Validity of UK stamp duties on the issue of shares into a depositary receipt system: UK authorities will not appeal the ruling of the UK tax tribunal that the 1.5% “season ticket” charge is in breach of European law

Sullivan & Cromwell LLP - May 1, 2012

In February 2012 the UK First-tier Tax Tribunal determined that the 1.5% stamp duty reserve tax charge on the issue of shares of an EU company to a depositary receipt system in the US was in breach of EU law.

HM Revenue & Customs have now announced that they do not intend to appeal the Tribunal’s decision and accept that they can no longer collect the 1.5% SDRT charge on the issue of UK shares into a depositary receipt system or a clearance service, regardless of the location of the depositary receipt system or clearance service.

Taxpayers who have incurred the 1.5% charge should consider whether they are entitled to a refund, plus interest, of the SDRT. Taxpayers who incurred the charge within the last 4 years are eligible for a refund of overpaid SDRT under UK statute. Taxpayers who incurred the charge outside this timeframe may also be entitled to a refund under common law.

The UK courts have traditionally awarded simple, rather than compound, interest on repayments of tax. However, the European Court of Justice is currently considering whether repayments of tax required by EU law should be made with compound interest.