Business tax – guidance

Stamp Duty on shares

Stamp Duty payable on paper share transfers, getting your stock transfer form stamped,and same-day stamping service

When buying shares where the price paid is greater than £1,000, and the purchase is recorded on a stock transfer form, the form will need to be stamped by HM Revenue and Customs (HMRC) and Stamp Duty (SD) will need to be paid.

For shares bought electronically, or without a stock transfer form, see the guide on Stamp Duty Reserve Tax (SDRT).

Share transfers valued at £1,000 or less

If you buy stocks and shares for £1,000 or less you don’t normally have to pay any SD and don’t have to tell HMRC about the transaction, but you need to:

  • make sure the first exemption certificate on the back of the stock transfer form has been completed - you don’t need to complete this certificate if you don’t pay anything for the shares
  • send the stock transfer form and the share certificate to the registrar of the company you’ve bought shares in - whether you gave anything for the shares or not

The address of the registrar is on the share certificate. The registrar will then issue you with your own share certificate.

Share transfers signed before 13 March 2008

The rules above have applied since 13 March 2008. If a share transfer with a value of £1,000 or less was agreed and signed before that date, it will need to be stamped by HMRC and you’ll have to pay SD.

Share transfers for more than £1,000

If you buy stocks and shares for more than £1,000 you will normally have to pay SD and you will have to send HMRC the stock transfer form for stamping, along with your payment.

Calculating how much SD is payable

The amount of SD you pay is based on the ‘chargeable consideration’ you give for the stocks or shares. The chargeable consideration can be:

  • cash
  • other stocks and shares
  • debt

You won’t have to pay SD where the consideration you give is not chargeable. Read more about exemptions in the guide on SD reliefs or exemptions and how to apply.

You pay SD at the rate of 0.5% of the value of the chargeable consideration, rounded up to the nearest £5, on each document to be stamped.

Example

Ben Harris buys shares using a stock transfer form and pays £1,995.

The SD rate is 0.5%. So £1,995 × 0.5% = £9.97. This is rounded up to the nearest £5, which means Ben pays £10 SD.

Completing a stock transfer form

When you complete a stock transfer form you should give all the details of the sale including the shares being transferred, the consideration, the buyer and the seller etc.

If you don’t give any consideration for the shares you should enter ‘Nil’ as the consideration money.

If the transfer is exempt from SD, or no chargeable consideration is given for the transfer, you need to complete one of the certificates on the back of the stock transfer form. The certificate you need to complete depends on the facts.

Certificate 1

You should complete certificate 1 if both of the following applies:

  • consideration you give for the shares is £1,000 or less
  • the transfer does not form part of a larger transaction or series of transactions where the total exceeds £1,000

Certificate 2

You should complete certificate 2 on the back of the stock transfer form in the following situations:

  • the transfer is exempt from SD, for example, transfers in connection with divorce or the dissolution of a civil partnership
  • the consideration given is not chargeable consideration

No certificate needed

You don’t need to fill in either certificate where no consideration is given for the shares or if you are claiming a relief from SD. If you are claiming a relief you will need to send the completed stock transfer form, together with details of the relief you are claiming to HMRC for stamping.

Getting your stock transfer form stamped

You have to send the stock transfer form to HMRC for stamping within 30 days of the ‘effective date’ of the transfer - normally the date the form is signed.

When you send the stock transfer form to HMRC, make sure that it is fully completed, signed and dated. You also need to include:

  • a covering letter quoting your payment reference number if you’ve already paid the SD using an electronic method, the reference number is the one that you’ve generated or chosen yourself
  • a cheque made out to ‘HM Revenue & Customs only’ for the amount of SD due - if you’ve not already paid using another method - note the reverse of the cheque with any reference number you’ve generated or chosen yourself
  • any agreement and supporting documents if HMRC has given a formal opinion or adjudication on how much SD you should pay
  • a self-addressed envelope - size C4 for up to 4 documents or C3 for more than 4 documents for HMRC to return the stamped documents to you

HMRC usually deals with stock transfer forms within 5 working days of receiving them. You should allow 10 days to give them time to be returned by post.

Errors that cause delays

There are a number of reasons why HMRC may reject your application. The most common ones are:

  • the stock transfer form is not dated
  • the SD is not rounded up to the nearest £5 on each document
  • the consideration value is not shown on the form - remember that if shares are given as consideration you’ll need to give the value of the shares

It’s worth checking that the form has been completed properly before sending it to Birmingham Stamp Office.

Find out how to pay SD, including the benefits of paying electronically.

What happens next HMRC usually deals with stock transfer forms within 5 working days of receiving them. But it’s a good idea to allow 10 days to give them time to be returned by post.

After you’ve received your stamped form back from HMRC, you need to send it to the registrar of the company you’ve bought shares in, along with the share certificate. The address of the registrar is on the share certificate. The registrar will then issue you with your own share certificate.

Same day stamping service The ‘same day’ stamping service is only available in exceptional circumstances, such as, unexpected or unforeseen circumstances when it is essential to have a document stamped immediately.

You can’t use the same day service if the urgency could have been avoided by either party or their respective agents.

This is important when adjudication is a legislative requirement for stamping, either due to the claiming of a relief or for some other reason. In these circumstances same day stamping service will not be considered. HMRC expects the number of occasions when same day stamping service is required to be minimal.

If you become aware that a transaction may need an instrument stamped at short notice, you should write to the SD team giving as much detail as possible, including the:

  • number of instruments to be stamped
  • specific reason or reasons for the request
  • amount of SD

In exceptional circumstances a request for the ‘same day’ stamping service can be made by contacting the stocks and shares ‘same day’ stamping service.

Penalties

You have 30 days after the stock transfer documents have been signed and dated to get them stamped and pay the SD that’s due. If you don’t do this within the time limit, you may be charged a penalty and interest.

Reliefs and exemptions

There are some share transactions that qualify for reliefs or exemptions that can reduce the amount of SD you pay or are exempt from SD altogether.

If you qualify for relief you’ll need to apply to HMRC so that they can confirm it, otherwise you’ll have to pay the full amount of SD.

Transactions that qualify for relief include:

  • transactions between related companies - known as group relief
  • some company reconstructions and acquisitions
  • purchases of shares by charities

Refunds

If you pay too much Stamp Duty on a transaction you may be able to claim a refund.

Refunds must be claimed within 2 years of the date of the stamped document. If the document is undated, a refund can be claimed within 2 years of first execution.

Send your request in writing to Birmingham Stamp Office saying why you think a refund is due and provide:

  • the original stamped document
  • the names of the parties involved

The Stamp Office will write to you if they need more information to support your claim.

If your refund is agreed, the Stamp Duty will be repaid, usually with interest, from the date the tax was paid.

CHAPS refunds

If the total amount of refunds you’re applying for is £150,000 or more you can ask for payment by CHAPS electronic transfer. You’ll need to include your bank details with your claim.

Getting an opinion

When you send your documents to be stamped you must pay the correct amount of SD, this may include penalties and interest payments. If you’re not sure of the amount to pay you can ask HMRC for their opinion.

UK shares bought from abroad

If you buy shares in a UK company while you’re abroad, you still have to pay SD, and get the transfer documents stamped. If you don’t do this within the time limits you may have to pay a penalty and interest.

If you buy foreign shares you don’t have to pay SD. If however you bring a share document into the UK transferring foreign shares there could be a charge to SD. There may be other foreign taxes to pay.

Enquiries If you need any help with working out if you have to pay SD, you can contact HMRC.