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HMRC internal manual

Stamp Taxes on Shares Manual

From
HM Revenue & Customs
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Exemptions and Reliefs: Exemptions: issue of company stocks and shares

When an investor subscribes or takes up an offer to purchase new shares that are authorised but not yet allocated on the issuing company’s share register, the new shares will legally vest and be registered in the purchaser’s name without the need for a stock transfer form to be completed and impressed with stamp duty. Similarly, as the shares are issued rather than transferred, there is no ‘agreement to transfer’ chargeable securities for Stamp Duty Reserve Tax (SDRT) charging purposes.

For guidance on shares issues to a depositary receipt issuer or to an operator of a clearance service, please see STSM053010.

Where a company decides not to return cash to its shareholders, it will sometimes instead announce a special dividend whereby each shareholder will receive an issue of free shares - a ‘bonus issue’. The bonus shares are issued in proportion to existing holdings without payment required. As the shares are newly created and initially unregistered, the shares vest in the name of the shareholder without the requirement of a stock transfer form or the payment of stamp duty. Similarly, as the bonus shares are issued rather than transferred, there is no ‘agreement to transfer’ chargeable securities for SDRT charging purposes. Trading of the right to receive the bonus shares may attract SDRT as the right is likely to constitute a chargeable security.