Stamp duty on commission?

[Avago]

In the past I have only been charged stamp duty on the value of a purchase of shares. Recently I bought some shares through HSBC and they have charged stamp duty on the value plus their commission. I wrote to them concerning this and they replied as follows:

"I can confirm that there are two ways for trading within HSBC
StockBroker Services. They are trading as principal and trading
as an agent.

HSBC StockBroker Services trades as a principal which means that
we trade through our own brokers with the stock market and we do
not use any agents who are not registered as part of HSBC so we
will charge stamp duty on the value of the purchase plus the
commission.

Other stockbrokers may trade as an agent so they use someone who
is already established in the market to place trades for their
customers who will pay stamp duty on the value of the trade only."

I find this a bit odd. Is what they say actually correct? Why should I pay stamp duty on their commission? I don't pay stamp duty on estate agent's fees when I buy a house! Any further clarification would be helpful.

 

[roguetrader]

I find this a bit confusing, to start with the Stamp Duty has nothing to do with HSBC, it is a government levied tax, if they want to goudge a bit of extra money out of you then they should add it to another fee not try to add it into a government tax. Imagine if all banks decided not to charge fees of any description and then by chance you did a calculation on your gross interest earned and net interest after tax to find a large disparity. Only to be told "ah yeah, the government taxes at 23% but we add a bit of extra tax on ourselves"
Not only does it sound absurd, but it also sounds illegal.

PS: Ther may of course be provision for this under Stamp Duty legislation, so you would need to check into this before aving a go at them

 

[daytradingUK]

This sounds very odd, as far as I am aware in all my dealings with shares through banks and brokers I have never once heard of stamp being charged on the commission+share value. It sounds stupid that HSBC would act as a principal in this manner as they are not buying the shares for the company itself (which I believe is the purpose of a principal and riskless principal trade type) whereas if they are buying shares on behalf of someone then it should be acting as an agent (which is what most brokers trade under), ie an agent for a client. Whether it is HSBC or Dave's Dealing Desk in Basingstoke does not matter it is who will be the recipient if I remember rightly!

I would double check this with someone more knowledgable than me but I thought principal was used solely for in-house dealing to segregate it from client orders. Check it out because it sounds like a mistake on their part or else I have been wrong for the last 3 years.

 

[Jack o'Clubs]

I checked my HSBC contract notes when I saw the original post, and Avago is definitely right - they do charge stamp on the total transaction value, including their comm. I did get temporarily hot under the collar, but it works out at about 6p a trade and while there is the principle of the thing, I just couldn't get that worked up about it...

 

[daytradingUK]

When you put it in those terms then its not so bad, but I would still look into it if you get chance in case 'something else' becomes added into their charging.

Oh and stamp is only ever charged on the purchase so make sure they aren't stiffing you on the sell by charging stamp on that commission too!

 

[manola]

you get chance in case 'something else' becomes added into their charging.
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[Claudia123]

It might be pennies but they still shouldn't be doing it. I'd change broker out of principal there are far better ones out there anyway and a lot cheaper.

 

[Technically Fundamental]

They should be doing it. Their fees are a part of the acquisition cost of the capital purchase just as legal fee's would be claimed when buying a house. They can be offset against any future capital gains made so it will net off in the end.

 

[ns1000]

They should be doing it. Their fees are a part of the acquisition cost of the capital purchase just as legal fee's would be claimed when buying a house. They can be offset against any future capital gains made so it will net off in the end.

But you pay stamp duty on the purchase price of the house, not on the legal fees.

In both cases, the commission / legal cost is not part of the equity you're purchasing, but a payment for a connected service.

Stamp Duty, or equivalent should be paid on the commission only if the commission is included in the price, by way of a mark up (e.g buy at 100 with 0.5% com, booking the trade at 100.5).

 

[Technically Fundamental]

Yeh I know that was a bad example but whatever the case just claim against it on the sale. you have proof you paid it.

 

[Jock Strap]

Stamp Duty/SDRT is levied on the consideration. My understanding of consideration is the value before commissions, charges and Stamp Duty/SDRT.

I'd be very interested to see whether HSBC are passing on this extra "stamp duty" to HMRC. Probably worth asking them or threatening to check with HMRC.

Certainly sounds very dodgy to me, and I'd suggest using a better broker anyway.

 

[A Dashing Blade]

I'd have said that's bollox but that they should charge VAT on their commission.
I don't pay stamp duty on Estate Ahgency fees when buying a house, . . .

 

[melanie911]

Cfd