When you hear the term “Stamp Duty”, you may automatically think of Stamp Duty Land Tax, the tax you pay on the acquisition of a “land interest”, such as your house. However, this is not the case, and in fact, Stamp Duty and Stamp Duty Land Tax are two different taxes.
Stamp Duty is a tax on documents, one of these documents, which is the subject of this article, is a stock transfer form. This is the form required to transfer shares and therefore ownership, in a company. The completion of this form and the transfer of the shares triggers the stamp duty tax liability. So, for instance, if you were purchasing the shares in a company, to become a beneficial owner and shareholder, the stock transfer form (and so the purchase), will be subject to tax. The current rate for Stamp Duty on shares is a flat rate of 0.5%. Therefore, a share purchase of 100 shares at £20,000 would attract a duty of £250. The duty is payable to HMRC within 30 days of the transfer whereby, on receipt of payment and the properly executed stock transfer form, HMRC will return the latter, duly stamped. If you fail to file and pay the duty within the 30 days, then you may face penalties and interest.
The stamped stock transfer then needs to be filed with the Company to effect the change in ownership. The Company is under a duty to reject any stock transfer form which is not duly stamped. Therefore, non-payment, could prejudice your ownership of the shares.
There are however some exemptions. Certified transfers executed prior to March 2008, for less than £1,000, are exempt from Stamp Duty as well as transfers for nil consideration. In addition, if the transfer is directed following a divorce or death, the transfer is exempt. There are many other exemptions however if you find you do not fall within the scope of the same, it may be that it is possible for you to claim relief. Thus, whilst a stamp duty liability may be triggered, relief against the duty may be available, meaning that no duty is due. For instance, relief can be claimed for company reconstructions and or intra group transfers, even if consideration is paid.
We would always recommend reviewing the Stamp Duty position with your Solicitor and Accountant, prior to your acquisition, in order to be aware of your liabilities.
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