February 13, 2015 · Trading · (No comments)

Stamp Duty Reserve Tax (SDRT)


Terrence Martin

Stamp Duty Reserve Tax (SDRT)

SDRT is a tax on investment transactions which is payable to HM Revenue & Customs (HMRC). An investor pays SDRT when purchasing shares through CREST (the electronic settlement and registration system).

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Direct investments

SDRT applies when buying shares in a UK company (or in a foreign company with a share register in the UK); an option to buy shares is exercised; rights arising from shares which the investor already owns materialise, or an interest in shares, such as an interest in the money made from selling them. CREST collects the tax and sends it to HMRC; the stockbroker pays CREST and then collects the SDRT from the investor concerned.

SDRT equates to 0.5% of the value of the transaction. If someone pays 1,000 or gives something of equivalent worth for shares, 5 SDRT will be due irrespective of the true value of the shares. So if shares are literally given away, SDRT does not have to be paid.

Collective investments

When investing in unit trusts and open ended investment companies even though the rate of tax remains at 0.5%, the situation is different. Although the purchaser of the units or shares is not charged SDRT, the tax is charged when units or shares are surrendered. In most instances but not all the fund manager pays the SDRT directly to HMRC and is reimbursed via the fund s annual management charges (AMC). Some fund managers prefer to collect the tax from the actual investor concerned rather than recovering it from the AMC.

(SDRT does not form part of a collective investment s Total Expense Ratio as the amount of SDRT the fund has to pay depends on the portfolio turnover rate i.e., how often the fund manager buys and sells shares.)

http://value-stocks-investing.comhttp://www.finishedarticles.co.ukhttp://www.misterwrite.co.ukAbout the authorI m a financial copywriter. My clients create and market financial products and services primarily intended for retail markets the public as distinct to the institutional markets. Some financial products can be very complicated: my role is to communicate in clear, succinct, unambiguous and engaging terms, the benefits and features of those products.

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Stamp Duty Reserve Tax (SDRT)