Citation, commencement and effect

1. —(1) These Regulations may be cited as the Stamp Duty and Stamp Duty Reserve Tax (Investment Exchanges and Clearing Houses) (Over the Counter) Regulations 2010 and come into force on 10th August 2010.

(2) These Regulations have effect—

(a) for the purposes of the charge to stamp duty, in relation to instruments executed on or after 10th August 2010;

(b) for the purposes of the charge to stamp duty reserve tax—

(i) in the case of agreements to transfer traded securities which are not conditional, in relation to agreements made on or after 10th August 2010;

(ii) in the case of agreements to transfer traded securities which are conditional, in relation to agreements where the condition is satisfied on or after that date.

Interpretation

2. In these Regulations—

“clearing participant” means a member of LCH.Clearnet Limited who as such is permitted by the Rules of LCH.Clearnet Limited to clear transactions made over the counter for a traded security;

“client” means a person who gives instructions to a non-clearing firm for traded securities to be sold or transferred over the counter;

“nominee” means a person whose business is or includes holding traded securities as a nominee for LCH.Clearnet Limited acting in its capacity as a person providing clearing services in connection with a transaction made over the counter, or as a nominee for a clearing participant, non-clearing firm or client;

“non-clearing firm” means any person who uses a clearing participant for the purpose of clearing over the counter transactions in traded securities through LCH.Clearnet Limited;

“over the counter” means a transaction in traded securities made other than on a recognised investment exchange( 2 );

“traded securities” means stocks and shares which are issued or raised by a body corporate but does not include stocks and shares issued or raised by a body corporate not incorporated in the United Kingdom unless—

Prescription of recognised clearing house

3. For the purposes of sections 116 and 117 of the Finance Act 1991 LCH.Clearnet Limited is prescribed as a recognised clearing house ( 4 ).

Prescribed circumstances for the purposes of sections 116 and 117

4. —(1) In the circumstances prescribed by paragraph (2) below, the charges to stamp duty and stamp duty reserve tax shall be treated as not arising.

(2) The circumstances prescribed are where, in connection with a transaction made over the counter, conditions A, B and C are met.

(3) Condition A is that traded securities are transferred, or agreed to be transferred, from—

(a) a clearing participant or its nominee to another clearing participant or its nominee;

(b) a non-clearing firm or its nominee or client to a clearing participant or its nominee;

(c) a clearing participant or its nominee to LCH.Clearnet Limited or its nominee;

(d) a person other than a clearing participant to LCH.Clearnet Limited or its nominee, as a result of a failure by a clearing participant to fulfil its obligations in respect of the transaction concerned to transfer traded securities to LCH.Clearnet Limited or its nominee; or

(e) LCH.Clearnet Limited or its nominee to a clearing participant or its nominee.

(4) Condition B is that the person to whom those securities are agreed to be transferred under any of the agreements specified in paragraph (3) above (“the relevant agreement”) is required on receipt of those securities to transfer traded securities under a matching agreement, to another person or, in the case of an agreement falling within paragraph 3(d), would have been so required if the failure referred to in that sub-paragraph had not occurred.

(5) Condition C is that traded securities which are the subject of a relevant agreement shall be dealt with by a clearing participant, who is a party to the relevant agreement, in a separate designated account.

(6) In this regulation—

(a) “designated account” means an account designated by LCH.Clearnet Limited for a clearing participant, in connection with the traded securities concerned;

(b) “matching agreement” means an agreement under which—

(i) the traded securities agreed to be transferred are of the same kind as the traded securities agreed to be transferred under the relevant agreement; and

(ii) the number and transfer price of the traded securities agreed to be transferred are in total identical to the number and transfer price of the traded securities agreed to be transferred under the relevant agreement.