STSM021260 | Scope of stamp duty on shares: stamp duty: basics of a charge: company purchasing its own shares

Under section 690 Companies Act 2006 a company may purchase its own shares. As a company may not hold its own issued shares, it may therefore only purchase them for cancellation or transfer to treasury. Under section 707 CA2006 it is compulsory for a company buying its own shares to make a return to Companies House within 28 days.

The return is made on an SH03 Form (issued by Companies House - see gov.uk) if the shares are to be cancelled or are to be held in treasury. Section 66 Finance Act 1986 makes the SH03 chargeable with Stamp Duty on the consideration given, as if it were an instrument of transfer. The Stamp Duty must be paid and the SH03 duly stamped by HMRC (or self-certified to declare that no Stamp Duty is payable) before it is submitted to Companies House.

An SH03 can be used to record more than one purchase of own shares, with each delivery shown on a separate line of the form. Stamp Duty is calculated on the aggregate amount paid for all the shares purchased for cancellation and/or transfer into treasury detailed on the SH03, and the Stamp Duty due is rounded up to the nearest £5.

In such cases, each SH03 is treated as an instrument of transfer under section 66 FA1986, and the date on which the SH03 is signed is treated as the date of execution for Stamp Duty purposes, not the date(s) of delivery of those shares to the company. It is therefore the date of signature which must be used when considering whether the SH03 has been submitted on time for Stamp Duty purposes when determining any liability to potential interest and/or penalties.

If a stock transfer form has been used to record the sale to the company this does not also attract Stamp Duty. Any such forms submitted along with an SH03 (upon which Stamp Duty is charged instead) will be returned unstamped.

Any charge to Stamp Duty Reserve Tax (SDRT) under section 87 FA1986 arising on the “own-shares agreement” will be cancelled (owing to section 92 (1C) and (1D) FA1986) provided the SH03 has been duly stamped and submitted to Companies House.

Any return to Companies House on a SH05 Form cancelling shares which are held in treasury does not attract a Stamp Duty charge, as Stamp Duty will already have been notified and paid when those shares were transferred to treasury as detailed above.

Qualifying Asset Holding Companies (QAHCs)

A QAHC is a company which holds and manages investments and also meets certain conditions. See IFM4000 for more information.

Where a QAHC repurchases shares or loan capital it has previously issued, this is exempt from both Stamp Duty and SDRT.

An SH03 for repurchases of own shares by a QAHC does not need to be sent to HMRC if the exemption applies. The exemption is self-certified by completing the relevant section of the SH03. See IFM41100 for more information.