HMRC is consulting on introducing a general connected party market value rule for transfers of securities, and applying the stamp duty reserve tax (SDRT) definition of consideration to stamp duty.
The government introduced a targeted market value rule effective from Budget Day 2018 to tackle contrived arrangements involving the transfer of publicly listed securities to companies to which the transferor is connected. Such transfers will be chargeable to stamp duty or SDRT based on the higher of the amount of the consideration for the transfer, or the market value of the securities.
The consultation proposes three further changes to the stamp duty and SDRT consideration rules. These are:
extending the new market value rule to unlisted securities and connected party transfers other than to companies;
aligning the stamp duty and SDRT definitions of ‘consideration’ by adopting the SDRT ‘money or money’s worth’ definition; and
aligning the stamp duty and SDRT treatment of contingent, uncertain and unascertainable payments.
The government does not intend to extend the market value rule to transfers between unconnected parties.
The ‘money or money’s worth’ definition of consideration for SDRT includes cash and the value of any type of non-cash consideration that could be bought and sold in the open market. This is broader than the stamp duty definition, which comprises only cash, debt or the value of any other stock or marketable securities.
Unlike stamp duty, SDRT does not have rules for situations where the consideration is not known on the date on which the transaction takes place. The ‘money or money’s worth’ method allows consideration to be estimated. Adopting the SDRT approach could mean having to value the unknown part of the consideration for stamp duty purposes. The consultation considers the option of adopting the SDLT approach, which uses money or money’s worth, but also permits reasonable estimates of unknown consideration to be used, which can be adjusted later.
Responses should be sent by 30 January 2019. See bit.ly/2Qq0wq3.
HMRC is consulting on introducing a general connected party market value rule for transfers of securities, and applying the stamp duty reserve tax (SDRT) definition of consideration to stamp duty.
The government introduced a targeted market value rule effective from Budget Day 2018 to tackle contrived arrangements involving the transfer of publicly listed securities to companies to which the transferor is connected. Such transfers will be chargeable to stamp duty or SDRT based on the higher of the amount of the consideration for the transfer, or the market value of the securities.
The consultation proposes three further changes to the stamp duty and SDRT consideration rules. These are:
extending the new market value rule to unlisted securities and connected party transfers other than to companies;
aligning the stamp duty and SDRT definitions of ‘consideration’ by adopting the SDRT ‘money or money’s worth’ definition; and
aligning the stamp duty and SDRT treatment of contingent, uncertain and unascertainable payments.
The government does not intend to extend the market value rule to transfers between unconnected parties.
The ‘money or money’s worth’ definition of consideration for SDRT includes cash and the value of any type of non-cash consideration that could be bought and sold in the open market. This is broader than the stamp duty definition, which comprises only cash, debt or the value of any other stock or marketable securities.
Unlike stamp duty, SDRT does not have rules for situations where the consideration is not known on the date on which the transaction takes place. The ‘money or money’s worth’ method allows consideration to be estimated. Adopting the SDRT approach could mean having to value the unknown part of the consideration for stamp duty purposes. The consultation considers the option of adopting the SDLT approach, which uses money or money’s worth, but also permits reasonable estimates of unknown consideration to be used, which can be adjusted later.
Responses should be sent by 30 January 2019. See bit.ly/2Qq0wq3.
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