STSM031210 - Scope of Stamp Duty Reserve Tax (SDRT): Transfers of listed securities and connected persons: How Stamp Duty Reserve Tax (SDRT) is to be calculated
Section 48 FA2019 introduced a new Stamp Duty Reserve Tax (SDRT) market value rule where listed securities are transferred to a company or its nominee (whether or not for consideration), and at the time the agreement to transfer is made 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 ‘chargeable securities’ by persons other than companies that are connected with the transferor, or to unlisted ‘chargeable securities’ to companies which acquire securities from a connected person(s).
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 intermediary relief) continue to apply in the normal way (it is only the consideration which is affected by the market value rule).
STSM031300 gives information on the SDRT market value rule which applies to transfers of unlisted securities to connected companies which was introduced by FA2020.
0.5% SDRT
In a case where the beneficial ownership of UK registered and listed securities is agreed to be transferred to a connected company (or its nominee) for consideration in money or money’s worth, an 0.5% SDRT charge under section 87 FA1986 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 agreement.
Where no consideration is paid, the agreement to transfer listed securities is to be treated as an amount of consideration in money that is equal to the value of the listed securities at the date of the agreement and SDRT is to be calculated by reference to the value of those listed securities.
1.5% SDRT
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?
For SDRT charging purposes:
- It applies to the 0.5% charge for unconditional agreements to transfer listed securities entered into on or after 29 October 2018, or to any conditional agreements made before then where the condition is satisfied on or after 29 October 2018.
- It applies to the 1.5% SDRT charge where the transfer of listed securities is on or after 29 October 2018.
STSM021310 gives information on Stamp Duty and transfers of listed securities and connected persons
STSM031220 gives information on how the market value is to be calculated
STSM031230 explains the meaning of listed securities
STSM031240 explains the meaning of connected company and connected persons
STSM031250 gives information on CREST reporting
STSM031090 explains ‘chargeable securities’