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Historically, transfers of shares between “connected” companies have been subject to stamp duty only on the amount or value of consideration. Unlike the Stamp Duty Land Tax rules for real property, there was no market value override.

At Autumn Budget 2018, in addition to the immediate introduction of a market value charge on transfers of listed securities between connected companies, the government also announced a consultation on introducing a general market value rule for all transfers of unlisted securities between connected persons. The scope of the proposed changes as described in the initial consultation document were very wide and would have applied for example on gifts or distributions in specie for no consideration.

Following a consultation period, HMRC have now published draft legislation on the unlisted securities stamp duty market value rule. The headline message is that HMRC have listened to feedback about the potential wider than anticipated impact of the original proposed changes and have limited the scope of the market value rule. 

HMRC consider that the measures as now drafted are "narrowly targeted to only apply where contrived arrangements are used to minimise tax in circumstances where Stamp Duty relief is not available."   

As now drafted, there will be a deemed market value consideration for stamp duty purposes where, broadly, the transferee is a company connected with the transferor, and the consideration for the transfer is the issue of shares. The changes are expected to apply from 2020 Royal Assent.