IFM41150 - Stamp Duty and SDRT: substantial sales

The exemption for repurchases of share and loan capital by a QAHC is denied in cases where arrangements for a ‘substantial sale’ exist.

This carve-out prevents exemption where there is a substantial sale of the QAHC but the conditions for there to be a disqualifying arrangement might not be met owing to a material change in the capital structure of the QAHC (which may involve new classes of security, perhaps held by more than one entity).

Arrangements for a substantial sale of the QAHC exist when there are arrangements for the disposal of shares and/or loan capital representing at least 90 percent of relevant interests in the QAHC.

The ‘sale of the QAHC’ covers direct sales of interests in the QAHC (but it is not concerned with sales of entities above the QAHC). Relevant interests are determined by reference to FA22/SCH2/PARA4 (see IFM40220 for further information on relevant interests).

The arrangements must also include the acquisition of shares or loan capital representing relevant interests by a person in the same QAHC. This means, for example, that a repurchase of shares that is not linked to a subscription of new securities in the same QAHC, and which led to a 90 percent change in ownership within the same investor base would not constitute a substantial sale.

Meaning of arrangements

Reference to ‘arrangements’ should be read in the same way as references to ‘arrangements’ for Stamp Duty group relief purposes.

Group relief under FA30/S42 will not be allowed if the transfer was effected in pursuance of, or in connection with, an arrangement under which FA67/S27(3)(a), (b) or (c) applies. See STSM042280.

The HMRC statement of practice 3/98 also refers to ‘arrangements’ in relation to FA67/S27(3) (and FA95/S151) at STSM042300.