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View the related Tax Guidance about Stamp Duty Reserve Tax

Stamp duty reserve tax

Stamp duty reserve taxStamp duty reserve tax (SDRT) was introduced by Finance Act 1986 to ensure that a charge equivalent to stamp duty would apply on the transfer of uncertificated securities. As there is no document transferring the shares in a paperless transaction, and therefore no document to stamp, without SDRT there would be no mechanism to collect the stamp duty.In practice, the majority of SDRT is paid automatically on stock exchange transactions dealt with electronically via the UK Central Securities Depository (CREST). Analysis of the application of SDRT to financial market trading is not outlined further in this guidance note.Transfers of securities outside CREST are normally effected by a transfer document on which stamp duty is paid. This generally has the impact of cancelling any SDRT liability (see below). Nevertheless, taxpayers and advisers need to be aware of the potential application of SDRT where there are agreements to transfer securities, in particular looking out for situations where there is an agreement to which SDRT applies but no corresponding document which is subject to stamp duty. Without further planning, the SDRT liability would not be extinguished in such circumstances.A consultation was launched in April 2023 by HMRC into the possibility of replacing stamp duty and SDRT with a single stamp tax on shares. For more information, see the Stamp duty 鈥� basic rules guidance note.Basic rulesSDRT applies where there is an unconditional agreement, whether documented or otherwise, to transfer 'chargeable securities' (see the definition below) for consideration in 'money

Introduction to stamp taxes

Introduction to stamp taxesThere are a five UK stamp taxes which apply to transactions involving UK land and buildings, stocks and marketable securities and partnership interests. The five stamp taxes are:鈥�stamp duty land tax (SDLT), applying to transactions in land and buildings in England and Northern Ireland 鈥�land and buildings transactions tax (LBTT), applying to transactions in land and buildings situated in Scotland鈥�land transaction tax (LTT), applying to transactions in land and buildings situated in Wales鈥�stamp duty applying to instruments (for example, a stock transfer form) that transfer UK shares and certain other types of stocks and securities鈥�stamp duty reserve tax (SDRT) applying to electronic (or paperless) transfers of UK shares and certain other securitiesIn addition, there is separate property tax known as the annual tax on enveloped dwellings (ATED) which should be considered along with the SDLT (or LBTT/ LTT) consequences of the acquisition of residential property. Broadly, ATED applies to the acquisition of certain UK dwellings worth more than £500,000 by companies and other types of 鈥榥on-natural persons鈥�. For more information, see the Overview of the ATED regime guidance note. Each stamp tax is briefly described below, with links to separate guidance notes containing further details.SDLT, LBTT and LTTSDLT was introduced on 1 December 2003 to replace stamp duty on transactions in land and buildings. Its scope is much wider than stamp duty in that it applies to any acquisition of a

Stamp duty 鈥� basic rules

Stamp duty 鈥� basic rulesIntroduction and scopeStamp duty is a tax on documents and has existed for over 300 years. During the latter part of the 20th century, and in particular following the introduction of stamp duty land tax (SDLT), the scope of stamp duty has been narrowed significantly.The documents which are now within the scope of stamp duty are broadly confined to:鈥�instruments relating to stock or marketable securities鈥�instruments transferring an interest in a partnership the assets of which include stock or marketable securities鈥�instruments which transfer UK land and buildings where the contract was entered into before 10 July 2003 and which are not within the SDLT regimeIn practice, by far the most common circumstance where stamp duty is encountered is on stock transfer forms for the purchase of unquoted shares in UK registered companies.The stamp duty statute is spread over many years, the most important legislation being the Stamp Act 1891 and FA 1999, Sch 13.HMRC manual references are to the Stamp Taxes on Shares Manual (STSM).On 21 July 2020, the Government issued a call for evidence inviting views on the design for a new framework for stamp duty and stamp duty reserve tax (SDRT) to help inform a broader long-term modernisation of the regimes. The consultation closed on 13 October 2020 and a summary of responses was published on 20 July 2021. In April 2023, HMRC published a consultation on whether to have a single tax on securities rather than the current framework of

Employee trusts 鈥� implications of disguised remuneration and where are we now?

Employee trusts 鈥� implications of disguised remuneration and where are we now?Employee benefit trusts (EBTs) are commonly used to support employees鈥� share schemes and to provide other benefits to employees. For example, EBTs were used to provide additional benefits where the previous reduction of the pension lifetime allowance resulted in employees having significantly less tax efficient pension provision than was intended. Many employers established employer financed retirement benefit schemes although the trusts were in fact an EBT that permitted the provision of retirement benefits. EBTs were also used to provide what was believed to be 鈥榯ax efficient鈥� bonuses 鈥� contributions to an EBT would be held for an employee鈥檚 (or a class of employees鈥�) benefit. The EBT would either invest for the benefit of the employees, or more widely, the EBT would provide a loan to the employee. The employee would have the benefit of the loan and not suffer the tax liability of a payment made outright to the employee.The use of EBTs has been significantly affected by the introduction of the disguised remuneration rules. For further information, please see the Disguised remuneration 鈥� overview guidance note. There are statutory exclusions from those rules to cover many of the share scheme-related activities of EBTs. However, providing loans or opportunities for wealth creation through long-term investment schemes, has declined due to the tax and NIC treatment as a result of the disguised remuneration legislation.Legislation introduced in Finance Act 2014 promoted employee ownership of companies. Employee owners who dispose of

Contractual disclosure facility (CDF)

Contractual disclosure facility (CDF)IntroductionThe vast majority of HMRC enquiries, or 鈥榗hecks鈥� as they are now more commonly called, are carried out by staff in the network of tax offices across the UK. A formal notice is issued and the individual, sole trader, partnership or limited company is told which tax return is to be the subject of a check. Typically, the HMRC officer requests information to conduct the check, in order to confirm the accuracy and completeness of the tax return in question.However, HMRC also has specialist teams conducting civil and criminal investigations where it suspects serious tax fraud, involving direct and / or indirect taxes, has taken place. HMRC considers a tax fraud to involve an element of deliberate behaviour where, for example, there has been a failure to declare a tax liability, a concealment or withholding of information or a misrepresentation of facts.HMRC鈥檚 regime for handling serious fraud cases is called the contractual disclosure facility (CDF). Code of Practice 9 (COP 9, also known as Code 9) governs how HMRC investigates suspected fraud and sets out the rules and conditions of the CDF policy. Under CDF, HMRC only guarantees not to prosecute where the person involved enters and fully complies with the terms on offer as part of the CDF.Under CDF, the taxpayer has the following two options:鈥�to accept the CDF regime, ie admit to the fraud and make a full disclosure to HMRC, or鈥�not to cooperate with HMRC, in which case they have no

Disclosure of tax avoidance schemes (DOTAS) 鈥� overview

Disclosure of tax avoidance schemes (DOTAS) 鈥� overviewScope of DOTAS regimeUnder the DOTAS regime, persons have to self assess tax planning proposals or arrangements, and if these meet one or more 鈥榟allmarks鈥� they must be disclosed to HMRC.The DOTAS regime is deliberately cast quite widely so that it is capable of applying both to something that everyone would recognise as a tax avoidance scheme and to any set of arrangements that may be expected to deliver a tax or national insurance advantage as a main benefit. In this guidance note, the word 鈥榮cheme鈥� is used to cover any sort of scheme or arrangement within that description.The DOTAS regime allows HMRC to act faster where it suspects a scheme should be disclosed under DOTAS but has not been. HMRC can issue an FA 2004, s 310D information notice to any person it suspects of being a promoter or supplier of services in relation to the scheme, requiring them to satisfy HMRC with 30 days that the scheme is not notifiable under DOTAS. The notice does not require approval from the Tribunal. If the person fails to reply within the time limit or fails to convince HMRC that the scheme is not notifiable, HMRC will issue a reference number in relation to the scheme. See 鈥楬MRC suspects that a scheme is notifiable鈥� below. Once the number has been issued to the person subject to the notice, this triggers the same obligations as where the scheme is disclosed voluntarily. See 鈥楧uties following

Buying a company 鈥� summary of key issues

Buying a company 鈥� summary of key issuesIntroduction to buying a companyThere are many tax related matters to consider when one company purchases the shares of another. Whilst tax is a major factor in this type of transaction, the impact of any potential tax consequences must be balanced with other wider commercial factors. This guidance note is written from the perspective of the acquiring company (or group of companies). Some of the relevant considerations are set out below, split between pre- and post-completion matters for ease of reference. More detailed commentary can be found in Tolley鈥檚 Tax Planning 2022鈥�23, Chapter 3, 鈥楤uying a company鈥�.It should be noted that distressed company purchases give rise to a range of additional issues, which are not covered in this note. For an overview of some of the relevant matters to consider in this regard, see 鈥楧istressed company purchases鈥�, by Eloise Walker in Tax Journal, Issue 1140, 21 (28 September 2012).Pre-completion mattersThe directors of the acquiring company will work with many different advisers throughout the transaction to acquire shares in a company. Depending upon the nature of the transaction this is likely to include a team of lawyers, corporate financiers, tax advisers, valuations specialists, etc. The key driver for each of these parties at this stage of the transaction is to agree the detailed terms of the share purchase agreement (SPA) to the satisfaction of their respective clients, including the price payable for the shares and / or assets being acquired.Due diligenceA due diligence

Stamp duty 鈥� corporate transactions

Stamp duty 鈥� corporate transactionsApplication of basic rules and introduction to corporate reliefsThe basic rules for stamp duty apply to companies as they do to other taxpayers. See the Stamp duty 鈥� basic rules guidance note for an introduction to the stamp duty regime.However, the stamp duty legislation also includes important reliefs which apply in relation to particular corporate transactions.The most commonly encountered reliefs are:鈥�associated company relief (known as group relief)鈥�relief for insertion of a new holding company鈥�reconstruction reliefThese are explained in further detail below.There are also reliefs applicable for transfers to recognised intermediaries, repurchases and stock lending, and transfers to charities.In contrast to transactions which are exempt from stamp duty, even where reliefs eliminate the stamp duty liability in full, the transfer document will still need to be sent to HMRC for adjudication and stamping. See the Stamp duty 鈥� basic rules guidance note for further details.Reliefs should be applied for in writing with sufficient and appropriate evidence to support the claim. HMRC will scrutinise applications carefully and thorough checks should be made before sending the application that all required documentation is enclosed and any confirmations and certifications are made by the appropriate individual(s). All claims for relief should be emailed rather than sent by post. Further details, including the relevant email address, can be found on the GOV.UK website.Relief for transfers between associated companies (group relief)Group relief is available where the instrument concerned transfers the beneficial interest in property (now in practice almost entirely

Spring Statement 2025

Spring Statement 2025The Chancellor delivered the Government鈥檚 Spring Statement on 26 March 2025. Although not a Budget or 鈥榤ajor fiscal event鈥� the statement included a number of tax announcements. Although not billed as a major fiscal event, several important changes were announced and HMRC issued several consultations to accompany the Chancellor鈥檚 Spring Statement 2025. HMRC has published a collection of 鈥榯ax-related documents鈥� alongside the Spring Statement.Key tax announcementsThe key announcements are:鈥�the Making Tax Digital for income tax self assessment threshold will be reduced to bring sole traders and landlords with income over £20,000 into the regime, from April 2028. Previously the Government had committed to including this further group by the end of the current Parliament鈥�late payment penalties for VAT and Making Tax Digital for income tax self assessment will increase from April 2025 for VAT, and for ITSA taxpayers as they join the regime (including, according to the wording of the Spring Statement 2025 report, those who join on a voluntary basis from April 2025)鈥�the Government has hinted at potential reform of ISAs, and is to review the venture capital schemes (with a series of roundtable discussions proposed for 鈥榢ey stakeholders鈥� in April 2025)ConsultationsAdvance tax certainty for major projects consultationThis consultation is about developing a new, dedicated service to provide 鈥榮tatutory certainty over how the tax rules will be applied鈥� for the 鈥榲ery largest major investment projects entailing significant expenditure鈥� 鈥� which the Government hopes will incentivise business decisions to invest. Eligibility will likely require

Loan notes and qualifying corporate bonds (QCBs) and non-QCBs

Loan notes and qualifying corporate bonds (QCBs) and non-QCBsOn the disposal of the shares in a company, a seller may receive loan stock (loan notes) in the acquiring company as consideration (or part consideration) for the sale.For tax purposes, loan notes are either qualifying corporate bonds (QCBs) or non-qualifying corporate bonds (non-QCBs). The expression 鈥榗orporate bond鈥� is a general commercial term for securities issued by companies to raise debt finance and does not have any special tax significance except in the process of identifying QCBs and non-QCBs. The issue, transfer and redemption of loan notes do not generally give rise to any liability to stamp duty or stamp duty reserve tax.The way in which the loan notes are treated for tax purposes depends on whether the loan notes are classified as QCBs or non-QCBs. HMRC needs to be satisfied that the issue of the loan note is not for the purposes of tax avoidance. Therefore, it is always advisable to seek clearance from HMRC when entering into a transaction involving loan notes. For more information on this, see the Paper for paper treatment clearances guidance note. Much of the commentary below relates to the tax position of the individual investor rather than the company. It is important for company directors and their advisers to understand the tax implications for investors when structuring transactions, as it is often a critical part of the deal. However, the individuals involved must obtain their own tax advice, which takes into account all of