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Tax Bite - Electronic stamp duty is made permanent

In response to the COVID-19 pandemic, HMRC began a paperless process for stamping stock transfer forms and applications for stamp duty reliefs on 27 March 2020. It was first announced as a temporary measure, but has since been confirmed to be permanent, with physical stamping now a thing of the past.

Most corporate lawyers and others involved in dealing with the administrative side of stamping will welcome this. Broadly, documents are now submitted to HMRC by email (stampdutymailbox@hmrc.gov.uk) and stamp duty payments usually sent electronically. HMRC then issue a confirmation that the documents are duly stamped (or, in the case of claims for relief, adjudicated as not subject to stamp duty).

HMRC’s guidance issued over the summer confirms that, in respect of stamp duty paid, and documents submitted electronically, since 27 March 2020 and where HMRC have issued an email confirming as much, the document is duly stamped for all purposes and nothing needs be resubmitted for stamping under the previous physical stamping system. When the changes were first introduced, it had been anticipated that documents might need to be physically re-submitted for stamping at a future date.

Confirmation of receipt of stamp duty (or that relief has been adjudicated) will now be sent by HMRC by way of letter, rather than by email which is how acknowledgements were issued during the temporary phase of the changes.

Certain practical and wider points are worth bearing in mind:

• If the consideration for the transfer is £1,000 or less, or one of the “automatic” exemptions applies (e.g. outright gifts, transfers on a change of trustee of a trust or transfers on death or divorce) the relevant self-certificate on the stock transfer form can still be completed and no application to HMRC is necessary;

• Emails claiming relief must note the type of relief in the subject header;

• There has been no relaxation to the detailed conditions that must be satisfied for any particular relief to apply. These remain complex in many cases, particularly when recent additional requirements are factored in (such as the “no disqualifying arrangements” requirement when applying for section 77 “new holding company” relief). The same letters and details all still need to be submitted to HMRC, albeit as attachments to an email, and all supporting documentation still needs to be included; and

• Similarly, no changes have been made as yet to the rules on calculating stamp duty, for example on earn outs and completion accounts adjustments. It is possible that these rules will be simplified or modernised to some extent in due course as HMRC is currently considering the responses to a call for evidence issued last summer, and we will provide a further update if so.

Finally, whilst the electronic process should be a less painful experience in most cases, it does not mean that documents are duly stamped as soon as they are submitted to HMRC. So, as has always been the case, it may be necessary to look at other approaches where, for example, there are to be sequential transfers of the same shares and the parties want the intermediate purchaser to be entered on the register of members before selling on. The usual approach to deal with that issue remains the declaration of trust route, i.e. where the declaration of trust becomes the stampable document under which the consideration passes, and the bare legal title to the shares can transfer under a stock transfer form on which the low value certificate is completed at the point of transfer without any HMRC involvement.

If you or your clients require any assistance with any of the above, please do get in touch.