Her Majesty's Revenues and Customs have announced that it has implemented temporary changes in the way that it deals with the payment of stamp duty on the transfer of shares due to the ongoing Covid-19 crisis.
Liability for stamp duty
Despite other forms of stamp duty now being digitised, stamp duty on transfer of shares is still dealt with in the 'old fashioned' way. The instrument of transfer, most commonly a stock transfer form, needs to be sent to the relevant registrar of companies with a "wet ink" signature and the document will be physically stamped, before being returned. The company books can only be updated after receipt of the stamped document.
Despite the ongoing crisis, no changes have been made to the time limit for payment of stamp duty which remains 30 days from execution of the stock transfer form. Payment outside of this period can lead to potential penalties and interest.
Given the current government guidance regarding staying indoors (leaving your residence only in a narrow set of circumstances), the difficulty and inherent risk in posting original documents, the HMRC has moved to implement temporary changes to ease payment of stamp duty.
Payment of stamp duty
Stamp duty must be paid (electronically) before HMRC will process the stock transfer form. It should be noted that, if the deadline for payment falls on a weekend or bank holiday, you must make sure your payment reaches HMRC on the last working day before the deadline, unless you're paying by Faster Payments or CHAPS.
The updated guidance (embed https://www.gov.uk/guidance/pay-stamp-duty) allows for an electronic copy of the fully completed, signed and dated stock transfer form (or the relevant instrument of transfer, including an SH03 on the purchase of a company's own shares) to be filed, with any supporting documents, after electronic payment of stamp duty to email@example.com.
HMRC have specifically confirmed that it will accept e-signatures whilst these measures are in place. Any original documents should not be posted.
Once the correct stamp duty has been paid, HMRC will send an email to the payer, attaching a letter that will:
- confirm receipt of the payment, and how much;
- detail the transactions they are confirming receipt for and provide the relevant reference codes; and
- give an assurance that HMRC will not pursue a penalty against the Registrar for registering the new ownership of the shares
Tax payers should ensure that any document received from HMRC in response to electronic filing is kept safe. Whilst we hope that HMRC will not issue any penalties in relation to payments made in accordance with the new guidance, there of course may be some element of 'bedding in', leading to penalties mistakenly being levied.
In the meantime, HMRC advise that, if anyone has already posted any original documents, they should file the stock transfer form electronically and include the details of any payments they have made in relation to specific matter. Failure to do so will mean that the original documents will not be assessed, or returned to them, until these temporary measures end, which could lead to penalties and interest.
Relief from stamp duty
Alongside the changes in payment of stamp duty, HMRC have also implemented concurrent temporary measures for applying for relief from stamp duty, which must also now be submitted electronically to the same email inbox detailed above.
The updated guidance (embed: https://www.gov.uk/guidance/stamp-duty-reliefs-and-exemptions-on-paper-shares) states that any application for relief should be made as follows:
- indicate within the e-mail subject box which relief is being claimed (intra-group relief, acquisition relief, reconstruction relief etc.);
- include an electronic copy of the stock transfer form (or other instrument of transfer)
- include electronic versions of relevant documents (for example for intra-group relief under section 42 of the Finance Act 1930 this will be an electronic version of the claim letter);
- provide a list of shareholders and the shares they hold (including class of shares) for each company rather than full copies of full registers of members (unless specifically requested by HMRC).
If HMRC confirm that relief is applicable, they will send an email attaching a letter that will:
detail the transactions that they are confirming relief for and the reference codes
give assurance that they will not pursue a penalty against the registrar for registering the new ownership of the shares.
This letter must be sent to the registrar of the company, along with the stock transfer form and share certificate.
HMRC will email you if more information is required or if relief is not due. If HMRC tells you that relief is not due, or you fail to claim relief, you'll need to pay the appropriate amount of stamp duty in full.
As with the payment of stamp duty, if any documents have already been posted then these should be resubmitted electronically. If they are not, then the claim for relief will not be assessed until the temporary measures end.
Whilst the temporary measures are helpful, there has been no change to the underlying stamp duty legislation. We would hope that, in these difficult times, any parties to a share transfer relying on a duly stamped stock transfer form would accept the temporary measures put in place.
It is important that any stamp duty tax payers have knowledge of the new measures to make sure that their payments, filings or applications for relief are not delayed, leaving them open to potential penalties and interest.
We recommend that any parties paying stamp duty and filing documents electronically request a 'read receipt' when the email is sent, so there is some evidence that the forms have been duly sent to the relevant email address.
Please contact the Corporate team at Greenaway Scott if you have any queries regarding upcoming, or a recently made, payment of stamp duty.
The information contained in this article is for information purposes only and is not intended to constitute legal advice. If you require further information, our corporate team would be more than happy to assist you. Please contact us at firstname.lastname@example.org or call us on 029 2009 5500 to speak to one of our team. Alternatively, please submit a quote through our website at https://www.greenawayscott.com/get-a-quote.