STSM031320 - Scope of Stamp Duty Reserve Tax (SDRT): Transfers of unlisted securities to connected companies – How the rule will apply

When the SDRT market value rule for unlisted securities applies

It applies where:

A person is connected with a company, and the person or the person’s nominee:

  • Agrees to transfer the beneficial interest in unlisted securities to the company or the company’s nominee for consideration in money or money’s worth; or
  • Transfers such securities to the company or the company’s nominee for consideration in money or money’s worth; and
  • The consideration given for those securities is (wholly or in part) the issue of shares.
Calculation of SDRT when the market value rule for unlisted securities applies
0.5% Charge

Where applicable, SDRT at 0.5% under section 87 FA1986 is charged on:

  • The value of the consideration given for the unlisted securities; or
  • If higher, the market value of the unlisted securities at the time of the agreement.
1.5% Charge

Where applicable, SDRT at 1.5% under section 93 or 96 FA1986 is charged on:

  • The value of the consideration given for the unlisted securities; or
  • If higher, the market value of the securities at the time they are transferred to the depositary receipt issuer or clearance service respectively.
Unlisted securities

Unlisted securities are any “Chargeable Securities” (see STSM031090) which fall outside the definition of a “Listed Security”. Listed securities are chargeable 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 SDRT market value rule for unlisted securities.

Determining the value of an unlisted security

For the purposes of the SDRT 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.