STSM021310 - Scope of Stamp Duty on shares: Stamp Duty - basics of a charge: Transfers of listed securities and connected persons: How Stamp Duty is to be calculated

Section 47 FA2019 introduced a new Stamp Duty market value rule where listed securities are transferred to a company or its nominee (whether or not for consideration), and when the transfer takes place the person transferring the securities is connected with the company or is the nominee of a person connected with the company.

The listed securities market value rule does not apply to acquisitions of stocks or marketable securities by persons other than companies that are connected with the transferor, or to transfers of unlisted stocks or marketable securities.

The rule applies irrespective of whether there is any consideration. For example, where a company declares a dividend in specie (see STSM021130), which is satisfied with existing listed shares, should any of its shareholders be connected companies Stamp Duty will be due based on the market value of those shares.

Exemptions and reliefs (such as the growth market exemption and Stamp Duty group relief) continue to apply in the normal way (it is only the consideration which is affected by the market value rule).

STSM021400 gives information on the Stamp Duty market value rule which applies to the transfer of unlisted securities to connected companies which was introduced by FA2020.

0.5% Stamp Duty

In a case where the beneficial ownership of listed securities is transferred to a connected company (or its nominee) for consideration in money, other stocks or securities, or to which section 57 Stamp Act 1891 applies, a 0.5% charge to Stamp Duty under Paragraph 1, Schedule 13, FA1999 arises and is to be calculated by the amount or value of the consideration or, if higher, the market value of the listed securities at the date of the instrument.

Where no consideration is paid, the transfer of listed securities is to be treated as being for an amount of consideration in money that is equal to the value of the listed securities at the date of the instrument, and Stamp Duty is to be calculated by reference to the value of those listed securities.

1.5% Stamp Duty

The market value rule for listed securities will also apply where the beneficial ownership of listed securities is transferred to a connected company (or its nominee), whether or not for consideration, and the purchaser instructs the transferor to deposit the securities into a depositary receipt system or a clearance service.

In these circumstances, the transfer will be chargeable at 1.5% based on the higher of the amount or value of the consideration (if any) for the transfer or the market value of the securities.

Example

Alfred and B Ltd are connected. Alfred agrees to sell listed shares in C plc to B Ltd, which B Ltd wishes to hold in a clearance service, so Alfred agrees to transfer the shares to the clearance service.

The shares in C plc have a market value of £1m, but B Ltd only pays £500,000 to Alfred for them. Due to the listed securities market value rule, 1.5% Stamp Duty is calculated on the market value of £1m, as this is higher than the amount actually paid.

When was the listed securities market value rule introduced?

The change came into effect on 29 October 2018 and for Stamp Duty purposes applies to an instrument of transfer that effects the transfer of listed securities which was executed on or after 29 October 2018.

STSM031200 gives information on SDRT and transfers of listed securities and connected persons

STSM021320 explains the market value calculation

STSM021330 explains the meaning of listed securities

STSM021340 explains the meaning of connected company and connected persons