Stamp Duty on Shares of a UK Company
When you buy shares valued above ?,000 using a stock transfer form, you usually have to get the form stamped by HM Revenue & Customs (HMRC) and pay Stamp Duty. The process to follow is explained below. For shares bought electronically, or without a stock transfer form, please read the guide ‘Stamp Duty Reserve Tax’
1. Share transfers valued at ?,000 or less
If you buy stocks and shares for ?,000 or less you don’t normally have to pay any Stamp Duty. You also don’t have to tell HMRC about the transaction.
All you need to do is:
• make sure the exemption certificate on the back of the stock transfer form has been completed
• send the stock transfer form and the share certificate to the registrar of the company you’ve bought shares in
The address of the registrar is on the share certificate. The registrar will then issue you with your own share certificate.
Share transfers signed before 13 March 2008
The rules above have applied since 13 March 2008. If a share transfer with a value of ?,000 or less was agreed and signed before that date, it will need to be stamped by HMRC and you’ll have to pay Stamp Duty.
2. Stamp Duty on share transfers for more than ?,000
If you buy stocks and shares for more than ?,000 you have to pay Stamp Duty. This means you have to send HMRC the stock transfer form for stamping, along with your payment.
Calculating how much Stamp Duty is payable
The amount of Stamp Duty you pay is based on the consideration you give for the stocks or shares. The consideration can be:
• Cash
• other stocks and shares
• debt, which is usually related to the loan stock
You pay Stamp Duty at the rate of 0.5 per cent of the value of the consideration, rounded up to the nearest ?, on each document to be stamped.
Example
Ben Harris buys shares using a stock transfer form. He pays ?,995.
The Stamp Duty rate is 0.5 per cent. So ?,995 ?0.5 per cent = ?.97. This is rounded up to the nearest ?, which means Ben pays ?0 Stamp Duty.
You can use the HMRC Stamp Duty calculator to work out how much you have to pay.
3. Applying to get your stock transfer form stamped
You have to send the stock transfer form to HMRC for stamping within 30 days of the effective date of the transfer. This is normally the date the form is signed.
When you send the stock transfer form to HMRC make sure that it is fully completed, signed and dated. You also need to include:
• A covering letter that gives your address so the stamped documents can be returned to you. The letter should also quote your payment reference number if youve already paid the Stamp Duty using an electronic method (the reference number is the one that you’ve generated or chosen yourself).
• A cheque made out to HM Revenue & Customs only for the amount of Stamp Duty that’s due – if you’ve not already paid using another method. Note the reverse of the cheque with any reference number you’ve generated or chosen yourself.
• Any agreement and supporting documents if HMRC has given a formal opinion or adjudication on how much Stamp Duty you should pay.
You can read more about getting an opinion from HMRC by following the link at the end of the section.
Common errors that cause delays
There are a number of reasons why HMRC may reject your application. The most common ones are:
• the stock transfer form is not dated
• the Stamp Duty is not rounded up to the nearest ? on each document
• the consideration value is not shown on the form – remember that if shares are given as consideration you’ll need to give the value of the shares
So, it’s worth checking that the form has been completed properly before sending it to Birmingham Stamp Office.
4. What happens once you’ve sent your form to HMRC?
HMRC usually deals with stock transfer forms within five working days of receiving them. But it’s a good idea to allow ten days to give them time to be returned by post.
After you’ve received your stamped form back from HMRC you need to send it to the registrar of the company you’ve bought shares in, along with the share certificate. The address of the registrar is on the share certificate. The registrar will then issue you with your own share certificate.
5. Urgent cases – same day stamping service
For the few occasions when it may be essential to have a document stamped immediately, for example for major privatisations or refinancing of multinational groups, HMRC offers a same day stamping service. If you want to pay by same day stamping you need to contact HMRC first to:
• ask them if you can use the service
• agree a convenient time and date
• arrange the preferred method of payment
Once you’ve made an appointment you need to take your documents to the same day stamping address. The documents will be stamped while you wait.
Same day stamping address
HM Revenue & Customs
Enquiry Centre
Third floor
City Centre House
30 Union Street
Birmingham
B2 4AR
If you need further information you can call the same day stamping office on Tel 0121 616 4513. Please note that this number is only for the same day stamping service and shouldn’t be used for general enquiries.
6. Penalties for late stamping and payment
You have 30 days after the stock transfer documents have been signed and dated to get them stamped and pay the Stamp Duty that’s due. If you don’t do this within the time limit you may be charged a penalty and interest.
7. Reliefs and exemptions for share transactions
There are some share transactions that qualify for relief that can reduce the amount of Stamp Duty you pay. And there are some that are exempt from Stamp Duty altogether.
If you think you qualify for relief you’ll need to apply to HMRC so that they can confirm it, otherwise you’ll have to pay the full amount of Stamp Duty.
Transactions that qualify for relief include:
• transactions between related companies – known as group relief
• company reconstructions and acquisitions
• purchases of shares by charities
You can find out more about exemptions and the reliefs you can claim, how to claim them and what to include in your application by following the link below.
8. Getting an opinion on the amount to pay
When you send your documents to be stamped you must pay the correct amount of Stamp Duty (this may include penalties and interest payments). If you’re not sure of the amount to pay you can ask HMRC for their opinion.
9. Stamp Duty on UK shares bought from abroad
If you buy shares in a UK company while you’re abroad, you still have to pay Stamp Duty and get the transfer documents stamped. If you don’t do this within the time limits, you may have to pay a penalty and interest.
If you buy foreign shares you don’t usually have to pay Stamp Duty in the UK. But there may be foreign taxes to pay.