IFM41130 - Stamp Duty and SDRT: specific exemption for repurchases of share and loan capital

FA22/SCH2/PARA54 provides an exemption from Stamp Duty and SDRT for repurchases of own shares and loan capital by a QAHC provided certain conditions are met.

‘Loan capital’ has the meaning given by FA86/S78(7), and reference to the issue of loan capital includes the issuing of any rights in connection with the raising of capital.

The date at which it is determined whether a company is a QAHC for the purposes of the exemption is the date of the unconditional agreement to transfer the QAHC’s own shares or own loan capital to the QAHC. This effectively replicates when the relevant date for an SDRT charge to arise on the transfer would be. The relevant date for a Stamp Duty charge (the date of execution of the instrument) would never precede the relevant date for SDRT purposes.

If a company subsequently discovers a breach of the eligibility rules which means that it was not a QAHC at the time of the unconditional agreement to transfer, the exemption would not be applicable. In these circumstances a charge to Stamp Duty or SDRT would arise, and customers should contact HMRC. If an instrument of transfer (for example an SH03 for a repurchase of shares) was used, customers should use the Stamp Duty contact details in the link. If no instrument was used, customers should use the SDRT contact details listed here (search on ‘tax when you buy shares on gov.uk).

A repurchase of shares or loan capital by a company that ceased being a QAHC as a result of that transfer is to be treated as a transfer to a QAHC. For example, a QAHC has 70 shares owned by category A investors and 30 shares owned by non-category A investors. It repurchases 5 shares from a category A investor. In consequence of that transaction, the QAHC fails the ownership condition. However, the Stamp Duty and SDRT exemption still applies on the transfer of the 5 shares.

The conditions for exemption are:

  • the repurchase does not form part of a disqualifying arrangement (IFM41140) or take place at a time when there is an arrangement for a substantial sale of the QAHC (IFM41150).

  • In the case of own shares, the QAHC must make a return to the registrar of companies (as required by CA06/S707). The relevant box on the form must be used to confirm that the repurchase of shares is self-certified as exempt under the QAHC exemption. Provided that the appropriate self-certification is correctly made, the SH03 can be forwarded to Companies House without being sent to HMRC for stamping.

If a return to the registrar of companies (as required CA06/S707) is not made, SDRT will be chargeable on the agreement to repurchase shares. (Guidance on category A investors is at IFM40240+ and ownership condition is at IFM40210+)