Stamp duty on shares – response to consultation on reform

The government has published its response to the consultation document published in April 2023 on modernising stamp tax on shares.

Currently, a buyer of shares will pay a tax or duty of 0.5% of the value of the transaction. If shares are bought electronically, it will be stamp duty reserve tax (SDRT). If shares are bought using a stock transfer form, it will be stamp duty (where the value of the transaction is over £1,000). There are some exemptions, for example for shares on a recognised growth market, which includes AIM. The aim of the reforms is to reduce complexity.

Key points from the response are as follows:

• Single tax – A new mandatory, single tax on securities will be introduced, replacing stamp duty and SDRT.
• Administration – The new tax will be self-assessed, and the reporting and paying of the tax will be via an online portal to be developed by HMRC. Transactions that are currently processed through CREST will continue to have the new tax collected through CREST. There will continue to be a requirement for company secretaries and registrars to have evidence of the reporting or payment of the new tax before updating share ownership on a company’s register. Company secretaries and registrars will be able to register changes upon receipt of the Unique Taxpayer Reference Number (UTRN), which will be issued to a taxpayer upon the submission of the tax return on the portal, rather than after the tax has been paid. This should ensure that there are no undue delays to registration and facilitate smoother same day transfers of share ownership.
• Liability – The purchaser will be the person liable for the new tax.
• Charging point – The charging point will be the earlier of ‘substantial performance’ or completion, with substantial performance to be defined broadly as:
  • for shares transferred in electronic settlement systems, when the details of the transfer are submitted and matched within the settlement system; and
  • for shares being transferred outside of a settlement system, when the benefits from those shares are exercisable by the purchaser or their nominee/intermediary (eg rights to receive dividend payments or vote).
• Accountable date – The accountable date, when payment of the tax is due, will be:
  • for transfers carried out in electronic settlement systems, 14 days from the charging point; and
  • for transfers taking place outside of electronic settlement systems, 30 days from the charging point.

A further consultation has been published on the 1.5% charge regime (which applies in certain circumstances when UK securities are transferred overseas), and this is described as the “next step in this long term project”.

The government aims to introduce the single tax, its legislative framework and the new HMRC portal in 2027.