Mon 29 Oct 2018
The 2018 Budget has introduced a new market value rule with immediate effect for the transfer of listed shares and securities to a connected company for the purposes of both stamp duty and stamp duty reserve tax (SDRT).
Where a person who is connected with a company transfers listed shares or securities to that company, stamp duty or SDRT, as appropriate, will now be charged on the market value of the securities transferred if this is higher than the actual consideration, if any, given for the transfer.
Stamp duty applies where the securities are transferred using paper instruments or documents such as a stock transfer form and SDRT applies to electronic transfers.
While the government has indicated that the measures are aimed at “contrived arrangements” aimed at minimising stamp taxes on the acquisition of high-value share portfolios it will also impact straightforward transfers for no consideration and will be another factor to take into account in when setting up family investment companies.
The Government has also announced proposals to consult on extending this market value rule to cover all transfers between connected persons, which apart from resulting in a charge on gifts of shares, would end the practice of using swamping to minimise the stamp duty on share transfers.
There will also be consultation on aligning the consideration rules for stamp duty and SDRT which are currently subtly different – stamp duty being charged on consideration given in money, stock and securities or the assumption or settlement of debt whereas SDRT is charged on any consideration given in money’s worth.
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