Revenue Note for Guidance

The content shown on this page is a Note for Guidance produced by the Irish Revenue Commissioners. To view the section of legislation to which the Note for Guidance applies, click the link below:

Revenue Note for Guidance

PART 6 SPECIAL PROVISIONS RELATING TO UNCERTIFICATED SECURITIES

Overview

PART 6 extends the charge to stamp duty to shares title to which is transferred electronically via the CREST system. The CREST system enables trades dealt on the Irish and UK stock exchanges to be settled electronically. In the absence of this charge transfers through the system would have escaped liability to stamp duty because no instruments (see section 2) are produced by the system.

Prior to the making of the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996, the Registrar of a company could not register a transfer of title to securities unless an instrument of transfer (i.e. a stock transfer form) had been received. These Regulations enable title to securities to be transferred and evidenced electronically i.e. without a stock transfer form. However, shareholders still have the option of holding share certificates if they wish.

Under the Regulations, a Registrar may update the register on receipt of a valid electronic message (called an operator-instruction) from CRESTCo., the UK company which is the operator of the CREST system. The charge to stamp duty in section 69 is based on deeming that operator-instruction to be an instrument of transfer. This method has the advantage that the provisions of the stamp duty code, including exemptions and reliefs, carry over automatically to the operator-instruction. However, as the stamp duty code requires that an instrument be “impressed” with a stamp, obviously certain parts of that code do not fit neatly into this new scenario. The appropriate adjustments are made in section 71.

In reading the provisions of this Part it is helpful to bear in mind that—

  • the “relevant system” means CREST;
  • the “operator-instruction” means the electronic message which is sent by the operator of CREST (i.e. CRESTCo.) advising the Registrar of a company to register a transfer of title to securities;
  • the “system-member” means the CREST member or sponsored member. In order to have one’s name on the company register as the holder of securities in electronic form one must be a CREST member or sponsored member. A CREST member will have a computer-link with the CREST system. A sponsored member does not have such a link but is sponsored by a person who does.

Leaflet CREST 1 contains general information regarding stamp duties and CREST.

Section 68 Interpretation (Part 6)

(1), (2) This section contains definitions which are required for the purposes of Part 6. “certificated securities”, “securities” and “uncertificated securities” are self-explanatory. Certain definitions are taken from the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996. These are the Regulations which enable title to securities to be transferred and evidenced electronically. The definitions (including the definitions set out in the associated footnotes) taken from these regulations are set out below:

  • “generate”, in relation to an operator-instruction, means to initiate the procedures by which an operator-instruction comes to be sent;
  • “instruction” includes any instruction, election, acceptance or any other message of any kind;
  • “operator” means any person specified in regulation 28 [of the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996,] or approved by the Minister [for Enterprise, Trade and Employment] under [those] regulations as operator of a relevant system;
  • “operator-instruction” means a properly authenticated dematerialised instruction1 attributable to an operator;
  • “relevant system” means a computer based system and procedures which enable title to units of a security2 to be evidenced and transferred without a written instrument, and which facilitate supplementary and incidental matters and “relevant system” includes an operator-system3;
  • “system-member”, in relation to a relevant system, means a person permitted by an operator to transfer title to uncertificated units of a security4 by means of that system and includes, where relevant, 2 or more persons who are jointly so permitted.

(3) This section also provides that references to title to securities in Part 6 include any legal or equitable interest in securities.

1“dematerialised instruction” means an instruction sent or received by means of a relevant system.

2“unit of a security” means the smallest possible transferable unit of the security (for example a single share).

3“operator-system” means those facilities and procedures which are part of the relevant system, which are maintained and operated by or for an operator, by which the operator generates operator-instructions and receives dematerialised instructions (see footnote 1) from systemparticipants and by which persons change the form in which units of a participating security are held. “system-participant” in relation to a relevant system, means a person who is permitted by an operator to send and receive properly authenticated dematerialised instructions. “participating security” means a security, title to units of which is permitted by an operator to be transferred by means of a relevant system. “securities” means shares, stock, debentures, debenture stock, loan stock, bonds, units in undertakings for collective investments in transferable securities within the meaning of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989, and other securities of any description.

4“uncertificated unit of a security” means a unit of a security title to which is recorded on the relevant register of securities as being held in uncertificated form, and title to which, by virtue of these [i.e. Companies Act, 1990 (Uncertificated Securities) Regulations, 1996] regulations, may be transferred by means of a relevant system and corresponding expressions shall be construed accordingly.

Relevant Date: Finance Act 2014