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HMRC internal manual

Stamp Taxes on Shares Manual

Exemptions and reliefs: reliefs: public issues - general

Placings and Offers for sale

Placings and offers for sales are usually sponsored by issuing houses acting either as agents for the issuing company and its shareholders, or as principals, and can include any combination of the following:

  1. new shares issued by the company for sale;
  2. bonus shares issued by the company to its shareholders and renounced by them for sale; and
  3. registered shares sold by the company’s existing shareholders.

Stamp Duty Reserve Tax (SDRT) may be payable. If the sponsor acts as agent then the sale of bonus and registered shares are chargeable transactions, being sales of chargeable securities by the vendor shareholders to the public. The issue of new shares is not an agreement to transfer securities and is, accordingly, not chargeable.

If the sponsor acts as principal then its purchase of bonus and registered shares and its sale of new, bonus and registered shares will all be chargeable unless the sponsor is a recognised intermediary (STSM042070) or the transactions come within FA86/S89A (STSM042030).

It is common with such offers for sale for the sponsor to arrange to pay the SDRT on behalf of the issuing company or the vendors, either through CREST or under an arrangement with HMRC.

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Renounceable letters of acceptance or allotment

If existing shares are offered for sale on renounceable letters of acceptance, then at the end of the renunciation period a transfer of shares is executed by the vendor shareholders in favour of the person who then holds renounceable letters of acceptance, renounced or otherwise. The transfer will be impressed with stamp duty, usually paid by the vendors or sponsor. If the original purchaser does not renounce the letter, the SDRT charge arising on the purchase will be cancelled by the stamp duty on the transfer. If the letter of acceptance is renounced then the SDRT charge falling on the original purchase remains in place, as do the charges on subsequent purchases of the renounced letter. The stamp duty payable on the eventual transfer will not cancel any SDRT charges arising in respect of such renounced letters of acceptance.

Where a company issues new shares (whether in connection with a rights issue or a bonus issue) existing shareholders will normally receive a renounceable letter of allotment, unless the new shares are to be held in CREST. A renounceable letter of allotment is itself exempt from stamp duties provided its life does not exceed 6 months. It is, however, a chargeable security for SDRT purposes.

The issue of a renounceable letter of allotment does not give rise to a charge to SDRT as there is no agreement to transfer securities. But the purchase of a renounced letter of allotment or acceptance (including a split letter) however does give rise to a charge to SDRT on the consideration paid. However, the issue of a share certificate in respect of the new shares at the end of the renunciation period to the person surrendering the allotment letter is not chargeable to SDRT.

The issue of a renounceable letter of acceptance, under an offer for sale of shares, can give rise to a charge to SDRT unless the conditions in FA86/S89A(3) have been met (STSM042030).