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HMRC internal manual

Stamp Taxes on Shares Manual

Companies and shareholders: company’s purchase of own shares: Treasury shares

Before 1 December 2003, if a company purchased its own shares it was obliged to cancel them. However, from 1 December 2003, the Companies Act allows a listed company to hold repurchased shares ‘in treasury’ instead of cancelling them, subject to certain restrictions. Companies whose shares are dealt in on the Alternative Investment Market (AIM) of the London Stock Exchange are ‘listed’ for this purpose. Treasury shares may then be either cancelled or resold, and can be used to fulfil employee share options and share schemes instead of issuing new shares.

A company is owned by its shareholders, not by itself. A company cannot have rights in respect of its own shares. The rights attaching to treasury shares (rights to vote, for example, or to receive distributions) are suspended and for most tax purposes the shares are treated as having been cancelled.

Stamp duty does not apply to any instrument selling on or transferring treasury shares unless it comes within the 1.5 per cent charge for transfers to clearance services or depositaries (FA99/SCH13 (1)(5)).

The principal charge to SDRT does not apply to an agreement to transfer own shares held by the company, including treasury shares (FA86/S90(7A)). As for stamp duty above, there will be a charge at the rate of 1.5 per cent if the treasury shares are transferred to a clearance service or depositary.