STSM021010 - Scope of stamp duty on shares: stamp duty: basics of a charge: overview
Stamp Duty is charged on instruments (documents) that effect the transfer on sale of the beneficial interest in stock or marketable securities. The most common of these is the Stock Transfer Form (STF), but any instrument that completes an agreement to buy and sell stock or marketable securities falls within the principal 0.5% Stamp Duty charge (see STSM013010).
Stamp Duty also applies to the transfer of partnership interests where the partnership assets include stock or marketable securities (transfers of partnership interests are charged at the general property rates, but special rules mean the effective rate is 0.5% - see STSM091050), instruments giving effect to land contracts entered into on or before 10 July 2003 (see STSM011030) and certain other instruments dated prior to 1 December 2003 (see STSM011040).
Unless a market value rule applies, Stamp Duty is normally charged based on the value of the chargeable consideration. STSM011090 gives details of the current and previous Stamp Duty rates.
The transfer of certain types of stock and marketable securities is exempt from Stamp Duty, and reliefs are also available on certain types of transfers. More information on reliefs and exemptions can be found from STSM040000.
Higher rate charge
A transfer to a depositary receipt issuer (see STSM051010) can give rise to a charge to the higher 1.5% rate of Stamp Duty (see STSM013030 and STSM053010).听 Any transfer to a depositary receipt issuer should be highlighted when presenting the instrument for stamping.
Similarly, a transfer to an unelected clearance service (see STSM052010) can also give rise to a charge to the higher 1.5% rate of Stamp Duty (see STSM013030 and STSM053010). Any transfer to a clearance service should be highlighted when presenting the instrument for stamping.
Clearance services can elect to charge 0.5% SDRT on transfers within them (see STSM058000). If this is done, then any instruments used to transfer to the clearance service are chargeable at the standard 0.5% Stamp Duty rate.
Nominees
If the beneficial interest is transferred to someone who uses the same nominee, so that instead of an STF the nominee is advised that they now hold the stock or marketable security on behalf of someone else, it is the letter advising the nominee of the change (sometimes referred to as a letter of direction) which attracts the Stamp Duty charge.
Agreements
No Stamp Duty charge generally arises on the agreement for the sale of stock or marketable securities, but an SDRT charge does arise. To prevent two charges arising,听 if an instrument of transfer is executed to complete the agreement, the appropriate stamping of that instrument will also discharge the SDRT liability on the agreement (see STSM012010.
A charge to Stamp Duty can arise under paragraph 7 of Schedule 13 FA1999 on certain contracts or agreements for sale (in practice now restricted to contracts or agreements for the sale of an equitable interest only in stock and marketable securities), which are treated as if they were transfers on sale. See STSM081080 for more information when the contract or agreement includes the use of a declaration of trust.
To prevent more than one Stamp Duty charge arising, where, apart from paragraph 7, a contract or agreement would not be chargeable to Stamp Duty, then if the instrument effecting the subsequent transfer on sale is presented to HMRC for stamping within 6 months (or such longer time that HMRC may consider reasonable) of the contract or agreement being executed, the instrument will be stamped and both it and the contract or agreement will be deemed duly stamped (paragraph 8 of Schedule 13 FA1999).