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HMRC internal manual

Stamp Taxes on Shares Manual

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HM Revenue & Customs
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Companies and shareholders: company takeovers: calculation - consideration as shares

Where shares are transferred in the course of the takeover of a company, stamp duty is chargeable by reference to the amount or value of the consideration for the sale (FA99/SCH13PARA2). How this is determined will depend upon the form of consideration paid for the transfer.

Consideration in the form of shares

For stamp duty purposes, consideration consisting of stock or marketable securities is valued at the date of the instrument of transfer (SA1891/S6(1)(b) and SA1891/S55(1)). The instrument of transfer is taken to be the block transfer form if the accepting shareholder has authorised the bank or offeror to execute the transfer on his/ her behalf. If not, the date for valuation of listed stock and securities is established as follows:

For block transfers covering acceptances received up to the date an offer is declared unconditional, duty is calculated on the first official quotation of the consideration shares (usually the date the offer is declared unconditional, or a day or two later). For interest and penalty purposes, the date of execution is taken to be the date the offer is declared unconditional.

For block transfers covering acceptances received during a specified period after the offer is declared unconditional, duty is generally calculated on the ‘quarter up’ value of the consideration shares averaged over that specified period (see STSM021190). For interest and penalty purposes, the date of execution is taken to be the last day of the batch of acceptances covered by the transfer.

For block transfers covering compulsorily acquired shares, the consideration shares are valued at the date of the relevant (usually final) block transfer form.

Consideration in the form of shares: Market value

For the sake of consistency across taxes, the basis of valuation for stamp duty is the same as that used for Capital Gains Tax, i.e. the price which stock or securities might reasonably be expected to fetch on a sale in the open market. The method of valuation differs depending on whether the stock or securities are quoted on the London Stock Exchange. For further details see STSM021060.