UK non-sterling bearer instruments eligible in Clearstream Banking
Non-sterling bearer instruments issued by or on behalf of UK companies (hereafter, “UK non-sterling bearer instruments”) that are chargeable securities for the purposes of UK Stamp Duty Reserve Tax (SDRT) are eligible for settlement through Clearstream Banking.
The procedures under which such instruments will be subject to the 0.5% regime in Clearstream Banking have been agreed with Her Majesty’s Revenue & Customs (HMRC).
Customers who want to deposit UK non-sterling bearer instruments with Clearstream Banking and effect transfers, free of or against payment, either between two CBL customer accounts, within a CBL customer's own books or between a CBL customer and a Euroclear Bank (EB) participant (hereafter, “internal transfers”) must comply with the procedures described below.
Description of securities
The securities subject to the following procedures include financial instruments, such as preference shares and convertible bonds, that are:
- Issued by or on behalf of UK companies;
- In bearer form;
- Listed on a recognised stock exchange;
- Deposited with a CBL-EB common depository (identified by an "XS" ISIN code);
- Denominated in a currency other than GBP.
Note: UK non-sterling bearer instruments subject to the procedures outlined below can be identified by means of the inclusion of "(UK 0.5)" in the name of the security.
SDRT regime applicable to listed UK non-sterling bearer instruments and Clearstream Banking’s service offering
Although listed UK non-sterling bearer instruments fall within the definition of chargeable securities for SDRT purposes, an agreement to transfer them is exempt from 0.5% SDRT1 provided that:
- The agreement to transfer the securities is not made in contemplation of, or as part of an arrangement for, a takeover of the entity that issued the securities; and
- In the case of a bearer instrument relating to loan capital, the securities do not carry any right of conversion into, or acquisition of, shares or other securities by the exercise of which chargeable securities that are not listed in a recognised stock exchange may be obtained.
In accordance with the above, a transfer of UK non-sterling bearer instruments made as part of an arrangement for a takeover of the entity that issued the securities is subject to 0.5% SDRT (hereafter, “chargeable transfer”).
Information to be provided in transactions and notification requirements
Customers holding UK non-sterling bearer instruments with Clearstream Banking and performing internal transfers are requested to include the following information in their settlement instructions so that Clearstream Banking can report the transactions to HMRC:
- Identification of securities (ISIN code);
- Nominal amount of securities transferred;
- Parties to the transaction, with details of the delivering and receiving parties;
- Trade date, requested and actual settlement dates;
- (In the Narrative field) consideration paid or market value of the transfer.
In addition, customers must provide Clearstream Banking with the appropriate notification immediately after a respective transaction is processed and not later than the close of business on the last business day of the month in which the transaction was processed. Details of the notifications required and the information to be provided are explained below.
Note: Examples of the various notifications are provided in a zip file attachment below.
Transfers between two Clearstream Banking customer accounts
Customers receiving the securities in their account from the account of another Clearstream Banking customer are obliged to notify Clearstream Banking when the transfer is made as part of an arrangement for a takeover of the entity that issued the securities.
If no notification is received by Clearstream Banking within the specified deadline, the transfer will be considered as not having been made as part of an arrangement for a takeover of the entity that issued the securities and, consequently, as exempt from 0.5% SDRT.
Transfers within the customer's books
Customers are obliged to notify Clearstream Banking of both exempt and chargeable transfers of securities effected in their books on behalf of their clients.
If notification is not received by Clearstream Banking, no transfers, either exempt or chargeable, will be considered as being effected.
Transfers between a Clearstream Banking customer and a participant of Euroclear Bank
Customers receiving securities from an EB participant, as part of an arrangement for a takeover of the entity that issued the securities, must notify Clearstream Banking of the nature of the transfer. No such notification is required when the Clearstream Banking customer delivers securities to an EB participant even if the transfer is made as part of an arrangement for a takeover.
If no notification is received by Clearstream Banking within the specified deadline, the transfer will be considered as not having been made as part of an arrangement for a takeover of the entity that issued the securities and, consequently, as exempt from 0.5% SDRT.
Notification of a position of 5% or more
Customers must notify Clearstream Banking when, at the end of a month, a particular account represents 5% or more of the total issued share capital of the issuing company and certify that transactions processed on the account within the particular month were not made as part of an arrangement for a takeover of the issuer unless otherwise indicated by the customer.
The notification, together with the certification, must be provided to Clearstream Banking via a SWIFT MT599 or CreationOnline free-format message to the attention of the Settlement Global department "PSG" in charge.
Certification for audit purposes
Upon request, for audit purposes, customers are obliged to certify, if applicable, that a specific transaction was not made in connection with a takeover. The certification may be requested for transactions that have occurred not later than six years before the request.
The certification must be provided to Clearstream Banking within the deadline specified by Clearstream Banking via a SWIFT MT599 or CreationOnline free-format message to the attention of the Settlement Global department "PSG".
Charging of SDRT
Clearstream Banking will verify the amount of 0.5% SDRT included by the customer in the notification and charge the SDRT to the customer account after the deadline for notification has passed. The charge is currently applicable to external CBL transactions only. Internal and Bridge transactions are reported but not charged with SDRT.
Should a customer fail to notify Clearstream Banking of a chargeable transfer, resulting in underpayment or late payment of SDRT, the customer is deemed to indemnify Clearstream Banking for penalties, tax, interest and other costs that may be due as a result of non-compliance.
Authorisations and undertakings related to the service
By holding UK non-sterling bearer instruments through Clearstream Banking and effecting internal transfers, customers are deemed to authorise and appoint Clearstream Banking as their attorney-in-fact for the purposes of reporting details of the transactions to HMRC under powers conferred on the latter by UK legislation and providing the notifications and certifications, or copies thereof, and any other information relating to the securities to HMRC, if requested by the latter.
Customers must ensure the accuracy and completeness of the information to be provided in the transactions, notifications and certifications referred to above and undertake to notify Clearstream Banking promptly upon receipt of any information that would render any statement or information in the transactions, notifications or certifications untrue or incomplete.
By holding the securities through Clearstream Banking and effecting internal transfers, customers accept full responsibility in the case of any claims or additional taxes, interest thereon, or penalties levied by HMRC in connection with the securities held on behalf of the customer, or in respect of any other costs incurred in connection with any action taken in reliance upon the transactions, notifications and certifications including any additional information provided by the customer in connection with them.
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1. Under section 90 (Release or writing off of debt: interest on tax overpaid) of Finance Act 1999, no 0.5% SDRT is due on transfer of UK non-sterling bearer instruments.