HM Revenue & Customs (HMRC) and HM Treasury are considering the judgment in detail. The Government's policy position remains that transactions involving UK shares should bear their fair share of tax. In light of today's judgment, we will determine whether and how to amend the Stamp Duty Reserve Tax (SDRT) rules to ensure movements of shares into and within clearance services bear their fair share of tax, whilst ensuring the rules are compatible with Community law.

With immediate effect, HMRC will not seek to apply a 1.5 per cent SDRT on the issue of shares into a clearance service within the European Union to which a 1.5 per cent charge would have previously applied.

Further changes effective from today: Transfers between clearance services and depositary receipt systems

Ministers intend to bring forward legislation, following the European Court of Justice's decision, to prevent exploitation of the Stamp Duty and Stamp Duty Reserve Tax rules applying to transfers of shares between different clearance services and depositary receipts systems.

Following the Court's decision today, a 1.5 per cent charge will no longer apply on the issue of shares into a clearance service within the EU.

Legislation currently provides certain exemptions with the aim of preventing a double charge arising when securities that have already been exposed to a 1.5 per cent charge move between clearance services or between depositary receipt schemes, or between a clearance service and a depositary receipt system, and vice versa.

Today HMRC announces that legislation will be brought forward to ensure that movements of securities between these different systems still bear their fair share of tax. Specifically, as the 1.5 per cent charge on issues into clearance services within the EU will no longer apply in future, the exemptions currently in place could mean for example that securities intended for the US market could be routed via a clearance service within the EU to avoid a stamp duty or SDRT charge. This would run counter to the Government's policy intention, and it could lead to a significant tax loss for the Exchequer.

It is therefore proposed to legislate at the next available opportunity, and with effect from today, to ensure that where securities enter a clearance service or depositary receipts scheme without Stamp Duty or SDRT being due in accordance with this decision, a subsequent transfer of those securities into a clearance service or depositary receipts scheme will no longer benefit from the exemptions designed to prevent a double charge.

Source: HMRC. www.hmrc.gov.uk. Copyright acknowledged.