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bigduckontax
bigduckontax, Accountant
Category: UK Tax
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Experience:  FCCA FCMA CGMA ACIS
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Shareholder transfer shares in English company X without mentioning

Customer Question

Shareholder transfer shares in English company X without mentioning consideration. The transfer is made between current shareholder (Transferor) and parent company of the current shareholder (Transferee). Both Transferor and Transferee, as obvious, belong to the same UBO.
Both Transferor and Transferee incorporated in British overseas territory


As I understand, this transaction may be exempt from the stamp duty with preliminary application to HMRC.
Providing that no tax application is obtain
Submitted: 8 months ago.
Category: UK Tax
Expert:  bigduckontax replied 8 months ago.
HMRC advice is:

For share transfers valued at £1,000 or less:

If you buy stocks and shares for £1,000 or less you don't normally have to pay any Stamp Duty. You also don't have to tell HMRC about the transaction.

All you need to do is:

Make sure the first exemption certificate on the back of the stock transfer form has been completed (you don’t need to complete this certificate if you don’t pay anything for the shares)

Send the stock transfer form and the share certificate to the registrar of the company you've bought shares in - whether you gave anything for the shares or not

The address of the registrar is on the share certificate. The registrar will then issue you with your own share certificate.
Customer: replied 8 months ago.

Thank you for reply but this is not what I was asking.


 


How HMRC control that stamp duty is paid correctly? See my initial question above.


 


More info if it will help....


Lets say companies expenses for last year were 1,5 mln. pounds but it never had taxable income. A month before said stock transfer for symbolic consideration (1 pound for about 20% of all shares) or no consideration, the Company issued new shares at the price 4 pounds per share. So, a month before stock transfer same shareholder was happy to pay much more than it get from further transfer of shares.


 


Correct me if I am wrong but stamp duty is paid not from the value parties envisage in the stock transfer form but at the market value of shares. If so, I wonder how HMRC is going to detect that marked value if shares are not traded at stock exchange?

Expert:  bigduckontax replied 8 months ago.
HMRC don't. The Stamp duty Office merely stamps documents as sent to them. The only problem which might arise is if there is a later dispute over share ownership the transfer form might be challenged. However, if the company registrar, usually the company secretary, has issued a new share certificate in the buyer's name a challenge is highly unlikely. Stamp duty is not charged on the value of the share, but on the actual amount paid. HMRC guidance is:

Stamp Duty

If you use a stock transfer form when you buy shares, then it's a paper transaction. You pay Stamp Duty on paper transactions, not Stamp Duty Reserve Tax. Stamp Duty is payable on the same sorts of transaction and at the same 0.5 per cent rate as Stamp Duty Reserve Tax, but the duty is rounded up to the nearest £5 above. However, if you buy shares for any amount of consideration up to £1,000 no stamp duty will be payable. If the consideration is £1,050, the duty will be £10 etc. If you're given shares for nothing, you don't have to pay any Stamp Duty.

Customer: replied 8 months ago.

"HMRC don't." - do you mean that nobody controll correctnes of duties paid? Why then anyone shall pay the duty?


 


There shall be some inforcement and control procedure. I wonder how it works in practice

Expert:  bigduckontax replied 8 months ago.
When you buy a property your solicitor will check the title. If the previous conveyance is incorrectly stamped then the vendor's title is suspect and the transaction held up until the matter is settled. Solicitors historically had a monopoly on conveyancing in return for collecting stamp duty.

It used to be said that the postage stamp collectors near the Law Courts had a flourishing trade in old stamps from lawyers who suddenly discovered un-stamped documents like receipts, which for many years carried a 2d stamp duty, a wartime money raising exercise, and required the correct duty. My copy birth certificate has a 2d postage stamp affixed, another wartime measure.
Customer: replied 8 months ago.

how this may influence transfer of shares?

Expert:  bigduckontax replied 8 months ago.
In exactly the same manner, the buyer will not proceed if the share owner's title is suspect. If the vendor bought the share then his title is the share transfer form and the share certificate. In normal transactions the stockbroker does this automatically and also deducts stamp duty on transaction and deducts same. It is only in private transactions in shares that stamp duty has to be worried about.
Customer: replied 8 months ago.

Thank you, XXXXX XXXXX what ground connected with Stamp Duty previous transaction with shares may be challenged if there is new share certificate? How someone in the future may judge what was the real price of transaction?


 

Expert:  bigduckontax replied 8 months ago.
In the case of stockbroker transactions there is no problem as the stamp duty is on the contract note. For private transfers the consideration for the shares is at the top of the share transfer form. From this the stamp duty needed to validate the form can be calculated. When presented to the Stamp Office in Birmingham they will affix the correct duty on payment. The form is then ready to present to the Company Registrar, usually the Secretary, for a new certificate to be issued.
Customer: replied 8 months ago.

It is more or less clear what to do with stamps when there is consideration. Correct me if I am wrong but if there is no consideration (nothing is stated on the top of the form), may this create questions in the future?


 


I am referring to what you wrote before: "If the previous conveyance is incorrectly stamped then the vendor's title is suspect and the transaction held up until the matter is settled."



How future transaction may be suspected in described case?

Expert:  bigduckontax replied 8 months ago.
It might well unless 'Nil' or '0' were inserted in the relevant box or there was an explanation on the form that the transfer was a gift. Other supporting documentary evidence would be quite acceptable in such cases. The minutes of the board meeting which approved the transfer might also shed some light on the matter in the event of some future dispute.
Customer: replied 8 months ago.

To sum up:


 


1) HMRC do not control accuracy of payment of SD


 


2) do you mean that if it is stated in the field consideration "Nil", nothing mentioned in the minutes of the board on the contrary, and no consideration is obtained in fact , - there is no ground to make stamp duty situation a deal stopper for further sale of shares?


 


3) Lets lays that in the future, someone (who? how? if transfer is made between oversees companies) detected that regardless "Nil" is stated in the field consideration Transferor received consideration from Transferee (for example in form of acceptance by Transferee the debt of Transferor). What is the mechanics of challenging of transaction in the past and how unpaid stamp duty is relevant?


 


 


 

Expert:  bigduckontax replied 8 months ago.
I would not worry about it. The share certificate is evidence of title. Any challenge would have to be made by application to the High Court, an expensive procedure.

You are correct that HMRC does not directly monitor the collection of stamp duty. They do, of course, at the Stamp Office, when payment and stamping are done.
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 710
Experience: FCCA FCMA CGMA ACIS
bigduckontax and 2 other UK Tax Specialists are ready to help you
Expert:  bigduckontax replied 8 months ago.
Thank you for your support.

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