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Stamp Duty

Where the rights under a covered warrant in respect of underlying securities are transferred and purchased before expiry no 0.5% Stamp Duty charge will normally arise.

This is because no instrument or other document of transfer will be required to be executed where the rights to a covered warrant (rather than a transfer of the underlying stocks and shares), are acquired by the purchaser.

Stamp Duty Reserve Tax (SDRT)

Whether or not a SDRT charge under section 87 Finance Act 1986 arises whenever rights to a covered warrant in respect of underlying securities are agreed to be transferred before expiry is dependent on how settlement will occur upon exercise of the warrant:

»Ê¹ÚÌåÓýapp terms of a covered warrant provide only for a cash settlement upon exercise of the warrant:

Here the transfer of rights to a covered warrant underlying securities (before warrant exercise) is not subject to a SDRT charge as no ‘rights to acquire� chargeable securities (as defined in s99(3)(c) FA86) have been transferred.

»Ê¹ÚÌåÓýapp terms of the covered warrant give the issuer of the covered warrant the discretion upon exercise to deliver (or acquire) the underlying securities, or to arrange for a cash settlement:

Here the situation, the transfer of rights to a covered warrant underlying securities before warrant exercise is not subject to a SDRT charge as no rights to acquire ‘chargeable securities� as (defined in s99 FA89) has been transferred.

»Ê¹ÚÌåÓýapp terms of the covered warrant give the holder of the covered warrant the discretion upon exercise to acquire the underlying securities, or to arrange for a cash settlement:

»Ê¹ÚÌåÓýapp transfer of rights to a covered warrant (which gives the holder the right, but not the obligation, to purchase the underlying securities) before warrant exercise will be subject to a SDRT charge if the underlying security is regarded as a ‘chargeable securityâ€� per s99 (3)(c) FA86.

»Ê¹ÚÌåÓýapp terms of the covered warrant only allow for delivery of the underlying security on exercise and settlement:

An agreement to transfer the rights to a covered warrant (before expiry of the warrant) which gives the holder the right to purchase the underlying securities will be subject to a SDRT charge if the ‘rights to acquire� are in respect of an underlying ‘chargeable security� per s99 (3) FA86.