeable by virtue only of this section shall not be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty; and notwithstanding anything in section 122(1) of the M1Stamp Act 1891, the stamp may be a stamp of such kind as the Commissioners may prescribe.]

[F1080B Intermediaries: supplementary.U.K.

(1)For the purposes of section 80A above the question whether a person is connected with another shall be determined in accordance with the provisions of section 839 of the M2Income and Corporation Taxes Act 1988.

(2)In section 80A above and this section—

• “collective investment scheme” has the meaning given in section 75 of the M3Financial Services Act 1986;

• “EEA exchange” means a market which appears on the list drawn up by an EEA State pursuant to [F11Article 16 of European Communities Council Directive No. 93/22/EEC on investment services in the securities field] [F11Article 47 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments];

• “EEA State” means a State which is a contracting party to the agreement on the European Economic Area signed at Oporto on the 2nd May 1992 as adjusted by the Protocol signed at Brussels on the 17th March 1993;

• “insurance business” means long term business or general business as defined in section 1 of the M4Insurance Companies Act 1982;

• “quoted or listed options” means options which are quoted on or listed by an EEA exchange or a recognised foreign options exchange;

• “stock” includes any marketable security;

• “trustee” and “the operator” shall, in relation to a collective investment scheme, be construed in accordance with section 75(8) of the Financial Services Act 1986.

(3)In section 80A above “recognised foreign exchange” means a market which—

(a)is not in an EEA State; and

(b)is specified in regulations made by the Treasury under this subsection.

(4)In section 80A above and this section “recognised foreign options exchange” means a market which—

(a)is not in an EEA State; and

(b)is specified in regulations made by the Treasury under this subsection.

(5)In section 80A above “the exercise of a relevant option” means—

(a)the exercise by the options intermediary concerned of an option to buy stock; or

(b)the exercise of an option binding the options intermediary concerned to buy stock.

(6)The Treasury may by regulations provide that section 80A above shall not have effect in relation to instruments executed in pursuance of kinds of agreement specified in the regulations.

(7)The Treasury may by regulations provide that if—

(a)an instrument falls within subsection (1) or (2) of section 80A above, and

(b)stamp duty would be chargeable on the instrument apart from that section,

stamp duty shall be chargeable on the instrument at a rate, specified in the regulations, which shall not exceed 10p for every £100 or part of £100 of the consideration for the sale.

(8)The Treasury may by regulations change the meaning of “intermediary” or “options intermediary” for the purposes of section 80A above by amending subsection (4) or (5) of that section (as it has effect for the time being).

(9)The power to make regulations under subsections (3) to (8) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.]

[F1280C Repurchases and stock lending.U.K.

(1)This section applies where a person (A) has entered into an arrangement with another person (B) under which—

(a)B is to transfer stock of a particular kind to A or his nominee, and

(b)stock of the same kind and amount is to be transferred by A or his nominee to B or his nominee,

and the conditions set out in subsection (3) below are fulfilled.

(2)Stamp duty shall not be chargeable on an instrument transferring stock to B or his nominee or A or his nominee in accordance with the arrangement.

(3)The conditions are—

(a)that the arrangement is effected on an EEA exchange or a recognised foreign exchange; and

(b)that stock of the kind concerned is regularly traded on that exchange.

(4)An arrangement does not fall within subsection (1) above if—

(a)the arrangement is not such as would be entered into by persons dealing with each other at arm’s length; or

(b)under the arrangement any of the benefits or risks arising from fluctuations, before the transfer to B or his nominee takes place, in the market value of the stock accrues to, or falls on, A.

(5)An instrument on which stamp duty is not chargeable by virtue only of subsection (2) above shall not be deemed to be duly stamped unless it has been stamped with a stamp denoting that it is not chargeable with any duty; and notwithstanding anything in section 122(1) of the M5Stamp Act 1891, the stamp may be a stamp of such kind as the Commissioners may prescribe.

(6)An arrangement is effected on an exchange for the purposes of subsection (3) above if (and only if)—

(a)it is subject to the rules of the exchange; and

(b)it is reported to the exchange in accordance with the rules of the exchange.

(7)In this section—

• “EEA exchange” has the meaning given in section 80B(2) above; and

• “recognised foreign exchange” has the meaning given in section 80B(3) above.

(8)The Treasury may by regulations provide that if stamp duty would be chargeable on an instrument but for subsection (2) above, stamp duty shall be chargeable on the instrument at a rate, specified in the regulations, which shall not exceed 10p for every £100 or part of £100 of the consideration for the transfer.

(9)The Treasury may by regulations amend this section (as it has effect for the time being) in order—

(a)to change the conditions for exemption from duty under this section; or

(b)to provide that this section does not apply in relation to kinds of arrangement specified in the regulations.

(10)The power to make regulations under subsection (8) or (9) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.]

F1381. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F1482. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F1583. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F1684Miscellaneous exemptionsU.K.

(1)In section 127(1) of the Finance Act 1976 M6(no stamp duty on transfer to stock exchange nominee executed for purposes of a stock exchange transaction) the words “ which is executed for the purposes of a stock exchange transaction ” shall be omitted.

(2)Stamp duty shall not be chargeable on an instrument effecting a transfer of stock if —

(a)the transferee is a recognised investment exchange or a nominee of a recognised investment exchange, and

(b)an agreement which relates to the stamp duty which would (apart from this subsection) be chargeable on the instrument, and was made between the Commissioners and the investment exchange under section 33 of the Finance Act 1970, is in force at the time of the transfer.

(3)Stamp duty shall not be chargeable on an instrument effecting a transfer of stock if —

(a)the transferee is a recognised clearing house or a nominee of a recognised clearing house, and

(b)an agreement which relates to the stamp duty which would (apart from this subsection) be chargeable on the instrument, and was made between the Commissioners and the clearing house under section 33 of the Finance Act 1970 M7, is in force at the time of the transfer.

(4)Subsection (1) above applies to any transfer giving effect to a transaction carried out on or after the day of The Stock Exchange reforms.

(5)Subsection (2) above applies to any instrument giving effect to a transaction carried out on or after such day as the Commissioners may appoint by order made by statutory instrument.

(6)Subsection (3) above applies to any instrument giving effect to a transaction carried out on or after such day as the Commissioners may appoint by order made by statutory instrument.

85SupplementaryU.K.

(1)Section 42(1) of the Finance Act 1920 M8 (reduction of duty in case of certain transfers to jobbers or nominees or qualified dealers) shall have effect, in the case of any transfer giving effect to a transaction carried out on or after the day of The Stock Exchange reforms as if the following were omitted —

(a)in that subsection, the words “ a jobber or his nominee or to”and in the proviso to it the words “jobber or”(in each place);

(b)in subsection (3) of that section, paragraph (d) of the definition of “qualified dealer”(Stock Exchange brokers).

(2)Section 34 of the Finance Act 1961 M9 and section 4 of the Finance Act (Northern Ireland) 1961 M10 (borrowing of stock by jobbers) shall not apply where stock is transferred in discharge of an undertaking given on or after the day of The Stock Exchange reforms.

(3)Section 42(1) of the Finance Act 1920 shall not apply to any transfer giving effect to a transaction carried out on or after such day as is specified for this purpose in regulations made under section 81(5) above; and different days may be so specified for different purposes.

(4)Section 127(2) of the Finance Act 1976 M11 (transfer otherwise than on sale from stock exchange nominee to jobber) shall not apply to any transfer giving effect to a transaction carried out on or after the day of The Stock Exchange reforms.

(5)In sections 81, 82 and 84 above and this section—

(a)“the day of The Stock Exchange reforms” means the day on which the rule of The Stock Exchange that prohibits a person from carrying on business as both a broker and a jobber is abolished,

(b)references to a recognised investment exchange are to a recognised investment exchange within the meaning [F17given by section 285(1)(a) of the Financial Services and Markets Act 2000],

(c)references to a recognised clearing house are to a recognised clearing house within the meaning [F18given by section 285(1)(b) of the Financial Services and Markets Act 2000], and

(d)“stock” includes marketable security.