Paying Stamp Duty When Transferring Company Shares
As of 13 March 2008, HMRC introduced new regulations which means any share transfers with a value of £1000 or more must pay stamp duty. The value of the transfer does not have to be a cash transaction, the value is based on the ‘chargeable consideration’ that is given for the shares. The chargeable consideration can be cash, other shares/stock or debt.
Who pays stamp duty?
When transferring shares in a company it is the buyer’s responsibility to pay the correct stamp duty and ensure it is filed with the stamp duty office within the required time frame. The buyer has 30 days from the day the forms are signed to calculate and pay the correct amount of stamp duty or they may incur fines or penalties from HMRC. The current stamp duty rate is charged at 0.5% of the transaction value rounded to the nearest £5 for each stock transfer form completed. An example would be if John Smith pays £1625 for shares in XYZ LIMITED the stamp duty is calculated at £8.13 (1625 x 0.5%) which would then be rounded to £10. If you are unsure how much stamp duty should be paid for your transaction you can contact HMRC for their ‘Formal Opinion’.
Once the stamp duty has been calculated you will need to consider if you will need to complete one of the certificates on the second page of the stock transfer form. Certificate 1 should be completed if the value of the transfer does not exceed the £1000 stamp duty threshold so no stamp duty is payable. Certificate 2 should be completed if the transaction is exempt from stamp duty or the fee paid is not a ‘Chargeable Consideration’, if you are unsure if the transaction is exempt or the consideration paid for the shares is not considered a ‘Chargeable Consideration’ you should contact HMRC directly to discuss this matter. You are not required to complete either certificate if the shares have been transferred for no value.
How do you pay stamp duty?
Once the stock transfer forms have been completed correctly you can pay the stamp duty electronically by bank transfer or cheque which should be posted with the forms to the stamp duty office at the following address:
HM Revenue and Customs – Birmingham Stamp Office
9th Floor City Centre House
30 Union Street
HMRC try to stamp all forms within 5 working days of receiving the documents however they request you allow up to 10 working days for the documents to be returned by post. HMRC can offer a same day stamping procedure in exceptional circumstances but you must contact them directly to discuss this service on 0300 200 3510.
Small Firms Services can assist with preparing your share change documents but we are not able to assist with filing documents and making payments to the stamp duty office. Contact us today for a quote.
This article is provided for information only and is not tax advice. Your personal circumstances must be taken into account when calculating stamp duty. We advise contacting an accountant for professional advice.