• Stamp Duty and SDRT changes

Stamp Duty and SDRT changes

15 July 2019

Extension of market value rule to unlisted shares

From when the Finance Act 2020 receives Royal Assent, the existing market value rule applicable to the transfer of listed shares to a connected company will be extended to the transfer of unlisted shares to a connected company (or for SDRT purposes, the agreement to transfer).

The market value rule will apply only where the purchase consideration is wholly or partly an issue of shares by the purchaser and will not affect transactions such as dividends in specie of shares. It is aimed at contrived arrangements which have been used when stamp duty reliefs such as group or acquisition relief have not been available.

Partition demergers - limiting the impact of anti-avoidance rules

The first step in a partition demerger such as a liquidation or capital reduction demerger often involves the share-for-share interposition of an acquiring company above the target company. Section 77 FA 1986 acquisition relief applies where the shareholdings and share structure of the acquiring company mirror those of the target company.

However, the wide-ranging anti-avoidance at section 77A has blocked this relief where ‘arrangements’ exist for a change of control of the acquiring company, which may be what is planned in the demerger. If the demerger does not qualify for reconstruction relief under section 75 FA 1986, there will be a double charge to stamp duty.

The new draft legislation is intended to limit the scope of section 77A anti-avoidance rules: it should prevent them from applying to a person who has held at least 25% of the issued share capital of the target company throughout the three year period ending with the share-for-share first step. The change will take effect from the date of Royal Assent to Finance Act 2020.

Back to Draft Finance Bill 2019/20