UK and International Tax news

Stamp Tax On Shares Modernisation

Tuesday 16th May 2023

In April 2023, the Government announced a package of technical tax policy proposals to support its ambition to simplify and modernise the tax system including a consultation on proposals to modernise and digitise the framework for stamp taxes on shares.

Stamp Duty is a charge on paper instruments that transfer the beneficial interest in ‘stock’, ‘marketable securities’ or interests in partnerships where the partnership assets include stock or marketable securities

Stamp Duty Reserve Tax was introduced on agreements to transfer uncertificated (paperless) shares and other securities in 1986.  With the growth of paperless transactions, SDRT rather than Stamp Duty now applies to most transfers of shares and securities. It is charged on agreements to transfer ‘chargeable securities’. Most securities are settled through the CREST settlement system and are known as ‘dematerialised’ as they are held in electronic rather than ‘materialised’ paper form.

Stamp Duty is normally charged at 0.5% of the amount or value of the consideration and is rounded up to the nearest £5. SDRT is also normally charged at 0.5% but is rounded up to the nearest 1p. A higher 1.5% Stamp Duty or SDRT rate can apply in certain circumstances where shares or other securities are transferred overseas.

SDRT is not payable where either a document has been stamped for Stamp Duty purposes or is exempt from Stamp Duty.

Stamp Duty does not normally apply where the consideration for shares is £1,000 or less. An exemption is claimed by self-certifying. This exemption prevents the administrative burden of having to notify low-value transactions.

The Office for Tax Simplification issued a report in 2017 in which it recommended the modernisation and digitalisation of Stamp Duty. HMRC consulted on the consideration rules for Stamp Taxes on Shares in 2018. In 2020, HMRC published a Call for Evidence on the guiding design principles and potential options for modernising the Stamp Taxes on Shares Framework. In November 2021, a joint HMRC and industry Working Group was established to inform the proposals outlined in the latest consultation.

HMRC is now consulting on:

  • whether to have a single tax on securities rather than the current framework of both Stamp Duty and Stamp Duty Reserve Tax
  • proposals for the assessment and administration of any new single tax on securities
  • proposals for key elements of any new single tax on securities including liability, tax base, geographical scope, compliance regime and exemptions and reliefs

The scope of the consultation does not include the 1.5% charge. If modernisation is taken forward, the 1.5% charge will be dealt with separately.

Comments have been requested by 22 June 2023.

If you would like further information on the consultation, please contact Keith Rushen on 0207 486 2378.

 

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