Scope of stamp duty on shares: stamp duty: basics of a charge: company purchasing its own shares
Under section 690 Companies Act 2006 a company may purchase its own shares. As a company may not hold its own issued shares, it may therefore only purchase them for cancellation or transfer to treasury. Under section 707 Companies Act 2006 it is compulsory for a company buying its own shares to make a return to Companies House within 28 days.
The return is made on a SH03 Form (issued by Companies House) if the shares are to be cancelled or are to be held in treasury. Section 66 Finance Act 1986 makes the SHO3 chargeable with stamp duty (SD) on the consideration given, as if it were an instrument of transfer. The SD must be paid and the SH03 impressed with the relevant SD by HMRC (or self-certified to declare that no SD is payable) before it is submitted to Companies House.
A SH03 can be used to record more than one purchase of own shares, with each delivery shown on a separate line of the form. SD is calculated on the aggregate amount paid for all the shares purchased for cancellation and/or transfer into treasury detailed on the SH03, and the SD due is rounded up to the nearest £5.
In such cases, each SH03 is treated as an instrument of transfer under section 66 Finance Act 1986, and the date on which the SH03 is signed is treated as the date of execution for SD purposes, not the date(s) of delivery of those shares to the company. It is therefore the date of signature which must be used when considering whether the SH03 has been submitted on time for SD purposes when determining any liability to potential interest and/or penalties.
If a stock transfer form has been used to record the sale to the company this does not also attract SD. Any such forms submitted along with an SH03 (upon which SD is impressed instead) will be returned unstamped.
Any return to Companies House on a SH05 Form cancelling shares which are held in treasury does not attract a SD charge, as SD will already have been notified and paid when those shares were transferred to treasury as detailed above.