This article provides a summary of tax duty of purchase shares imposed by HM Revenue & Customs (HMRC) on limited company in the UK.

Usually, you will need to pay a tax or stamp duty of 0.5% on the transaction when you buy shares through a stock transfer form and the shares is over £1,000. Stamp duty is payable when you buy:

1. existing shares in a company incorporated in the UK;
2. an option to buy shares;
3. an interest in shares;
4. shares in a foreign company that has a share register in the UK; or
5. rights arising from shares.

For shares under £1,000, you will not need to pay tax or stamp duty even you buy shares through stock transfer form.

1.       Purchase shares by filing the Stock Transfer Form

When you buy shares by using a Stock Transfer Form and the transaction amount is over £1,000, you must pay stamp duty to HMRC. The Stock Transfer Form must be delivered to the Stamp Office for stamping and pay stamp duty within 30 days of it being signed and dated. When you complete a Stock Transfer Form you need to give all the details of the sale including:

(1)	the class, quantity and value of shares being transferred;
(2)	consideration of share transfer. If consideration is not in cash, please specify the particulars of the consideration;
(3)	full name and full postal address of the transferor and transferee;
(4)	the residential address proof of the new shareholder;
(5)	date of transfer; and
(6)	signature of the seller or representative of the seller.

There are also two certificates on the reverse of the Stock Transfer Form, you need to complete a different certificate depending on what you paid for the shares. When the consideration you give for the shares is £1,000 or less and the transfer does not form part of a larger transaction or series of transactions where the total exceeds £1,000, you will need to complete Certificate 1. If the transfer is exempt from stamp duty and the consideration given is not chargeable consideration you should complete the certificate 2 on the back of the Stock Transfer Form.

You do not need to fill in either certificate where no consideration is given for the shares or if you are claiming a relief from stamp duty. If you’re claiming a relief, you’ll need to send the completed Stock Transfer Form, together with details of the relief you’re claiming to HMRC for them to consider the relief claim. To apply for exemption of relief stamp duty, please refer to the section 2.

2.       Exemption or Relief Stamp Duty

Certain share transactions that qualify for reliefs or exemptions to reduce the amount of stamp duty paying or are exempt from stamp duty altogether.

If your transaction is exempt or you do not have a chargeable consideration, you do not have to pay stamp duty and you do not need to tell HMRC about it.

In some other circumstances you must notify HMRC, but you can claim a relief, so you do not have to pay stamp duty.

When transactions are exempt from tax or stamp duty, you are not required to send the Stock Transfer Form to HMRC for stamping. However, you will need to complete the second exemption certificate on the back of the stock transfer form if a chargeable consideration of more than £1,000 is given for a transfer for which a specific exemption exists. Some examples of transfers that are exempt including:

(1)	shares that you receive as a gift and that you do not pay anything for (either money or some other consideration);
(2)	shares that your spouse or civil partner transfers to you when you marry or enter into a civil partnership;
(3)	shares held in trust that are transferred from one trustee to another;
(4)	transfers that a liquidator makes as settlement to shareholders when a business is wound up;
(5)	shares held as security for a loan that are transferred back to you when you repay the loan;
(6)	transfer to the beneficiaries of a trust when the trust is being wound up;
(7)	shares that someone leaves to you in their will;
(8)	shares transferred to you when you get divorced, or when your civil partnership is dissolved;
(9)	certain types of loan capital; or
(10)	shares that are admitted to trading on a recognized growth market but not listed on any market.

To apply relief of stamp duty, the Stock Transfer Form together with the detail of relief claims shall be delivered to HMRC for stamping. There are some transactions that qualify for relief to reduce the amount of stamp duty due. Even if the relief is reduced to nil, you will still need to send the transfer document to HMRC. Examples of common reliefs:
(1)      Intra-group relief

Transfers of land or shares between companies in the same group can qualify for intra-group relief, so long as certain conditions are met.

(2)      Reconstruction relief

There is no stamp duty to pay when all or part of a company’s trade is transferred, as long as certain conditions are met.

(3)      Sales to intermediaries

There is no stamp duty to pay when stock is transferred to a recognized intermediary.

(4)      Repurchases and stock lending

There is no stamp duty to pay if transfers of stock meet certain conditions.

(5)      Transfers to charities

There is no stamp duty to pay for transfers to charities as long as certain conditions are met.

3.       Calculating of Stamp Duty is payable

The amount of stamp duty of the transaction is based on the consideration which you stated on the Stock Transfer Form. You will need to provide the value of what you paid for the shares in:
(1) cash;
(2) other stock and shares; or
(3) debt.

The deadline for paying stamp duty and getting stock transfer documents to the Stamp Office is no later than 30 days after they have been dated and signed. You may have to pay a penalty, interest or both if you are failure to pay stamp duty on time.

4.       After Paid Stamp Duty

After paid stamp duty that must email below details information to HMRC:
(1) the payment reference and amount;
(2) the date of payment; and
(3) a signed and dated Stock Transfer Form.

Transactions are normally processed by HMRC within 15 working days upon receipt the completed Stock Transfer Form and if there are no errors cause delays.

No Stock Transfer Forms are currently being stamped by HMRC. Instead, once HMRC have checked your form and confirmed they have received payment, HMRC will send you an email that will include a letter that will:

(1)	confirm receipt of stamp duty;
(2)	detail the transactions are confirming receipt for and the reference codes; and
(3)	give assurance that HMRC will not pursue a penalty against the Registrar for registering the new ownership of the shares.

You must send the Stock Transfer Form and share certificate to the registrar of the company. The address of the registrar is on the share certificate. The registrar will then issue you with your own share certificate.

5.       Common errors that cause delays

There are several reasons why HMRC may reject your application. The most common ones are the:

(1)	Stock Transfer Form is not dated;
(2)	stamp duty is not rounded up to the nearest £5 on each document; and
(3)	consideration value is not shown on the form.

You are recommended to complete all required information on the Stock Transfer Form and check before you are submitting the documents to HMRC.

6.        Same day stamping service for the urgent cases

The ‘same day’ stamping service is only available in exceptional circumstances, such as unexpected or unforeseen circumstances when it’s essential to have a document stamped immediately. You must email requests for the “same day” stamping service to: stampdutymailbox@hmrc.gov.uk

You cannot use the “same day” service if the urgency could have been avoided by:
(1)    either party; or
(2)    their respective agents.

You will not be able to use the “same day” stamping service if the law requires you to apply to HMRC for a decision known as adjudication prior to stamping, such as when a relief is being claimed.

 

If you become aware that a transaction may need a Stock Transfer Form stamped at short notice, you should email: stampdutymailbox@hmrc.gov.uk giving as much detail as possible, including the:
(1)     number of Stock Transfer Forms to be stamped;
(2)     specific reason or reasons for the request; and
(3)     amount of Stamp Duty.

The HMRC will reply you by e-mail on same day if the transactions are eligible to apply “same day” stamping services after they have reviewed the details of transactions and reasons of for the request.