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HMRC internal manual

Stamp Taxes on Shares Manual

HM Revenue & Customs
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Companies and shareholders: rights issues: Stamp Duty implications

Stamp Duty is charged on instruments (documents) that transfer on sale a beneficial interest in stock or marketable securities (FA99/SCH13(1)). There is no ‘transfer on sale…’ on the issue of a Provisional Allotment Letter (PAL) or Renounceable Letter of Allotment (RLA), as the letters simply document an offer. There is therefore no stamp duty charge on the issue of a PAL or RLA.

Once the offer is taken up and the shares are issued, there is no transfer of beneficial interest, as this is an issue of new shares out of the company’s authorised share capital, rather than a transfer of a pre-existing interest. There is therefore no liability to stamp duty on the issue of shares under the terms of a rights issue.

A RLA does represent a beneficial interest in stock or marketable securities, so prima facie comes within the stamp duty charge if transferred for consideration. However, a transfer on sale of rights under a RLA is specifically exempt from stamp duty, provided that the rights are renounceable within six months of the date of issue (FA99/SCH15(16)).

For more detail re: allotment letters and RLAs, see also STSM055030.

For the SDRT implications of rights issues, see STSM072050.