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Abstract: 

In HSBC Holdings plc and The Bank of New York Mellon Corporation v. The Commissioners for Her Majesty’s Revenue & Customs, decided in February 2012, the U.K. First-tier Tax Tribunal determined that the Stamp Duty Reserve Tax (SDRT) “season ticket” charge on the issue of shares of a company established in an E.U. member state to a depositary receipt system in the United States was in breach of E.U. law. HMRC have announced that they will not appeal the decision and they will no longer collect the charge on the issue of U.K. shares into a depositary receipt system or a clearance service. Although a U.K. Tribunal cannot provide definitive rulings on U.S. law, the Tribunal considered the nature of American Depositary Receipts (ADRs), finding on the evidence that the rights of holders of ADRs are contractual. The Tribunal could not conclude that holders of ADRs have, for U.K. legal purposes, a beneficial interest in the underlying shares in the ADR program. In spite of the Tribunal’s ruling, however, HMRC have announced that they will continue to treat ADRs as giving their holders beneficial ownership of the underlying shares.

Keywords: HSBC Holdings plc and The Bank of New York Mellon Corporation v. The Commissioners for Her Majesty’s Revenue & Customs; stamp duty reserve tax; SDRT; depositary receipt system; American Depositary Receipts; ADRs

Affiliations:  1: Sullivan & Cromwell LLP; 2: Sullivan & Cromwell LLP.