STSM021420 - Scope of Stamp Duty on shares: Stamp Duty - basics of a charge: Transfers of unlisted securities to connected companies – How the rule will apply

When the Stamp Duty market value rule for unlisted securities applies

It applies where:

• An instrument transfers the beneficial interest in unlisted securities to a company or a company’s nominee for consideration;

• The person transferring the securities is connected with the company or is the nominee of a person connected with the company; and

• The consideration given for those securities is (wholly or in part) the issue of shares.

The legislation does not specify that the new shares need to be issued to any particular person or by any particular person

Calculation of Stamp Duty under the market value rule for unlisted securities

When it applies, Stamp Duty is charged based on:

  • The value of the consideration given for the unlisted securities; or
  • If higher, the market value of the unlisted securities.
Unlisted securities

Unlisted securities are any “Stock or Marketable Securities” (see STSM021040) which fall outside the definition of a “Listed Security”.

Listed securities are stock or marketable securities which are regularly traded (see STSM042100) on a regulated market, a multilateral trading facility or a recognised foreign exchange. Regulated market, multilateral trading facility and recognised foreign exchange have the same meaning as in section 80B Finance Act 1986.

Connected companies

Section 1122 of CTA 2010 (connected persons) specifies the circumstances where a person is connected with a company for the purposes of the Stamp Duty market value rule for unlisted securities.

Determining the value of an unlisted security

For the purposes of the Stamp Duty unlisted securities market value rule, “Market value” has the same meaning as in the Taxation of Chargeable Gains Act 1992 (TCGA 1992), section 272(1): “the price which those assets might reasonably be expected to fetch on a sale in the open market” and is to be determined in accordance with sections 272 and 273 of TGCA 1992.

In cases where it proves difficult to accept the market value figure provided by the customer, officers may refer it to HMRC Shares & Assets Valuation (SAV), who can check if the declared market value is acceptable. Guidance on how to make a submission to SAV can be found at CG59560.