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HMRC internal manual

Stamp Taxes on Shares Manual

Exemptions and reliefs: reliefs: company reconstructions and acquisitions - 'or as nearly as may be the same'

There is a requirement in section 75 that, after the acquisition, the proportion of shares held by any shareholder in the acquiring company must the same ‘or as nearly as may be the same’ as the proportion held in the target company. There is a similar requirement in section 77 relating the proportion of shares held in the target company (before the acquisition) and the acquiring company (after the acquisition). This condition is a small relaxation of an earlier condition that the proportions had to be identical.

The condition was relaxed so that materially insignificant differences in shareholdings that were unavoidable or unintended should not necessarily bar relief. For example, relief would not necessarily be barred: if a shareholder held 101 shares out of 10,000 in one company and 1 share out of 100 in the other (since it would be impossible to hold 1.01 shares in the latter company); or where a subscriber share is inadvertently overlooked and has no material effect on the shareholdings. The relaxation of the condition does not allow shareholdings to be intentionally adjusted. In particular, HMRC will generally not accept that the condition is satisfied:

  • where there is a change in control,
  • where there is a material change in economic interest, or
  • where a shareholder gives up their interest (or where a new shareholder gains an interest).

For changes of control see STSM042460.