Stamp Duty (SDRT) on Corporate Bonds

I have recently bought the Enterprise Inns 6.375% 2031 bond and was surprised to be charged SDRT on the transaction by Hargreaves Lansdown who, when queried, responded -
" Corporate Bonds are liable to stamp duty on a case by case basis. All securities that we trade must settle within CREST and we have been informed by them that this bond is liable to stamp duty and have been charged accordingly on the transaction. The ultimate decision on liability lies with HMRC."

HMRC's 'SDRT Compliance' team responded thus -
"Bonds are generally not subject to SDRT unless they are capable of being converted into shares. Therefore the onward trading of a convertible bond is chargeable.
This security is classed as chargeable by Euroclear and I would suggest that you contact them directly if you feel that it has been classed incorrectly"

All my Bond purchases to date have been SDRT-exempt. Can anyone explain why not in this case?

Comments

  • Seems this has been a grey area for a while. Here is a link to a bond of the week in 2009

    http://www.fixedincomeinvestor.co.uk/x/analysis.html?type=bond-of-the-week&cat=analysis-comment&y=2009&aid=314

    If HMRC can't give you a good answer I suspect the forum members won't be able to either! Not quite sure how one would approach Euroclear but that seems to be the next step.
  • Thank you. Rather worrying that that was 2009 and we're no further forward! I've fired off an enquiry to Euroclear via their website, more in hope than expectation. When I bought the ETI 2021 Bond previously, HL originally added SDRT but then reimbursed it, so I was rather hoping that would happen again.
  • The following link might help.................
    http://www.hmrc.gov.uk/so/sdrt/sdrt_newsletter11.htm
  • Thank you, philipwine, that's very helpful.
  • Just to report back. The matter has now been resolved but by a very circuitous route! The platform trading the bonds is Euroclear and if the system is not set up correctly at the outset when the Bonds are first issued, they will not mark the Bonds as 'SDRT-exempt' and Stamp Duty will automatically be levied. The only way to correct this is for the original Issuer of the Bonds, or a CREST member (e.g. a broker,) to complete a 'Certificate of Exemption' authorising Euroclear to mark them exempt. In this case, I contacted the CoSec of Enterprise Inns, they submitted the relevant form and the Stamp Duty has been repaid to my account. In this case it wasn't a huge amount but it begs the question as to what has been happening to others trading this bond! Anyway, case closed.
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