STSM021060 | Scope of Stamp Duty on shares: Stamp Duty: basics of a charge: chargeable consideration: stock or marketable securities

Consideration consisting of stock or marketable securities is valued on the date of the instrument in accordance with S6 (1) (b) and S55 (1) Stamp Act 1891. For stock or marketable securities given or allotted at a future date, either certainly or contingently, see STSM021110.

Where the consideration is a security which is not a marketable security (e.g. debentures) Stamp Duty is charged on the sum of the principal and interest due at the date of the document. SA1891/S55 (2) refers.

To determine the market value of the stock or security, if a customer applies the valuation method set out in The Market Value of Shares, Securities and Strips Regulations 2015 (SI 2015/616), this is acceptable to HMRC Stamp Taxes. This is:

Securities included in the Stock Exchange Daily Official List

• the lower of the two prices shown in the Stock Exchange Daily Official List for that day as the closing price for the shares, securities or strips on that day, plus one-half of the difference between those two figures;

Securities listed on a foreign stock exchange

• The price shown in the foreign exchange list as the closing price for the securities on that day (or if more than one price is shown, the lower price plus one-half of the difference between those two figures)

This principle also extends to shares traded on any other recognised market and is commonly known as the “mid-price valuation”.

Shares which are not generally traded

If the shares are not generally traded (e.g. shares in a private company) any recent transactions in those shares at arms’ length, may be taken as indicative of the value of the shares. Otherwise a valuation is agreed between HMRC Stamp Taxes and the applicant.

It should be noted that this agreement is made without prejudice to any other transaction or tax liability and is made only in respect of determining the Stamp Duty payable on a particular transaction. This must be made clear when the valuation is accepted. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

Where several transfers of shares form part of a single collective transaction (such as when one company acquires the whole of the issued share capital of another, which is likely to be held by multiple persons), the whole allotment of consideration shares should be valued as a single holding. Stamp Duty will be chargeable on, each individual transfer on the appropriate proportion of the total value of the holding transferred and no discount is given for minority holdings.

The shares issued in a single collective transaction should be valued by reference to the property which is acquired in consideration of their issue. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)

This produces a common-sense result, particularly where the consideration shares are issued by a newly formed company whose only assets are the shares acquired.