New UK Securities Transfer Tax to replace current UK stamp tax regimes
The UK Government has recently published draft legislation for a new UK securities transfer tax (STT) that will replace the existing UK stamp tax regimes associated with purchases of UK equities and other in-scope securities. The new STT is planned to take effect some time in 2027, although the exact date is unknown. The new STT rules consolidate and simplify the existing UK stamp tax regimes, though clarification from the UK tax authorities (HMRC) is still needed around areas of uncertainty.
Under the existing UK stamp tax regimes, stamp duty and stamp duty reserve tax (SDRT) impose a charge of 0.5% of the consideration payable for the securities. Very broadly, SDRT is automatically paid on (electronic) trades in listed UK equities; while a stamp duty payment and filing cancels out the SDRT charge due on transfers of non-listed UK equities. A stamp duty filing also allows the share register of such non-listed UK equities to be updated to reflect the new purchaser’s ownership without violating the UK Companies Act, which is why, under the current system, a stamp duty filing needs to be made and the requisite duty paid by a purchaser of UK shares within 30 days of completion – a standard procedure for every UK share deal. If a stamp duty relief is being applied for (e.g. group relief), the transfer document is submitted to HMRC for adjudication to the effect that the transfer is not chargeable to stamp duty.
The new STT means that these submission processes will disappear and be replaced by a single mandatory STT filing, including for relief claims. In the meantime, there is much work for HMRC to do to facilitate compliance by purchasers of UK securities. Given the UK Government’s intention to “simply and fully digitise the administration and payment of tax on transactions in securities”, it is anticipated that HMRC will need to develop a dedicated online payment and submission portal for the purpose. For now, the advice is to keep a watching brief for further developments in this area.
The new STT will be relevant for purchasers of UK securities. As such, it will mainly impact M&A, private equity secondary deals and corporate reorganisations involving UK companies. It is not expected to have any significant impact on financing transactions.
A link to the article, authored by Sarah Gabbai, can be found here (subscribers only)
