Changes to the stamp taxes on shares regime

Following HMRC consultations on the modernisation of the stamp taxes on shares regime in 2023 and 2018 and related publications by HMRC and the Government on the subject stretching back to 2017, HMRC published in outline form on 28 April a proposed replacement of the regime. The details of the new regime, which the Government is looking to introduce in 2027, are being thought through. In this article, our tax lawyer Michael Fluss explains the  key features, as set out in HMRC’s publication.

What could the new regime entail?

• The introduction of:
  • a new mandatory single self-assessed tax (“single tax on securities” (“STS”)), for which the purchaser is to be liable, on transactions in UK shares (including share buybacks) and UK securities/UK loan capital with equity-like features, instead of the current system of separate taxes for electronic transfers (SDRT) and paper instruments (Stamp Duty);
  • a new HMRC online portal for reporting (presumably in some form of return) and paying the STS chargeable in respect of transfers of shares/securities, with each transfer receiving, via the portal on submission of the report/return, a UTRN in the STF itself on which registrars can rely to register changes in ownership so that same-day stamping and registration becomes a reality. (It appears that share transactions in CREST, which take place electronically and through which, currently, the SDRT chargeable is collected, are, broadly, to be unaffected, in practical terms, by the new regime.)
• In relation to paper transfers, a period of 30 days running from completion or, if earlier, “substantial performance” (when the benefits of the shares (in terms of dividend payments/voting rights) arise to the purchaser) for the purchaser to account for the STS. (The period is to be 14 days for transfers carried out in electronic transfer systems.)
• A tax-based penalty regime for late notification, with failure to notify by the due date attracting an immediate penalty equal to 5% of the tax, rising to 10% after six months, and if there is concealment and/or deliberate withholding of relevant information, a further penalty equal to 70%-100% of the tax after 12 months, with additional fixed £10 daily penalties potentially accruing over a 90-day period commencing three months after the due date.
• The removal of the £1k de minimis consideration exemption band currently applicable for Stamp Duty purposes, so that STS will be chargeable even where the consideration or aggregate consideration for the transfer of shares or the series of transfers of shares is no more than £1k.
• The facility to apply online for a deferment of STS for up to four years and a further facility to apply for a renewal of that deferment for up to two further 4-year periods (so 12 years in all) in the case of transfers of shares for contingent, uncertain or unascertainable consideration.
• A broad streamlining of the system of reliefs, with group relief and reconstruction and acquisition reliefs applying as currently and presumably claimed when the transaction is notified.

It would appear that the STS rate will be 0.5% (as with Stamp Duty and SDRT (in general)).  However, this will need to be confirmed. Publication of draft legislation on the STS is expected in due course.

If you have questions or concerns about the new regime, please contact tax lawyer Michael Fluss.