Historically, transfers of shares between connected companies have been subject to stamp duty on the amount of consideration paid only. Unlike the Stamp Duty Land Tax rules for real property, there has been no market value override (i.e. the deemed payment of market value consideration) where the transferee is a company connected with the transferor.
It was announced in yesterday’s Budget, that with immediate effect, instruments transferring listed securities to a connected company where stamp duty group relief is not available will be subject to a market value override. That is, stamp duty will be chargeable on an amount of consideration which is equal to the market value of the securities transferred. Stamp Duty Reserve Tax (SDRT) will apply similarly in tandem on agreements which have become unconditional on or after 29 October 2018.
In addition, the government yesterday announced their intention to consult on introducing a general market value rule for all transfers between connected persons (not just in situations where group relief is not available), bringing the consideration rules for stamp duty into line with the SDRT rules. The consultation will be published on 7 November.
HMRC have stated that reforming the consideration rules will simplify stamp taxes on shares and prevent contrived arrangements being used to avoid tax.
If you’d like to discuss this further, please get in touch with your usual PwC Stamp Taxes contact.