A new single tax on transfers of shares and securities will be introduced to replace the current separate taxes of stamp duty and stamp duty reserve tax (SDRT). The objective of this reform is to make it simpler to interact with the stamp tax on shares regime to align with the Governments predictability and stability set out in the Corporate Tax Roadmap. 

Current landscape

At present, there are separate taxes of stamp duty and stamp duty reserve tax (SDRT); they are collectively known as stamp taxes on shares (STS).

Stamp duty is a tax on transferring shares and securities documents, namely a stock transfer form and is payable at a 0.5% rate of the value of the shares being transferred within 30 days from the signing of the transfer document. 

If shares are to be transferred for less than £1,000, there is no obligation to pay stamp duty. However, unstamped documents cannot be used as admissible evidence in court proceedings nor can a transfer be registered at Companies House without correct stamping.

Stamp duty reserve tax (SDRT) is applicable to the transfer of shares (chargeable assets) for consideration. When shares are transferred the recipient may be subject to SDRT. The tax is calculated at a rate generally of 0.5% of the consideration (total value) of the relevant assets (shares) being transferred. 

The proposed reforms

 The proposed tax reform is to be introduced in 2027 to attempt to modernise stamp duty taxes on shares system. 

The move to an online system

HMRC’s payment system will now move to an online platform for payment of the new tax on share transfers. A move from paper-based systems to a digital platform allows for a more streamlined approach and shorter wait time for stamping. It is worth noting that tax on electronic transfers will remain as collection through the UK’s Central Securities Depositary System. 

UTRN reference number

At present, a registrar cannot update their statutory registers until receipt of a stamped stock transfer form. Following this change, HRMC will be registering changes in ownership following online tax returns by issuing a unique transaction reference number (UTRN) which will then allow company registers to be updated to reflect the change in ownership immediately upon payment of any tax or relief, enabling companies to update their statutory registers in a much shorter timescale.

The de minimis rule

HMRC has confirmed that they intend to remove the £1,000 exemption threshold that currently exists for stamp duty. The current threshold was put in place with reasoning to administration purposes however the use of the new online portal will remove the need for the ‘de minimis’ threshold.

Single charging point and accountable rate 

With SDRT, the charging point is the point when an agreement to transfer shares is made. The Government proposed to have this charging point at a relevant date, this could either be the point of agreement where shares were agreed to be transferred, or if there are any conditions placed on the agreement to transfer shares, then the date these conditions are fulfilled. For example, a condition may take the form of a shareholder being restricted from selling their shares for a certain time frame or the need for an independent price valuation to take place.

From the charging point there is a two-year time limit to pay SDRT. This two-year time limit acts as a backstop if the amount paid for the shares (consideration) is uncertain or cannot be ascertained yet.  This may be due to factors such as company performance or market instability. The two years back stop has now been proposed to increase to four years. 

Late notification and penalties 

HMRC intends to implement a penalty regime based on a percentage for late notification rather than a combination of fixed and percentage-based penalties.

The Government is aiming to introduce the single tax, its legislative framework and the portal in 2027. The new single tax will be mandatory, and the purchaser will be liable to pay this. 

If you require support or guidance in relation to these changes, please contact the corporate team at Anthony Collins, headed by Laura Jordan.