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HMRC internal manual

Stamp Taxes on Shares Manual

Scope of stamp duty on shares: stamp duty: basics of a charge: future cash: examples

Example 1

A sells some shares to B. The agreed consideration is £5,000 on completion with further payments of £1,000 on the first day of each of the 12 months following completion. The chargeable consideration is £17,000 (£5,000 + (12 x £1,000)).

Example 2

A sells some shares to B. The agreed consideration is £50,000 plus 10 per cent of the profits in each of the next 2 years, but this is limited to a sum of £12,500 in respect of each of those years. The chargeable consideration is £75,000 (£50,000 + (2 x £12,500)) on the maximum contingency. See STSM021120.

Example 3

A sells some shares to B. The agreed consideration is £50,000 plus 10 per cent of the profits in each of the next two years, subject to a minimum of £10,000 in respect of each of the two years with no upward limit. The chargeable consideration is £70,000 (£50,000 + (2 x £10,000)) on the minimum contingency. See STSM021120.

Example 4

A sells some shares to B. The agreed consideration is £50,000 plus 10 per cent of the profits in each of the next two years, subject to a minimum of £10,000 and a maximum of £12,500 in respect of each of the two years. The chargeable consideration is £75,000 (£50,000 + (2 x £12,500)) on the maximum contingency. See STSM021120 

Example 5

A sells some shares to B. The agreed consideration is £50,000 plus 10 per cent of the profits in each of the next two years. The target for that payment is stated to be £11,250 in respect of each of the two years; but this will be varied up or down depending on actual results. The chargeable consideration is £72,500 (£50,000 + (2 x £11,250)) on that variable contingency. See STSM021120.

Example 6

A sells some shares to B. The agreed consideration is £50,000 plus 10 per cent of the profits in each of the next two years. The agreement has no target, minimum or maximum and thus those future payments are wholly unquantifiable. The chargeable consideration is limited to the initial payment of £50,000.

Example 7

A sells some shares to B. The agreed consideration is £50,000 providing that the Net Asset Value (NAV) as determined by completion accounts is £35,000. If that is not the case the consideration will be varied up or down on a pound for pound basis depending on whether the actual NAV is higher or lower than that assumed. The final consideration will not be known until the completion accounts have been agreed. Because the NAV could, theoretically, have been determined at the time of completion the chargeable consideration will be that which is agreed when completion accounts have been agreed. See STSM017020 for the Stamp Taxes procedure and process to be followed in such cases.