Call for evidence outcome

Modernisation of the Stamp Taxes on Shares Framework: summary of responses

Updated 20 July 2021

1. Introduction

In July 2020, the government published a Call for Evidence on the principles and design of a new Stamp Duty and Stamp Duty Reserve Tax (SDRT) framework to inform a longer-term modernisation of Stamp Duty and SDRT.

Prior to this, the Office of Tax Simplification published a report in July 2017 recommending modernising Stamp Duty.

Stamp Duty and SDRT are collectively known as Stamp Taxes on Shares (STS). In November 2018, the government published a consultation on changes to the STS consideration rules including alignment of the Stamp Duty and SDRT definitions of consideration and the rules on contingent consideration. Following consultation, the government acknowledged in the Summary of Responses document published in July 2019 that such changes in isolation without wider reform and modernisation of Stamp Duty would create significant negative impacts on certain sectors.

The STS framework is the legislation, guidance and administrative processes that allow HMRC to administer Stamp Duty and SDRT effectively. It defines the obligations on HMRC and taxpayers, including:

• when and how taxpayers must notify an obligation to pay tax
• how liability is calculated and agreed, including determining eligibility for reliefs and exemptions
• how tax is collected (for example compliance powers, penalties and interest)
• how disputes are managed

The Call for Evidence asked for views on:

• what the principles and design of a new framework for STS should be
• prioritising changes within the overall modernisation programme

HMRC held the Call for Evidence from 21 July to 13 October 2020, including meetings with stakeholders. This document summarises the responses to the Call for Evidence and sets out the government’s response and next steps.

The Call for Evidence received 33 written responses, along with comments made during the meetings. Written responses were received from legal firms (11 responses), representative bodies (9 responses), accountants/tax advisors (7 responses), large businesses (5 responses) and one individual. The businesses and organisations that submitted written responses and sent representatives to attend a meeting are listed in the annex.

Common themes were raised by respondents in writing and in the meetings. The Call for Evidence was well received with agreement that modernisation is much needed and majority support for a single tax for listed and unlisted securities that is self-assessed, with digitisation and movement away from the traditional paper stamping methods. There was very strong support for measures that would reduce the length of time between a transaction being completed and company share registers being updated.

There was also very strong support for keeping the COVID-19 temporary measures in place as an interim step towards digitisation, with some suggestions for improvements that could be made to them.

A few respondents thought that STS should be removed altogether, citing that this would improve the attractiveness of the UK stock market and promote investment in UK companies. These comments are outside the scope of the Call for Evidence and have not been considered further as part of this work.

Part 2 of this document provides a summary of the responses received. Part 3 outlines the government response and next steps.

The government is grateful to all stakeholders who responded in writing or attended meetings during the course of the Call for Evidence.

2. Responses

Prioritisation of Stamp Duty modernisation elements and amalgamation with SDRT

Question 1: If you were designing a STS regime from scratch what would your top design principles be? What would you like a new STS regime to deliver?

Twenty-nine out of 33 respondents answered this question.

Design principles

The top design principle for most respondents is a system that is simple and easy to use. Clarity and certainty were identified as key elements for success, in particular around territoriality, chargeable consideration, when a liability is incurred, and identification of liable and accountable persons. A few respondents highlighted fairness between different types of investors as a key element, also commenting that taxpayers in similar circumstances should bear the same amount of tax and double taxation should be avoided.

Quote from a law firm:

A new share transfer tax should be a single tax, replacing both stamp duty and stamp duty shares tax and covering the transfer of certificated and non-certificated shares. Whilst we understand from the Call for Evidence that some practitioners may prefer keeping stamp duty separate so as not to change existing principles, in our view this would miss the opportunity to simplify and modernise the administration and enforcement of stamp duty to align the scopes of the 2 taxes, and to codify practices which currently rely on old case law or HMRC guidance.

Half of all respondents thought there should be movement to a single tax on securities, with some citing adoption of the current SDRT regime as being a sensible way forward since it is well established and generally considered to operate effectively. It was mentioned that a single tax would remove the complexities that can arise from the way in which the 2 taxes currently interact.

A number of those respondents were concerned about destabilising capital markets or disturbing the current CREST operational framework. Some respondents suggested that a way to overcome this was that that there should be a single tax, but listed/dematerialised and unlisted/materialised securities could be administered separately to make the system practical.

The availability of Stamp Duty reliefs was also mentioned by a few respondents, and one respondent mentioned exemptions for trustees and beneficiaries of employee share schemes.

A number of respondents thought that greater efficiency could be achieved by basing a new framework on a self-assessment regime (potentially with an optional pre-transaction clearance process), designed to adopt digital and modern technology, reduce delays in updating registrars and be future-proofed as far as possible. A few respondents mentioned the digital system used for Stamp Duty Land Tax (SDLT) as a potential model.

Delivery

Most respondents want to be able to register transactions through same day processing or instant unique transaction reference number (UTRN) generation. Again, the SDLT electronic self-assessment regime was mentioned as a potential model, but with a free text box and the ability to upload documents in support and explanation of the self-assessment.

Most respondents also thought a clear tax base for the types of transactions in scope is needed. Many respondents reiterated several of the design principles, in particular, the alignment of territorial scope to SDRT with exclusion of non-UK securities.

Question 2: Do you have experiences of how tax on securities is implemented/collected in other (overseas) tax systems? Do you consider any of these other ways of collecting tax on securities to be more efficient or easier to use?

Twelve out of 33 respondents answered this question.

Most respondents mentioned the Irish system as a good model, being an online self-assessed system that allows company share registers to be updated quickly and efficiently upon payment. One respondent mentioned that SDRT as it operates through CREST is an efficient, low-cost tax so that there is not necessarily a great deal to be learnt from how transfer taxes on listed shares are administered in other jurisdictions. They did, however, think it was useful to look at how Stamp Duty applies on non-listed shares and mentioned Ireland, South Africa, Singapore and Hong Kong, noting that all 4 have wholly or in part moved on from a paper-only stamping process.

Another respondent also had experience with the online Singaporean system, commenting that Singapore also maintains a publicly accessible register of Stamp Duty certificates which allows verification of information and makes due diligence easier for mergers and acquisitions.

A few respondents commented that Australia and the USA charge tax on securities at a state level, and not all states impose the charge. Similarly, a few respondents mentioned that some European countries do not charge tax on securities.

Question 3: What are your views as to the priority which should be given to elements in any modernisation programme? This will encompass any views on which areas currently cause most problems and which areas would rely on other elements being addressed first.

Twenty-two out of 33 respondents answered this question.

Half of all respondents want wholesale changes resulting in a single self-assessed tax on securities, rather than piecemeal reform; the main concerns being that piecemeal reform could add to complexity, cause confusion and result in increased burdens for customers and their advisors. (Others did not comment on this, but focused on the question asked about priorities.)

Quote from an accountancy firm:

Based on the focus on simplicity, certainty and flexibility, priority should be given to design of a single STS regime which applies to both listed and unlisted securities, as described in our response to question 1 above. However, as that design will require time and further consultation, we strongly suggest HMRC continues the temporary stamp duty process adopted as a result of COVID-19 in the meantime and continue to allow for electronic submission of stock transfer forms and for those forms to be electronically signed. We recommend that the stamping machines should be retired permanently and any legislative changes that are required as a result (including, for examples, legislative references to ‘stamped’ documents) are made as soon as possible.

For prioritisation, most respondents thought the top priority is removal of the requirement to physically stamp documents through the permanent adoption of the COVID-19 temporary processes. A few respondents commented that these processes should be placed on a statutory basis.

Other top priorities identified are the creation of an electronic filing and payment system and amending registrars’ obligations, either by removing the link or making it possible to update company share registers upon evidence of notification to HMRC or payment of Stamp Duty, for example by producing a UTRN.

Amending the territorial scope of Stamp Duty to align with SDRT, amending the legislation to remove the 1.5% charge on issuance into a clearance service or depositary receipt system, and the extension of Stamp Duty reliefs to SDRT, in particular the company reliefs, are also priorities for a number of respondents.

Question 4: Taking into account the areas discussed in this call for evidence (and any other areas you think are relevant) we would be grateful for any views on the impacts, benefits or drawbacks of combining (as far as possible) Stamp Duty and SDRT as part of modernising the Stamp Duty regime.

Twenty-five out of 33 respondents answered this question.

Most respondents would like to see the taxes combined into a single tax on securities, including consolidated legislation, with only a few respondents suggesting this was not a priority or shouldn’t be undertaken due to the challenges it poses.

The main suggested benefits of combining Stamp Duty and SDRT into a single tax are the removal of complexity and the removal of anomalies and inconsistencies in the application of the taxes and their reliefs. A few respondents also commented that combining Stamp Duty and SDRT would result in cost savings, increase the attractiveness of the UK as a business centre and remove the risk of double charges arising.

Only a few suggested drawbacks were identified by respondents. These are the time it may take for advisors to familiarise themselves with new legislation, concern that the legislation may fail to be drafted in a way that achieves simplicity and reflects current working practices, and that careful consideration is needed on the appropriate application of reliefs and transactions outside the current scope of SDRT for a new tax.

The scope of Stamp Duty and SDRT

Question 5: What would be the benefits and drawbacks of Stamp Duty replicating the territorial scope aspects of the SDRT definition of chargeable securities and/or fully adopting the SDRT definition of chargeable securities? Are there any other options for aligning the scope of Stamp Duty and SDRT and if so what is your reasoning?

Twenty-four out of 33 respondents answered this question.

Most respondents are in favour of adopting SDRT territorial scope, with the main benefits identified as providing clarity, reducing unnecessary complications and workarounds, and reducing costs. The only drawback identified is that some property that is in scope of Stamp Duty is not in scope of SDRT. Tax neutrality was also mentioned, in particular, the extent to which a new regime should replicate the tax implications of the current regimes, and that modernisation design choices could create both winners and losers.

Only some respondents commented on other options. The most popular options identified are that the exemption for stocks, shares and loan capital in a foreign company from the definition of chargeable securities should not be dependent on the register being kept outside of the UK, tax should only be chargeable on securities issued by UK incorporated companies, and more clarification should be provided on transferring interests in overseas partnerships holding interests in UK and non-UK securities.

Possible alternative options identified are removing the extra territorial application of Stamp Duty in relation to the production of instruments as court evidence, and explicitly stating what is within territorial scope and the features of the securities in scope. A review on the principle of contingency is also mentioned.

Reporting and Collection of Stamp Duty and SDRT (including reliefs)

Question 6: How would you like the Stamp Duty notification framework to operate? In particular, should there be a greater element of self-assessment?

Twenty-six out of 33 respondents answered this question.

Approximately 92% of respondents are in favour of self-assessment. The most popular notification framework requests suggested are:

• an online notification system

• UTRN generation to evidence notification/payment of Stamp Duty

• inclusion of a free text box and the ability to upload documents in support of submissions

• obligation on the purchaser to notify

• a pre-clearance service available on request

Quote from an individual:

Self- assessment is widespread in the context of other taxes: there seems no reason why stamp taxes should be an exception.

Some respondents commented that the SDLT regime could be used as a model for a new framework.

Question 7: Is it now redundant for Stamp Duty to be tied to registration of title of shares? Do you think that registrars’ obligations in respect of Stamp Duty should be amended and, if so, in what way?

Twenty-three out of 33 respondents answered this question.

Approximately 77% of respondents thought the tie between payment of Stamp Duty and registration of title of shares is redundant, with 19% of respondents disagreeing.

Most respondents are in favour of amending registrars’ obligations, with one respondent highlighting that company law may also need to be updated if any changes are made. The most popular suggestion is to allow registrars to update company share registers upon provision of a UTRN.

The second most popular suggestion is to remove the need for registrars to see any evidence from HMRC before updating registers, although one respondent suggested a new notification requirement for registrars that have not been provided with evidence of payment of Stamp Duty within 30 days of the share transfer.

A few respondents referenced the SDLT regime and the receipt of a SDLT5 (transaction has been electronically reported to HMRC). They thought that an equivalent mechanism for Stamp Duty could allow company share registers to be updated.

Question 8: What would be the benefits and drawbacks of making changes to the notification framework before Stamp Duty is digitised?

Fifteen out of 33 respondents answered this question.

Most respondents reiterated that they would like to see all changes made at the same time, with the temporary COVID-19 processes made permanent as an interim step to digitisation. The drawbacks identified to making piecemeal change are that it would add complexity to an already complex system, be more difficult to communicate, be inefficient, and delay the full benefits of a new system.

One respondent commented that they would not support the introduction of a self-assessed requirement for Stamp Duty without the introduction of a digital payment system and the abolition of physical stamping.

Quote from a law firm:

If the intention is to digitise stamp duty in the near future, it would seem sensible (and avoid unnecessary confusion) for the changes to the notification framework to be made at the same time as digitisation.

A few respondents thought that changes could be made to registrars’ obligations before digitisation by allowing company share registers to be updated without stamped documents or upon receipt of evidence that HMRC has been notified, with the benefit of reducing delays. One respondent also suggested extending such practice to the use of documents in court.

One respondent suggested reducing the need for adjudication of Stamp Duty reliefs, citing the potential for reduced compliance costs as a benefit. Another respondent thought that the benefit of making changes before digitisation was that having to draft revised notification obligations would help to inform the procedural aspects.

Question 9: Can you think of improvements other than digitisation that can be made to the current process for collecting Stamp Duty and SDRT?

Fifteen out of 33 respondents answered this question.

Most respondents reiterated the request to make the COVID-19 temporary measures permanent as an interim step towards digitisation. Several respondents also wanted HMRC to address uncertainties around resubmission of documents for physical stamping, and clarify the legal certainty provided by HMRC’s email responses to relief claims against the HMRC adjudication letters usually issued.

A few respondents thought that efficiencies could also be realised by raising the threshold at which Stamp Duty applies, commenting that this would reduce the number of transfers attracting duty while still ensuring the largest transactions are captured (ideally by a digital process in future).

Other suggestions made by respondents are aligning the scope of Stamp Duty and SDRT, extending Stamp Duty reliefs to SDRT, disapplying the contingency principle and putting the ‘wait and see’ principle related to contingent and unascertainable consideration on a statutory footing.

Question 10: What are your views on the desirability of having the company reliefs applicable to SDRT as well as Stamp Duty? What other Stamp Duty reliefs should also be applicable to SDRT?

Twenty-two out of 33 respondents answered this question.

Some of the most common Stamp Duty reliefs which customers claim relate to companies. Intra-group relief, acquisition relief and reconstruction relief exist only in Stamp Duty and not in SDRT.

All respondents were in favour of the company reliefs being applicable to SDRT, with approximately 71% commenting that all Stamp Duty reliefs should be applicable to SDRT. A few respondents suggested that the scope and policy intent of some of these reliefs could also be considered.

Quote from a tax advisory firm:

We hope it is clear to HMRC that the need to create a document in order to access stamp duty reliefs is sub-optimal and that the SDRT regime should have its own reliefs, or at least the reliefs should be available from both stamp duty and SDRT if the factual conditions are satisfied, irrespective of whether a document is executed or not.

Question 11: What is your experience of dealing with ‘residual securities’? Would you normally expect these securities to be settled by the completion of a Stock Transfer Form (STF)?

Fourteen out of 33 respondents answered this question.

Approximately 79% of respondents expect residual securities to be settled by a STF, with half of those respondents advising that this is due to current legislative requirements.

A few respondents commented that declarations of trust can also be used and avoid problems caused by delays to registration. One respondent commented that digitisation/dematerialisation should negate the need for a STF.

Question 12: What has been your experience of the COVID-19 temporary changes to the processing of STFs and other instruments of transfer? Which elements of the temporary processes do you think HMRC should retain?

Twenty-five out of 33 respondents answered this question.

All respondents had positive experiences of the temporary COVID-19 processes, and most respondents thought that they should be retained. The most common benefits identified are time and cost savings, increased ease and convenience, and less risk of documents being lost in the post.

Some respondents commented that there are still opportunities to improve the temporary processes, the most commonly mentioned of which was that processing times can still be slow. Several respondents also reiterated their concerns around potential resubmission of documents for physical stamping and the certainty attached to relief claim emails, questioning whether legislative changes are required.

A few respondents recommended assigning a reference number to each application to assist with any follow-up queries or issues.

Enforcement and Payments

Question 13: Is there anything you would particularly like to see or not see in a redesign of payments and enforcement for STS?

Fourteen out of 33 respondents answered this question.

Half of all respondents would like a redesign of payments and enforcement to broadly replicate the SDRT regime, with a few respondents also commenting that the SDLT regime would be a good model to follow.

Some respondents thought that making the tax compulsory and clearly identifying liability would be beneficial.

A number of respondents also commented that self-assessment processes work well for other taxes, and provide HMRC with enquiry powers and customers with the ability to appeal to tribunals.

Question 14: Do you think the current Stamp Duty payment and enforcement framework is appropriate? If not, what do you think would be appropriate?

Fourteen out of 33 respondents answered this question.

Approximately 23% of respondents think the current Stamp Duty payment and enforcement framework is appropriate, with one of those respondents commenting that it would not be appropriate if a new self-assessed regime was introduced.

Quote from an accountancy firm:

In our view the payment and enforcement framework like the charge itself is outdated. In particular the charge is ‘voluntary’ with indirect enforcement via the inability to register title until stamp duty is paid. As a consequence there is no concept of a liable person for stamp duty. These are concepts which are difficult for many of our clients, particularly those located outside of the UK, to understand.

Approximately 46% of respondents think the framework is not appropriate. The most popular suggestions of what would be appropriate include self-assessment, a digitised payment system, HMRC information and enquiry powers, and making the purchaser liable.

Question 15: Should any of the Stamp Duty and SDRT processes in relation to payments and enforcement be aligned? If so, what would be the most effective means of aligning these processes (eg charging point, notification, payment, repayment, appeals etc)?

Fifteen out of 33 respondents answered this question.

Half of all respondents thought that the Stamp Duty and SDRT payment and enforcement processes should be aligned, with the most popular suggestion being that Stamp Duty appeals should be heard at the tax tribunals rather than the High Court.

Some other suggestions are that:

• payment of disputed Stamp Duty should not be required before making an appeal

• notification and payment should be made within a set time on a self-assessed basis

• customers should have the ability to amend their return within a set time frame

• repayment should follow other taxes and be made on the basis of an amended return or an appeal to HMRC

There were mixed views on aligning the charging point. One respondent thought that the charging point should be on the transfer of beneficial interest, whilst another respondent thought that the different charging points for listed and unlisted securities may need to be retained in order to prevent confusion, adding that care must be taken to respect the CREST operational practice that has developed over many years.

Question 16: Registration of share title is currently conditional on having the relevant instrument appropriately stamped for Stamp Duty. Is this current conditionality effective as a means of incentivising compliance? If so, is it the most effective means of achieving that? If the answer to either question is ‘no’, then what would be more effective?

Twenty out of 33 respondents answered this question.

There were mixed views on whether the tie to registration effectively incentivises compliance, with approximately 42% of respondents agreeing that it does, and approximately 26% of respondents disagreeing. However, most respondents agreed that it is not the most effective means of achieving compliance, with several respondents pointing to problems caused by delays.

The most popular suggestions for what would be effective are:

• a fully virtual STS regime that is self-assessed and policed by enquiry and enforcement, with appropriate penalties and interest where necessary
• being able to update company share registers upon receipt of a UTRN or confirmation of notification/payment from HMRC
• clear legislation and guidance

Question 17: Has the fact that HMRC is only able to accept payments and make repayments for Stamp Duty and SDRT electronically rather than by cheque while the temporary processes are in place caused any issues for you or your clients?

Nineteen out of 33 respondents answered this question.

Most respondents had no issues with having to make electronic payments, although a few respondents commented that they had experienced a delay by HMRC not being able to find a payment.

A few respondents thought that payments shouldn’t be restricted to electronic payment only, so as not to disadvantage some customers or contribute to digital or financial exclusion.

Moves towards Digitisation

Question 18: What are your views on the digitisation of Stamp Duty? Do you think that this is vital for the modernisation of the tax? Do you have any views as to the best method of achieving this?

Twenty-six out of 33 respondents answered this question.

Almost all respondents are in favour of digitisation, with many stating that it is vital for modernisation, will bring Stamp Duty in line with the majority of other UK taxes, and is a necessity in a modern commercial world. One respondent commented that alternative options should also be available for those that are unable to use digital processes.

A few respondents commented that it is only a matter of time until shares are dematerialised, with most of those respondents thinking that digitisation is necessary to remove potential barriers to dematerialisation and deliver short term efficiencies. However, one of those respondents thought that any changes to Stamp Duty should be paused until after dematerialisation takes place.

Quote from a representative body:

We believe that the digitalisation of stamp duty is absolutely vital in order to bring the UK in line with most other jurisdictions and to send a clear message that the UK is moving away from its anachronistic traditions. Stamp duty also appears to lag behind the UK’s other taxes, where HMRC and the UK government have made significant moves to optimise technology in a way that benefits both HMRC and the taxpayers.

Most respondents thought the best way to achieve digitisation is via an online portal, with some respondents mentioning the SDLT system as a good model to follow. A few respondents also mentioned taking customers through requirements and allowing supporting documents to be uploaded as good features for an online portal. Some respondents reiterated their view that Stamp Duty or a new single tax on securities should be a self-assessed regime.

A few respondents also commented that the portal should allow the generation of a UTRN or some other ability to electronically verify notification and payment of Stamp Duty to allow the speedy updating of company share registers.

One respondent thought it would be beneficial for lawyers to be able to make submissions on behalf of clients without becoming tax agents or having to receive the Government Gateway details of those clients.

A few respondents also reiterated that enshrinement of the COVID-19 temporary processes was a good interim step towards full digitisation.

Question 19: How would you or your clients envisage holding and transferring shares in future?

Twelve out of 33 respondents answered this question.

Most respondents envisage dematerialisation, with shares in the future being transferred and held electronically. A few respondents commented that this will ultimately be down to company law, and that some customers may still want paper shares. One respondent also commented that this will also be down to whether Companies House is modernised to reflect a system where share transactions can be tracked in real time. Several respondents recommend that any digitised system is not tied to STFs.

Other possibilities mentioned by more than one respondent were beneficial owners’ names being on company share registers with access to their holdings online, nominees being recognised as agents of investors rather than owners, and shares being held via a nominated intermediary (with the caveat that this would reduce transparency and hamper the exercise of ownership rights).

Question 20: In your view, is the STF a necessity? Could you and your clients do without a STF? What other documents could be used, for example, an agreement to transfer?

Eighteen out of 33 respondents answered this question.

Approximately 72% of respondents do not think that the STF is a necessity, with a few of those respondents advising that an agreement to transfer could be used instead.

A few respondents think that the STF is a necessity under the current system, with a few of those respondents commenting that without the STF, another document would be needed to replace it.

One respondent commented that whether the STF is a necessity depends on the type of transaction being undertaken.

A few respondents also mentioned the need to ensure that removal of the STF would not cause any unintended consequences in company law. Consideration of whether removal of the STF would affect the ability to present evidence in court cases is also mentioned as a concern by a few respondents.

Question 21: Would an electronic STF be beneficial?

Twenty out of 33 respondents answered this question.

Over two-thirds of respondents thought an electronic STF would be beneficial, with one respondent highlighting that the option to send physical documents should be retained to assist those who are digitally excluded. A number of those respondents linked their responses to question 20, commenting that an electronic STF would only be useful if STFs were retained.

One respondent also cautioned that the benefits need to be weighed against the investment in infrastructure required to make dematerialising private listed shares cost effective. Another respondent recommended introducing the flexibility to transfer multiple share classes and the space to set out a detailed description of the consideration for the transfer.

The remaining respondents thought that an electronic STF would possibly be beneficial, depending on the future design of Stamp Duty and company law considerations. A few respondents thought that STFs could be beneficial if they are easily adaptable to new technology or used as part of a wider digitisation agenda.

Question 22: Would it be beneficial for HMRC to continue to allow the use of electronic signatures after the COVID-19 measures have ended?

Twenty-five out of 33 respondents answered this question.

All respondents thought it would be beneficial for HMRC to continue accepting electronic signatures, with most respondents commenting that this helps to speed up the process.

There were mixed views on security. A few respondents had concerns, for example, highlighting that a photocopy of a signature applied to a document is problematic; however, another respondent commented that electronic signatures are increasingly common and used for other legally binding instruments.

One respondent also requested clarification on the status of documents that have been executed wholly or partly electronically.

Question 23: Are there any additional electronic processes which you and/or your clients would like to see after the COVID-19 measures have ended?

Sixteen out of 33 respondents answered this question.

Most respondents commented that the COVID-19 temporary processes should be retained.

Other electronic processes requested by more than one respondent are:

• the ability to send documents and communicate with HMRC by email
• electronic notifications and payments
• electronic updating of company share registers
• digitisation of the ‘wait and see’ process (where non-contingent consideration for the transfer of securities is theoretically ascertainable but not yet ascertained at the date of the transfer document)

Question 24: Do you or your clients envisage using distributed ledger technology to hold records of ownership?

Fourteen out of 33 respondents answered this question.

Almost half of all respondents do envisage using distributed ledger technology in the future or think it is likely, mainly in respect of larger clients.

There were mixed views on whether the technology is suitable for holding share ownership arrangements. Some respondents saw the technology as particularly suited to holding share ownership information, while others cited concerns about cost, connectivity, accessibility and security.

Quote from a representative body:

The distributed ledger technology lends itself to share ownership recording, as it provides a database that can securely record financial, physical or electronic assets for sharing across a network through entirely transparent updates of information.

Quote from a representative body:

Currently we do not consider it [distributed ledger technology] appropriate technology for holding records of share ownership. Whilst it could be used for the collection of Stamp Duty, the concern with any technology is the connectivity and the accessibility for all of those that need to use it. APIs and other forms of system to system processing (including Distributed Ledger Technology (DLT)) could be part of improvements to efficiency in communications in the move to digitisation and/or self-assessment, without using DLT to hold records of ownership. A flexible approach would be helpful so that where necessary firms can be supported on legacy systems if they are not able to move immediately to digitised processes.

A few respondents thought that it would be wise to consider the impact of this type of technology when designing any new system to ensure the legislation is as future proof as possible.

Question 25: Do you or your clients envisage making use of smart contracts?

Thirteen out of 33 respondents answered this question.

Most respondents do envisage using smart contracts. The main comments made are that company law may need to be considered in this respect, and that any new framework and system should be future proofed as far as possible to enable easy adaptation as technologies develop.

Stamp Duty Legislation

Question 26: What terms and business practices are not adequately covered in current Stamp Duty and SDRT legislation?

Fourteen out of 33 respondents answered this question.

There were several suggestions of terms and business practices not adequately covered in the current Stamp Duty and SDRT legislation. The key themes identified by respondents are:

• the need to review the rules on contingent, deferred and unascertained/unascertainable consideration (a few respondents commented that the SDLT rules may provide a good starting point)
• the use of unsuitable language for a modern tax
• clarification of the rules for the granting of options, securities in overseas companies and non-marketable debentures
• amending the legislation to provide certainty on the removal of the 1.5% charge on issuance into a clearance or depositary receipt service

Question 27: Do you have any further comments or thoughts on the current STS regimes and modernisation of Stamp Duty? To what extent have the COVID-19 temporary changes impacted your thinking?

Twenty-two out of 33 respondents answered this question.

There were many comments giving further thoughts on modernisation. The key themes identified by respondents are that:

• streamlining Stamp Duty and SDRT into a single tax should be the ultimate goal
• consideration should be given to raising the de minimis threshold
• a full digital system that is future proofed to cope with new technology as it develops is preferred
• the legislation should be amended to remove the 1.5% charge on issuance into a clearance or depositary receipt service

In terms of the extent to which the COVID-19 temporary changes have impacted thinking, most respondents thought that the changes have shown that the physical stamping of documents is unnecessary and that significant changes can be made to processes where there is sufficient incentive to do so.

3. Next steps

The government response

The Call for Evidence opened a conversation on potential options for redesign and modernisation as the first step in a longer-term project with potentially several stages of consultation and new legislation.

The government has carefully considered the responses and is committed to exploring potential options for modernisation, including through further engagement and dialogue with stakeholders. This will ensure that all potential impacts are fully understood.

However, the government has been able to take immediate action on the most requested priority area highlighted by respondents. On 18 June 2021, we announced the removal of the requirement to physically stamp documents due to the permanent adoption of the COVID-19 temporary processes which give the option of electronic notification and under which HMRC issues a confirmation letter rather than physically stamping the document.

Owing to legislative changes made in 2019 in anticipation of potential changes to the stamping method, these processes are legally valid and ‘duly stamp’ transfer instruments for all purposes. There is no requirement for any instruments processed since March 2020 to be resubmitted to HMRC. Improvements to these processes have also been made as a result of stakeholder feedback. More guidance on this is available on GOV.UK.

Our next steps for this work are to:

• explore the feasibility and implications associated with the key priority areas identified by respondents, including a single self-assessed tax on shares, territorial scope and digitisation, and build a full picture of all the risks and benefits involved
• set up a Working Group to work collaboratively with stakeholders and help inform the development of policy proposals and frame subsequent consultation documents

Stakeholders interested in being part of the Working Group should email sts.consultation@hmrc.gov.uk with their contact details by 10 September 2021. Please note that depending on the number of requests received, it may not be possible to accommodate all requests to join the Working Group.

Annex: list of stakeholders consulted

We are grateful to all those who took time to send written responses to the Call for Evidence, each of which has been carefully considered. We are also grateful to those who took time to participate in a consultation meeting.

The businesses and organisations that submitted written responses or took part in a meeting are as follows:

Addleshaw Goddard LLP

ADE Tax

Ashurst LLP

Association of Investment Companies

Blick Rothenberg

Chartered Governance Institute Registrars Group

Chartered Institute of Taxation

City of London Law Society

Cleary Gottlieb Steen & Hamilton LLP

Computershare Investor Services PLC

Cooley (UK) LLP

Deloitte LLP

DWF Law LLP

Ernst & Young LLP

Euroclear

FTI Consulting

Grant Thornton UK LLP

Investment Association

KPMG LLP

The Law Society

The Law Society of Scotland

Legal & General Group PLC

Linklaters

The London Stock Exchange Group

Macfarlanes LLP

The Miller Partnership

Pinsent Masons LLP

PricewaterhouseCoopers LLP

Simmons & Simmons LLP

Slaughter and May

Stamp Taxes Practitioners Group

Taylor Wessing LLP

Travers Smith LLP

The UK Individual Shareholders Society and the UK Shareholders’ Association

YBS Share Plans

One individual responded to the Call for Evidence.