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Thank you, Mr. Atkinson.
Clause 82 and schedule 37 are slightly different, in that they relate to both stamp duty land tax and stamp duty reserve tax. With the clause we return, with interest, to repos, which have already featured in parts of the Finance Bill. Where, due to the insolvency of one of the parties, securities are not returned in the repo to the originator of a stock lending or repurchase arrangement, a reverse repo arrangement and/or a related transaction, the clause and schedule provide relief from stamp duty land tax and stamp duty reserve tax. As discussed on Tuesday, stock lending and repo arrangements involve the transfer of the full title to the securities involved for a limited or temporary period.
The clause arises from the fact that the stamp duty and SDRT legislation exempt the transfers from taxes because the ownership is temporary. However, a default by the borrower or purchaser under repo or stock lending arrangements such that the transfer becomes permanent reinstates the charge to SDRT that would have arisen in the absence of relief. That can happen when one of the parties to the transaction goes into insolvency, which leads to, first, the creditors of the insolvent entity having less money available due to the additional tax liability and/or, secondly, a possible restriction on the ability of the solvent entity to restore its original position.
The clause prevents that by ensuring that no stamp duty or SDRT charge arises when one party to the arrangement goes into insolvency. If the solvent party does not have the shares or other securities returned, he would probably have to purchase replacement shares from the market and thus incur stamp taxes. The Finance Bill removes the SDRT charge from purchases of replacement securities of the same kind and amount as those transferred prior to the insolvency that afflicted the solvent party at the end of the transaction.
The clause and schedule were introduced in response to the Lehman Brothers collapse in mid-September 2008, hence the start date of 1 September 2008. They have, as I see it, been welcomed.
I am grateful to the hon. Gentleman for correctly setting out the background to the clause. It arose because the collapse of Lehman Brothers exposed the potential for unexpected stamp duty and stamp duty reserve tax charges when stock lending and sale and repurchase arrangements terminate because of insolvency. The overall cost to the Exchequer of that relief, which is certainly a welcome help for people facing unexpected costs, is nil. There is no net benefit or cost to the Exchequer because any tax repaid as a result of a claim for those reliefs is tax that the Government did not intend to be paid anyway. It is a helpful measure and I am grateful for the hon. Gentlemans support for it.