Central Counterparty for Equities

Guidance Note

December 200008/00

Irish stamp duty

1Introduction

Unlike UK legislation, Irish Stamp Duty is charged against the actual transfer of securities, as reflected in CREST, rather than a contractual change in beneficial ownership. The interposition of the central counterparty or a clearing member in the settlement chain will give rise to additional stamp duty charges, unless the appropriate reliefs are applied. The following paragraphs explain how existing reliefs will apply post introduction of the central counterparty for cleared contracts.

2Example settlement chain

The following settlement chain could arise:

1 / 2 / 3 / 4
NCM / → / GCM / → / CCP / → / GCM / → / NCM
  1. The General Clearing Member (GCM) receives the stock from the Non-Clearing Member (NCM) with No Change of Beneficial Ownership (NCBO). While the GCM is now the legal owner of the stock he is still holding it on behalf of the NCM’s client. The GCM should input the “Y” flag to exempt this transaction.
  2. The Central Counterparty (CCP) receives the stock from the GCM with a change of beneficial ownership. It has been confirmed with the Irish Revenue Commissioners that CCP settlements are concessionally relieved from payment of the stamp duty charge where they subsequently qualify for closings relief. Members should be aware that under the closings relief a stamp duty charge may arise if the contract is not settled within 25 days of the original contract (see final section).
  3. The GCM receives the stock from the CCP with a change of beneficial ownership. The GCM, if acting in a principal capacity, can exempt this leg by using the “Z” flag indicating Broker/Dealer or Market Maker Exemption. If the GCM is acting in an agency capacity, a charge to stamp duty arises on this leg.
  4. If the GCM has exempted Leg 3 then a charge to stamp duty arises on this leg. If the GCM has accounted for stamp duty on Leg 3 then this leg can be exempted by use of the “Y” flag, NCBO.

3Late Settlement

If a stamp duty charge arises as a consequence of the failure of the seller to make good the delivery within 25 days of the original contract, LCH reserves the right to charge stamp duty to the central counterparty member clearing that contract. Members may wish to ensure they have the right to recover this from their client.

List of guidance notes

The project has published a number of guidance notes. The others published to date, or in production, are listed below, please contact the project for any later guidance notes.

01/00Disclosure of shareholdings

02/00UK Stamp Duty Reserve Tax

03/00Agency and riskless principal trading

04/00Balance sheet reporting

05/00Impact of late settlement

06/00Adjustment to LCH’s Default Fund to Cover Clearing of London Stock Exchange Business

07/00Tripartite NCM-GCM-LCH Agreement

08/00Irish Stamp Duty

Contact points

The CCP for Equities project can be contacted on 020 7849 0510 or via email at . Members of the Exchange, LCH or CRESTCo can also make use of their usual contacts in these organisations.

Information about the service is also available on the following websites:


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