HMRC consults on proposals to modernise UK stamp duty on shares

Published on 19th May 2023

Reform of stamp duty and SDRT on shares with a proposed single tax on securities is a welcome development

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The UK government has published a consultation on proposals to reform the current dual stamp duty and stamp duty reserve tax (SDRT) charges on shares with a single tax on securities.

The consultation forms another step in the digitalisation of the UK tax system, with the overall aim of modernising and simplifying what the UK government itself acknowledges is an anachronistic stamp duty regime that can cause uncertainty, overlap and delay in registering share transfers.

Outline proposals

The consultation closes on 22 June 2023 and sets out the government's initial proposals for the tax. Perhaps unsurprisingly, these draw on a number of principles currently included in the SDRT and stamp duty land tax regimes. The following has been proposed:

  • The new tax would be mandatory for the purchaser to pay and it would be collected through self-assessment, bringing the charge in line with the administration of other UK taxes (currently, stamp duty is a voluntary tax but which is normally paid by the purchaser as the registrar cannot update the register of members of the company without a stamped transfer).
  • Other than for transactions undertaken through CREST (the Certificateless Registry for Electronic Share Transfer) – which will continue to be collected through CREST – the tax would be notified and paid through a new online portal.
  • A reference number would be generated immediately on payment and the registrar will be permitted to write up the register on receipt of that reference number.
  • In line with current SDRT rules, the tax would apply to equity in UK incorporated companies, including securities with equity-like features (expected to be defined along similar lines to the current loan-capital exemption).
  • The current SDRT concept of the chargeable consideration being made up of "money or money's worth" would also be used.
  • The existing stamp duty land tax rules for uncertain and unascertainable consideration would largely be followed for the new tax, including the ability to apply for deferral, but with a new maximum deferment of two years. The tax would be due upfront in full for fixed but contingent consideration; but, for uncertain or variable consideration, it would be due upfront based on a reasonable estimate. There will then be an adjustment in either case when the contingency is known.
  • There will no longer be a £1,000 de minimis for stamping a document but the granting of a security interest will be out of scope.
  • Other key exemptions and reliefs are expected to be retained, including stamp duty group relief, reconstruction and acquisition reliefs, the growth-market exemption and intermediary relief. Reliefs though will be self-assessed by the taxpayer without the need for HMRC adjudication.
  • Payment will be due within 14 days of the chargeable date (a reduction in the current time limit of 30 days), being the date of the agreement or, for a conditional agreement, the date the agreement becomes unconditional, with an overall two year time limit. Penalties would start at 31 days and tax-geared penalties would start after seven months.
  • A full and enforceable compliance regime (which currently exists for SDRT but not stamp duty) is proposed for the new tax.

Osborne Clarke comment

This is not the first time the UK government has looked at modernising stamp duty. The consultation follows an Office for Tax Simplification report in 2017 and a call for evidence in 2020. The removal of the need for physically stamping documents in response to Covid-19 has widely been regarded as a positive step forward but it has not significantly sped up the stamping process.

There seems now to be a general consensus that the changes made as a result of Covid-19 should be a stepping stone towards the wider modernisation of stamp duty fit for the 21st century and there appears to be meaningful momentum driving the reform that could see changes implemented in the next few years.

While the proposals remain at consultation stage, they will continue to evolve with engagement from tax practitioners and industry experts. The final position will need to be assessed once the detailed proposals and draft legislation have been produced but the overall aim of the modernising duties, simplifying the administration and minimising delays in registering transfers will be welcomed by most.

In particular, the changes should mean that the current need to expend advisor fees restructuring certain transfers (that do not qualify for relief and where there is an urgent need to update the share registers) as a declaration of trust could now be a thing of the past.

While the aim to limit the administrative burden of the new tax is welcome, the removal of the £1,000 de minimis is slightly surprising in this context and practitioners should be particularly aware of the proposals to reduce significantly the time periods for paying the tax (though the grace period to 31 days before penalties are imposed is helpful).

Not only is there a reduction in the time limit to pay from 30 to 14 days but also the period will run from the unconditional date rather than completion. For split exchange and completion transactions, this could lead to greater uncertainty on the deadline and there could be instances where the duty may need to be paid very close to completion (and, in some circumstances, prior to completion), which could lead to challenges in ensuring the duty is accurately calculated in advance and paid on time.

This is the second in a series of Insights on the government's tax administration and maintenance proposals for Spring 2023. The series opened with an Insight on reform of the Construction Industry Scheme. The next article will cover the proposals for a new taxation framework for cryptoasset loans and "staking" in the context of decentralised finance.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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