UK publishes draft legislation for new Securities Transfer Tax

The UK government has published draft Finance Bill legislation proposing to replace Stamp Duty and Stamp Duty Reserve Tax (SDRT) on shares and securities with a mandatory, single new Securities Transfer Tax (STT). The draft legislation published on 13 July largely implements proposals from HMRC's consultation response in April 2025.

The government aims to implement STT in 2027, with some transitional arrangements. An update on the commencement date is expected this autumn. Further detail of the online portal through which returns and payment will be made is still awaited.

Main features

STT applies to the transfer of chargeable securities to another person for consideration in money or money's worth, adopting the SDRT definition of consideration.

Chargeable securities include shares and equity-like debt interests in a UK-incorporated company, units in certain unit trusts, options to acquire chargeable securities and certain other interests in, and rights to, chargeable securities. Shares in non-UK incorporated companies are outside the scope of STT.

Transfers of partnership interests also fall outside the scope of STT. Anti-avoidance provisions, however, apply where it is reasonable to conclude that the underlying securities came to be held as partnership property as a result of arrangements whose main purpose, or one of whose main purposes, was the avoidance of STT.

The main charge and higher-rate charge apply regardless of where chargeable securities are traded or where the parties are resident or situated, inheriting SDRT's wide geographical scope.

The main charge is levied at 0.5% of the consideration for the majority of transactions, rounded to the nearest penny. The £1,000 de minimis for stamping a document is abolished. A higher-rate charge of 1.5% applies to transfers of chargeable securities to a clearance service provider or a depositary receipt issuer. The higher rate charge for bearer instruments is removed, following the outcome of a consultation, published alongside the draft legislation. 

The draft legislation also provides for a full and enforceable compliance regime, which currently exists for SDRT but not stamp duty.

Liability and payment

The buyer is the person liable for STT, An accountable person, however, may make the return and pay the tax. An accountable person is jointly and severally liable for the STT unless they make a claim that they have taken, without success, all reasonable steps to obtain payment from the liable person.

Payment is due within 30 days for transfers taking place outside of electronic settlement systems or 14 days for those carried out in electronic settlement systems from the charging time, which is effectively when the relevant agreement is made or, if the agreement is conditional, when the conditions are satisfied.

Where the agreement is not an electronic transaction and the charge would otherwise arise before the transfer has been substantially completed, the charge is deferred and arises instead when the transfer is substantially completed. This is broadly defined as the payment of all or substantially all consideration, exercise of voting rights, receipt of dividends or other financial benefits, or an onward sale or agreement to sell the chargeable securities.

Where the consideration is unknown at the charging time, whether that is because it cannot be determined, or has not yet been determined, a reasonable estimate of the STT must be paid and adjusted once the exact amount is known.

Where the consideration is uncertain, depending on uncertain future events, and unlikely to become clear within six months, a claim may be made in a return to defer STT until the amount is determined. Deferral is capped at four years, extendable to a maximum of 12 years. Once final consideration is known, the return must be amended (and the tax paid) within 30 days.

A claim for repayment can be made for any STT paid but not in fact due, subject to a four-year deadline for overpayment relief.

Exemptions and reliefs

Exemptions and reliefs under the existing regimes are retained, including group relief, reconstruction and acquisition reliefs, the growth-market exemption and intermediary relief. The loan capital exemption is not replicated, as this is achieved by defining the scope of STT for debt is instead defined by reference to debts in UK-incorporated companies that have equity-like features.

Reliefs and some exemptions must be claimed in a return via the online portal, removing the requirement for HMRC to adjudicate reliefs. It is unclear whether a written application will still be required or whether it will be a box-ticking exercise, similar to how reliefs for Stamp Duty Land Tax are claimed).

Returns and writing up

A return must be made for each relevant transaction, unless an exemption applies that need not be claimed in a return, and HMRC must give written acknowledgment of receipt. The timing of returns mirrors the payment deadlines: 14 days for electronic returns and 30 days for non-electronic returns.

A company must not register the transfer of chargeable securities unless it receives a copy of the acknowledgement of receipt or a statement that no return was required. While not specified in the draft legislation, HMRC confirmed in its consultation response in April 2025 that a unique taxpayer reference number (UTRN) would be generated immediately on submission of the return via the portal and the company registrar would be permitted to write up the register of members on receipt of the UTRN.

The return can be amended within a 12-month period, extendable where STT was paid on the basis of a reasonable estimate that is then finalised or where a deferral has been made.

Osborne Clarke comment

The reform of stamp duty is welcome and it should speed up the registration of share transfers. The draft legislation is open for consultation until 7 September.

There will be a fundamental change for corporate transactions involving the transfer of shares: the current "wait and see" procedure for consideration ascertainable but not yet ascertained at completion will end, simplifying post-completion matters for completion accounts deals and allowing for the possibility of a refund of tax paid on contingent consideration. Making an agent an accountable person, and therefore jointly and severally liable for the tax, may, however, deter advisers from assisting in the process on behalf of clients. 

The abolition of the £1,000 de minimis will bring many small, off-market transactions within the scope of STT. It will create additional burdens for option holders exercising their options and employee benefit trusts transferring shares to employees, many of which would previously have been exempt.

HMRC said in its April 2025 consultation response that the online portal would have the facility to produce, with the UTRN included, the stock transfer form, the SH03 purchase of own shares form or the certificate of confirmation so as to ease any administrative burden caused by removing the de minimis. This provision is not, however, included in the draft legislation, though it may appear later once the portal is launched.

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