The government has published revised legislation that will give statutory footing to the existing disapplication of the 1.5% stamp tax charge in common situations, including all issuances of securities.
Readers will recall that the Retained EU Law (Revocation and Reform) Act 2023 (REULA 2023) had raised the prospect of the 1.5% charge applying after the end of this year to transactions that, under EU law, have not attracted the charge for over a decade, and that draft legislation was published in September to preserve the status quo. The revised legislation follows a consultation process which has resulted in a number of helpful changes to the initial draft.
The most significant changes are to the scope of the exemption for transfers. There are two key points to note.
First, there is a new exemption for transfers in the course of ‘qualifying listing arrangements’ i.e. the first listing of a company’s securities (or depositary receipts for them) on a particular recognised stock exchange, where the arrangements do not affect the beneficial ownership of the securities (see CG50240 for HMRC’s view of beneficial ownership in this context). This new exemption brings the legislation more closely in line with statements by the CJEU in the Air Berlin case. As a strict technical point, in the case of depositary receipts, the ‘listed’ securities will, from a securities law perspective, actually be the depositary shares (e.g. American Depositary Shares, or ADSs), rather than the depositary receipts for them (as referred to in the legislation) – but the intention is clear.
Second, there has been a rewording of the conditions for exemption where a transfer of securities is delayed until some time after a capital-raising or listing (for example, until the expiry of a lock-up period). The initial draft required that the transferor was subject to a ‘prohibition’ that prevented the transfer at the time of the capital-raising arrangements; in the revised version, ‘prohibition’ is replaced by the broader term ‘restriction’, which is welcome. However, as a connected point, the revised drafting requires that the delayed transfer occurs ‘in the course of’ the relevant capital-raising/listing – which might seem a little odd, but ought not to cause difficulties in practice.
Other changes include a new exemption from the 1.5% charge for transfers of shares out of treasury, meaning such transfers will be treated in the same way as issuances.
The revised legislation is set out in ways and means resolutions, which give provisional statutory effect from 1 January 2024 under FA 1973 s 50 (for stamp duty) and the Provisional Collection of Taxes Act 1968 s 5 (for SDRT). Enactment will be through the Autumn Finance Bill; it is helpful that we don’t need to wait until Spring for a Bill, as early enactment reduces any risk of provisional effect being lost, for example through the calling of an early general election.
It is understood that HMRC will be issuing guidance to clarify its view on a number of matters, including what will meet the standard of ‘as soon as reasonably practicable’ for transfers which are delayed until after a restriction has expired.
Home >Articles > 1.5% stamp tax charge: revised legislation published
1.5% stamp tax charge: revised legislation published
The government has published revised legislation that will give statutory footing to the existing disapplication of the 1.5% stamp tax charge in common situations, including all issuances of securities.
Readers will recall that the Retained EU Law (Revocation and Reform) Act 2023 (REULA 2023) had raised the prospect of the 1.5% charge applying after the end of this year to transactions that, under EU law, have not attracted the charge for over a decade, and that draft legislation was published in September to preserve the status quo. The revised legislation follows a consultation process which has resulted in a number of helpful changes to the initial draft.
The most significant changes are to the scope of the exemption for transfers. There are two key points to note.
First, there is a new exemption for transfers in the course of ‘qualifying listing arrangements’ i.e. the first listing of a company’s securities (or depositary receipts for them) on a particular recognised stock exchange, where the arrangements do not affect the beneficial ownership of the securities (see CG50240 for HMRC’s view of beneficial ownership in this context). This new exemption brings the legislation more closely in line with statements by the CJEU in the Air Berlin case. As a strict technical point, in the case of depositary receipts, the ‘listed’ securities will, from a securities law perspective, actually be the depositary shares (e.g. American Depositary Shares, or ADSs), rather than the depositary receipts for them (as referred to in the legislation) – but the intention is clear.
Second, there has been a rewording of the conditions for exemption where a transfer of securities is delayed until some time after a capital-raising or listing (for example, until the expiry of a lock-up period). The initial draft required that the transferor was subject to a ‘prohibition’ that prevented the transfer at the time of the capital-raising arrangements; in the revised version, ‘prohibition’ is replaced by the broader term ‘restriction’, which is welcome. However, as a connected point, the revised drafting requires that the delayed transfer occurs ‘in the course of’ the relevant capital-raising/listing – which might seem a little odd, but ought not to cause difficulties in practice.
Other changes include a new exemption from the 1.5% charge for transfers of shares out of treasury, meaning such transfers will be treated in the same way as issuances.
The revised legislation is set out in ways and means resolutions, which give provisional statutory effect from 1 January 2024 under FA 1973 s 50 (for stamp duty) and the Provisional Collection of Taxes Act 1968 s 5 (for SDRT). Enactment will be through the Autumn Finance Bill; it is helpful that we don’t need to wait until Spring for a Bill, as early enactment reduces any risk of provisional effect being lost, for example through the calling of an early general election.
It is understood that HMRC will be issuing guidance to clarify its view on a number of matters, including what will meet the standard of ‘as soon as reasonably practicable’ for transfers which are delayed until after a restriction has expired.
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