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 save 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 save 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 save 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 saving Stamp Duty and Stamp Duty Reserve Tax, contact Patrick.
Who Pays Stamp Duty on Shares?
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.
How is Stamp Duty on Shares Calculated?
Share transactions worth more than £1,000 are subject to 0.5% stamp duty.
Can You Save Stamp Duty on Shares?
Yes – there are a number of ways you can save 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.
Are there Reliefs and Exemptions for Stamp Duty?
Some share transactions are exempt from stamp duty. These include:
- shares in a company that is not incorporated in the UK and doesn’t maintain a UK based share register
- stock quoted on a market outside the UK
- gilts or corporate bonds
- shares issued in a flotation, or new shares issued in a rights issue
- shares traded on the London Stock Exchange’s AIM market or on Exchange Traded Funds (ETFs)
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.
How Can Patrick Cannon Help?
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 save 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.
Frequently Asked Questions
How Long Do You Have to Pay Stamp Duty on Shares?
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.
Do Companies Pay Stamp Duty on Shares?
Yes, companies must pay stamp duty on the purchase of shares unless a relief applies such as a group relief or company reorganisation relief.
Is Stamp Duty Applicable on Transfer of Shares?
A transfer of shares is exempt from stamp duty tax in a number of cases, including:
- Shares that are received as a gift
- Shares that are inherited under a Will
- Shares transferred between spouses or civil partners upon marriage or entering into a civil partnership
- Shares held in trust that are transferred between trustees
- Transfers that a liquidator arranges as settlement when a company is wound up
- Shares that are held as security for a loan and transferred back to the shareholder once the loan has been repaid
- Shares transferred to beneficiaries of a trust when it is being wound up
- Shares transferred upon divorce or the dissolution of a civil partnership
- Certain types of loan capital
- Shares admitted to trading on HMRC recognised growth markets but are not listed on a recognised stock exchange
In some cases, you will need to claim Stamp Duty relief instead. This applies to:
- Intra-group relief: for certain transfers of shares between companies in the same group
- Acquisition relief: when one company acquires all the shares in another company, but the share structure of both companies is identical
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.
What are the Penalties for non-payment of Stamp Duty?
|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:
- The original document was destroyed beyond use in your solicitor’s office due to fire, flood or another natural disaster.
- Your solicitor suffered a serious illness that prevented them from controlling their business and private affairs.
- Your solicitor died.
- Some examples of excuses that HMRC will not accept as reasonable include:
- Your solicitor was waiting for you to pay the Stamp Duty, or another solicitor was due to pay it.
- You were waiting for a valuation, in this situation you should send in your documents while the valuation is being decided.
- The delay was caused by the vendor’s solicitor.
- There was a disagreement between your solicitor and the vendor’s solicitor.
- You were abroad and could not sign the documents, in this situation you should arrange a Power of Attorney so that someone else can sign on your behalf.
- The documents were held by another government department, for example, the Land Registry.
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.
Do You Pay Stamp Duty When You Sell Shares?
There’s no stamp duty to pay when you sell shares – although you may be liable for capital gains tax.