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HMRC internal manual

Stamp Taxes on Shares Manual

Scope of stamp duty on shares: stamp duty: basics of a charge: dividend in specie

When a company declares a dividend this is a voluntary disposition by a company to its shareholders and, as such, does not attract a charge to Stamp Duty (SD). But satisfying an obligation that has been created is the release of a debt. The two scenarios, and their different SD treatment, are shown below.

Company A owns shares in company B. It decides to transfer those shares to its shareholders as a dividend. There are two possibilities from a SD perspective:-

  • the dividend is declared to be the shares in company B. The shareholders in A never have a right to receive any money. There is no chargeable consideration and thus no SD.
  • the dividend is declared in money and company A agrees that the shares it owns in B will be transferred to all or some of its shareholders in lieu of that dividend. When company A declared the dividend it created a debt to its shareholders. Satisfying that debt by the transfer of shares causes a SD liability to arise under SA1891/S57 by reference to the amount of debt released. See STSM021070.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)