STSM022190 | Scope of stamp duty on shares: stamp duty: adjudication, stamps and reliefs: transfer in contemplation of a sale

Under section 90 FA1965, any instrument conveying or transferring property that was executed in contemplation of a sale (before a contract for the sale is made) is chargeable with Stamp Duty as if it were a transfer on sale of that property for a consideration equal to the value of the property transferred.

The measure was introduced to counter an avoidance device which had become apparent following the decision of the House of Lords that a transfer of shares to a company that held an outstanding option to purchase was not chargeable with Stamp Duty (William Cory & Son Ltd v IRC [1965] 1 All ER 917).

Adjudication under section 12 Stamp Act 1891 (see STSM022020) is compulsory in order for an instrument chargeable under section 90(1) FA1965 to be duly stamped. Evidence of the market value of the stock or marketable securities transferred will need to be provided when the instrument is presented to HMRC.

If, for any reason, the sale does not actually take place, or the price is reduced then a repayment of the excess Stamp Duty may be made but this is subject to the overriding 2-year limit placed on the repayment of Stamp Duty by the Stamp Duties Management Act 1891.