STSM075020 - Companies and shareholders: company’s purchase of own shares: Stamp Duty / Stamp Duty Reserve Tax implications

Under the provisions of the Companies Act, a company is obliged to make a return to the Registrar of Companies (Companies House) giving details of own shares purchased (Section 707 Companies Act 2006).

Section 66 FA1986 provides that the return form (SH03) is treated as an instrument of transfer of the shares for Stamp Duty purposes and is chargeable with Stamp Duty.

If another instrument (e.g. stock transfer form) is used to effect the transfer of own shares to a company, then this is not also chargeable with Stamp Duty (Schedule 13 (1)(4) FA1999).

Any charge to Stamp Duty Reserve Tax (SDRT) will be cancelled, provided that the return has been made as above and to the extent that Stamp Duty has been paid on the SH03 (section 92 (1C) FA1986).

Reliefs and Exemptions

Where a 75% (or more) subsidiary company purchases some of its own shares from its parent company, relief from the Stamp Duty charge may be available under the group relief provisions (section 42 FA1930) subject to certain conditions: see STSM042200 to STSM042320.

Where a Qualifying Asset Holding Company (QAHC) repurchases shares (or loan capital) which it has previously issued, this is exempt from Stamp Duty and SDRT providing certain conditions are met.

An SH03 for repurchases of own shares by a QAHC does not need to be sent to HMRC if the exemption applies. The exemption is self-certified by completing the relevant section of the SH03. See IFM41100 for more information.

Further Information

See STSM076000 for the Stamp Duty and SDRT implications of a company’s purchase of own shares held on an overseas branch register.

See STSM075030 for the Stamp Duty and SDRT implications of a subsequent transfer of own shares held in treasury.