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HMRC internal manual

Stamp Taxes on Shares Manual

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HM Revenue & Customs
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Scope of stamp duty on shares: stamp duty: basics of a charge: the contingency principle

Contingent consideration is consideration that may or may not be given dependent on future events. As Stamp Duty (SD) is payable on documents by reference to all the facts and circumstances of the transaction known at the date of execution of the document, a body of case law has defined how these contingent payments are to be assessed for SD.

Broadly there are five types of contingent payment:

  • a payment which is subject to a stated upper limit - a maximum
  • a payment which is subject to a stated lower limit - a minimum
  • a payment that will fall between two stated limits - a minimum and a maximum
  • a payment which is estimated but can vary up or down
  • a payment which is wholly unquantifiable

Payments which are limited to a stated maximum are charged on that maximum - Underground Electric Railways Co of London Ltd v IRC [1906] AC21, HL

Payments subject to a stated minimum are charged on that minimum - Underground Electric Railways V IRC [1916] 1 KB 306, CA and Jones v IRC [1895] 1 QB 484

Payments that have both a stated minimum and a stated maximum are charged on the maximum

Payments that are stated but can vary are charged on that sum - the contingency in that case being that no variation will occur - Independent Television Authority and Associated Rediffusion Ltd v IRC [1961] AC 427, HL

Payments that are wholly unascertainable are regarded as having no value to be charged.

SD charged according to the contingency principle is not varied depending on whether or not the contingency does or does not occur. This is because a document attracts duty by reference to the facts and circumstances known as the date of execution and the actual outcome of a future contingency can have no effect on that calculation.

A transaction where the initial consideration is variable according to completion accounts is not assessed to duty under the contingency principle on that element. For payments variable in that fashion see STSM017020.

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