How to Avoid Stamp Duty on Shares
Tax is payable on the purchase of shares in the UK – known as Stamp Duty on paper transactions, and Stamp Duty Reserve Tax (SDRT) on...
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Tax is payable on the purchase of shares in the UK – known as Stamp Duty on paper transactions, and Stamp Duty Reserve Tax (SDRT) on electronic transactions involving chargeable securities.
The rate of stamp duty is 0.5% on a share transaction over £1,000.
In many cases, the broker will pay the stamp duty, and the cost is absorbed in the payment made to the broker.
However, for anyone engaging in share purchases without using a broker, it is important to ensure that you calculate and submit stamp duty payments correctly and in good time. Penalties for non-payment are tied to the cost of shares purchased – so for people and companies who are trading large numbers, these can amount to a great deal of money.
It is possible to avoid paying stamp duty on shares in certain circumstances, such as shares donated as a gift, shares in foreign companies which are not kept on a register in the UK, and shares in a unit trust.
Finding legitimate ways to avoid stamp duty on share transactions can be complex, and it’s always advisable to consult an experienced tax professional before committing to a transaction that supposedly saves you money on stamp duty.
Similarly, if you have attempted to avoid stamp duty payments and are facing an HMRC investigation, an expert tax lawyer will be able to manage any appeals, filing documents and correspondence with HMRC.
Patrick Cannon has in-depth knowledge in all areas of tax law – both as a solicitor and as a barrister. For all enquiries about avoiding Stamp Duty and Stamp Duty Reserve Tax, contact Patrick.
The buyer normally pays stamp duty on shares. If you are buying shares from a broker, they will absorb the cost of stamp duty within the share contract. For those individuals and businesses trading shares without a broker, it is your responsibility to calculate and pay the stamp duty within 30 days of the transaction.
Share transactions worth more than £1,000 are subject to 0.5% stamp duty.
Yes – there are a number of ways you can avoid paying stamp duty on shares. These can be relatively simple or more complex, and there are penalties if you get it wrong, so it’s always a good idea to talk to a tax expert before attempting to save on paying stamp duty.
Some share transactions are exempt from stamp duty. These include:
You are also exempt from paying stamp duty on shares that are transferred directly between parties without payment. If the transfer is exempt or there is no chargeable consideration, you do not have to pay stamp duty or SDRT, nor do you need to tell HMRC about the share transfer.
If the transfer qualifies for relief, you must apply to HMRC for confirmation of the relief, otherwise, you will need to pay the full amount of Stamp Duty or SDRT.
If you are seeking to mitigate your stamp duty liability or think you may be able to claim for an exemption, it’s important to consult a tax expert.
A tax barrister with experience in this field will be able to offer advice on the best ways to save money on stamp duty tax on shares, help you file your claim to HMRC, and manage any investigations or appeals for non-payment / underpayment of Stamp Duty or SDRT.
Patrick Cannon has extensive experience in the field of taxation around shares, advising and representing individual and business clients on legitimate ways to mitigate or avoid paying stamp duty on share transactions. As a former solicitor and a highly respected tax barrister, Patrick has a background in managing HMRC investigations and appeals, and in representing clients in tax tribunals and in the courts.
To find out how Patrick Cannon can advise you on Stamp Duty on shares and SDRT, contact him here.
Stamp Duty must be paid to HMRC within 30 days of the date on which the Stock Transfer Form is signed and dated. Failure to pay Stamp Duty by the deadline may result in a penalty and/or interest being charged. Stamping is now done digitally and it is not necessary to send the forms to the Stamp Office for manual stamping.
Yes, companies must pay stamp duty on the purchase of shares unless a relief applies such as a group relief or company reorganisation relief.
A transfer of shares is exempt from stamp duty tax in a number of cases, including:
In some cases, you will need to claim Stamp Duty relief instead. This applies to:
If you want to claim either of these reliefs, you’ll need to arrange for digital stamping as the Stamp office no longer operate a system of impressed manual stamps. If HMRC accepts your claim for relief from Stamp Duty and the documents are electronically stamped, you won’t have to pay SDRT either.
|Up to 12 months||10% of duty, capped at £300|
|12 to 24 months||20% of duty
|More than 24 months||30% of duty|
A penalty may be appealed within 30 days on the grounds that the taxpayer has a reasonable excuse for submitting a return late.
Some examples of a ‘reasonable excuse’ include:
If you are facing a penalty from HMRC over non-payment or underpayment of the tax, you are always advised to get in touch with a tax lawyer to manage your correspondence with HMRC and guide you through the appeal process.
There’s no stamp duty to pay when you sell shares – although you may be liable for capital gains tax.