Consultation outcome

Modernisation of the Stamp Taxes on Shares Framework – Summary of responses

Updated 28 April 2025

Executive summary

Introduction

Stamp Duty and Stamp Duty Reserve Tax (SDRT) are collectively known as Stamp Taxes on Shares (STS). The taxes are interdependent, with SDRT relying on elements of the Stamp Duty regime for its operation. The principal charge for both taxes is 0.5% of the chargeable consideration paid. A higher 1.5% rate can apply in certain circumstances where securities are transferred overseas.

The objective of this project is to make it simpler for customers to interact with the STS regime. This aligns with the government’s commitment to predictability, stability and certainty in the tax system, as set out in the Corporate Tax Roadmap. Separately, the government recognises that some stakeholders are calling for further reforms to the STS regime, to support wider objectives. As with all parts of the tax system, the government keeps the STS regime under review, and will consider proposals beyond the necessary changes proposed as part of this modernisation project.

The project follows 3 guiding principles to inform its work:

• simplicity
• ease of use
• clarity and certainty

In November 2018, the then government conducted an initial consultation on changes to the STS consideration rules, which concluded that changing a single aspect of the regime would be ineffective without considering the STS Framework as a whole. It was within this context that the then government published a Call for Evidence in July 2020, to explore potential guiding design principles and options for the modernisation of STS. The response to the Call for Evidence was published in July 2021, In November 2021, HMRC established an industry Working Group with whom further extensive consideration was given to the shape of possible modernisation reforms. The consultation document published in April 2023, built on those discussions and sought formal views on the potential areas for reform in relation to the 0.5% principal charging regime. This summary of responses results from the April 2023 consultation.

Responses

The consultation received 65 written responses, along with comments made during the 4 stakeholder requested consultation meetings. Written responses were received from legal firms (22 responses), representative bodies (21 responses), accountants/tax advisors (12 responses), businesses (8 responses) and 2 individuals. The businesses and organisations that submitted written responses and sent representatives to attend a meeting are listed in the Annex.

Common themes were raised by respondents in writing and in the meetings around the need for clarity and simplicity. There were consistent themes in terms of the need for modernisation, simplification, clarity around various aspects of the tax and the turnaround times for processing the tax.

Outcomes

For the vast majority of questions, the government will be proceeding with the proposals as outlined in the consultation document. Some of the questions dealt with technical detail that is most appropriately considered at the point of legislating. The areas of particular interest or change from the original proposals are as follows:

Unique Transaction Reference Number (UTRN) at reporting

The government proposed replacing Stamp Duty and SDRT with a mandatory, single self-assessed tax on securities, with the following suggestions:

• a new online portal to digitise the reporting and payment of current paper-based transactions, with a UTRN issued immediately upon payment of any tax due or where relief is claimed. The CREST settlement system will continue to be used for those transactions where it is possible to do so
• retaining the requirement for registrars to have evidence of the reporting or payment of STS before updating share ownership on company registers – registrars will be able to register changes in ownership upon immediate receipt of the UTRN

85% of respondents were in favour of an online portal and 64% supported keeping the link between the tax and registrars.

Among all respondents there were concerns raised about the UTRN not being issued until after payment of the tax, because this may delay same day transfer of the share ownership, which is considered to be a key benefit of the modernisation project.

The government intends to introduce an online portal, developed by HMRC, for the reporting and payment of the single tax and to keep the link with registrars as an appropriate assurance and detection measure. The government also intends for the UTRN to be issued upon the submission of the tax return on the portal rather than after the tax has been paid to ensure that there are no undue delays.

The de minimis

The government proposed the removal of the £1,000 de minimis that currently exists for Stamp Duty.

86% of respondents were against the removal of the de minimis and 14% agreed with removing it. The arguments made for retaining the de minimis were around its removal creating an additional burden for the customer due to a need to fill out a stock transfer form for company law purposes and additionally report the transaction through the portal.

The government still intends to remove the de minimis and plans to remove the potential for additional burden through providing the facility for the portal to produce the STF, SH03 or certificate of confirmation with the UTRN included.

Liable and accountable persons

The government proposed that the purchaser would become the liable and accountable person for non-CREST transactions, and that the current SDRT liable and accountable persons rules would be retained for CREST transactions.

95% of respondents agreed with the approach that was outlined in the consultation document. There were no substantial concerns raised with the proposals. However, it has become clear during early stages of portal design that, where an agent is used, having them as an accountable person as well as the purchaser as the liable person would be useful for non-CREST transactions.

The government intends for all transactions under a single tax to have the purchaser as the liable person, and the accountable person as the purchaser or another person depending on the facts of the transaction, as it is for SDRT currently.

Single charging point and accountable date

The government proposed having a single charging point at the relevant date, and a single accountable date of 14 days from the relevant date. The relevant date proposed was either the point of agreement, or where there are conditions on the agreement, the date those conditions are fulfilled, with an overall two-year time limit.

There was an equal split from respondents between those supporting the single charging point and those against it, while some responses did not give a clear answer either way. 74% of respondents were against having a single 14 day accountable date.

Concerns were raised around what would be considered acceptable conditions for tax purposes, the impact that a single charging point would have on non-listed shares transactions and the proposed 2-year backstop. There were also concerns raised around complex transactions, those being financed by debt, valuations and the impact of holiday periods and bank holidays.

The government intends to set the charging point as the earlier of substantial performance or completion, with substantial performance defined along the lines of:

• for shares transferred in electronic settlement systems, when the details of the transfer are submitted and matched within the settlement system (as per current agreement to transfer)
• for shares being transferred outside of a settlement system, when the benefits of those shares are exercisable by the purchaser or their nominee/intermediary (for example dividend payments or voting rights)

This should remove the need for any backstop to prevent resting on contract.

The government intends to allow different accountable dates for transfers carried out in electronic settlement systems (14 days) and those taking place outside of electronic settlement systems (30 days). This should account for the feedback that has been given and enable customers to meet their deadline obligations more easily.

Uncertain and unascertainable

The government proposed that the rules for any single tax would largely follow the existing Stamp Duty Land Tax rules for uncertain and unascertainable consideration. This included the ability to apply for a deferral, but with the addition of a 2-year time limit for deferment. 85% of respondents supported those proposals.

Feedback was that the 2-year deferment backstop was not long enough, with suggestions that it should either be removed or extended. It was suggested that deferrals should be able to be applied to a transaction without having to seek HMRC approval for it and that further deferrals beyond the initial period should be able to be applied for. There were also requests that any valuations involved should be reasonable estimates and not formal valuations.

The government intends to proceed as outlined in the consultation document with some key modifications. The government has decided to extend the backstop to 4 years initially and allow for extension applications beyond the 4-year period up to a maximum of 12 years. The government intends that the request for deferment will be able to be made online and will be applied where the criteria are met. The government has no intention of introducing a need for formal valuations as part of the reporting process.

Late notification penalties

The government proposed that the SDRT compliance regime, including penalties and interest, apply to any single tax, with some tweaks to address specific issues.

74% of respondents agreed that the compliance regime as outlined in the consultation document is appropriate and proportionate. There were suggestions for the assessment time being shortened, late notification penalties being scrapped and a penalty cap being put in place.

The government intends to implement the majority of the penalty regime as outlined in the consultation document but change notification penalties to a percentage based regime.

Next steps

The government has today published a consultation covering the 1.5% charge regime as the next step in this long term project.

The government intends to publish draft legislation in due course, before legislating for a single tax on securities to replace Stamp Duty and SDRT.

The government is aiming to introduce the single tax, its legislative framework and the portal in 2027.

1. Introduction

Stamp Duty and SDRT are collectively known as STS. The taxes are interdependent, with SDRT relying on elements of the Stamp Duty regime for its operation. The principal charge for both taxes is 0.5% of the chargeable consideration paid. A higher 1.5% rate can apply in certain circumstances where securities are transferred overseas.

HMRC is focused on becoming a trusted, modern tax and customs department – one that collects the tax due at minimal cost to customers and the Exchequer, in a way that makes it easy for customers to get tax right and operates in a way that is recognised as fair.

This government maintains that Stamp Duty, as a paper-based regime, is often regarded as an anachronistic feature of an otherwise well performing UK tax system. Moves towards digitalisation in other areas have indicated that there is scope to update aspects of the regime; and the Office of Tax Simplification (OTS) in their 2017 report Stamp duty on paper documents: a way forward to reform, digitise and simplify recommended that the process be digitised and modernised.

The objective of this project is to make it simpler for customers to interact with the STS regime. This aligns with the government’s commitment to predictability, stability and certainty in the tax system, as set out in the Corporate Tax Roadmap. Separately, the government recognises that some stakeholders are calling for further reforms to the STS regime, to support wider objectives. As with all parts of the tax system, the government keeps the STS regime under review and will consider proposals beyond the necessary changes proposed as part of this modernisation project.

In November 2018, the then government conducted an initial consultation on changes to the STS consideration rules, which concluded that changing a single aspect of the regime would be ineffective without considering the STS Framework as a whole. It was within this context that the then government published a Call for Evidence in July 2020, to explore potential guiding design principles and options for the modernisation of STS.

In its response to the Call for Evidence, published in July 2021, the then government recognised the importance of the following 3 guiding principles to inform further work in this area:

• simplicity
• ease of use
• clarity and certainty

In November 2021, HMRC established an industry Working Group with which further extensive consideration was given to the shape of possible modernisation reforms. The consultation document published in April 2023, built on those discussions and sought formal views on the potential areas for reform in relation to the 0.5% principal charging regime.

In April 2023, the previous government published a consultation document seeking views on proposals to modernise the STS framework.

HMRC held the consultation from 27 April to 22 June 2023, including 4 meetings with stakeholders. This document summarises the responses to the consultation and sets out the government’s response and next steps.

The consultation received 65 written responses, along with comments made during the meetings. Written responses were received from legal firms (22 responses), representative bodies (21 responses), accountants/tax advisors (12 responses), businesses (8 responses) and 2 individuals. The businesses and organisations that submitted written responses and sent representatives to attend a meeting are listed in the Annex.

Common themes were raised by respondents in writing and in the meetings around the need for clarity and simplicity. There were consistent themes in terms of the need for modernisation, simplification, clarity around various aspects of the tax and the turnaround times for processing the tax.

There was also strong support for having a single tax and it being self-assessed with the ability to report and pay through an online portal. For any UTRN being issued upon reporting a transaction rather than upon payment, the proposals for liable and accountable persons, our position on the granting of security interests, the proposal to use money or money’s worth for the consideration, proposals to deal with uncertain and unascertainable consideration and including reliefs that are currently only available in Stamp Duty in a single tax.

There were concerns about potential additional burdens falling on customers and company registrars, various aspects of any portal’s design, losing the ability to be able to tap into STS expertise within HMRC, the resilience in any portal both in terms of capacity to handle the number of transactions and its availability, proposals for the charging point and accountable date and removing the de minimis.

Comments received regarding expanding the geographical scope of intermediary relief and stock lending and repurchase relief are outside of the scope of this consultation and have not been considered further as part of this work. However, policy on taxes is kept under continuous review and the suggestions made have been recorded.

Chapter 2 of this document provides a summary of the responses received and the current government’s response. Chapter 3 outlines the next steps.

The current government is grateful to all stakeholders who responded in writing or attended meetings during the course of the consultation.

2. Responses

The consultation sought views on proposals to modernise the STS framework for the 0.5% principal charging regime. It asked 50 questions across the following areas:

• whether to have a single tax on securities rather than the current framework of both Stamp Duty and SDRT
• proposals for the assessment and administration of any new single tax on securities
• proposals for key elements of any new single tax on securities including liability, tax base, geographical scope, compliance regime and exemptions and reliefs

Single tax and its administration (self-assessment, online portal, registrar obligations)

The government proposed replacing Stamp Duty and SDRT with a mandatory, single self-assessed tax on securities, to reduce complexity and bring STS in line with other modern taxes administered by HMRC. The consultation set out the following suggestions:

• a new online portal to digitise the reporting and payment of current paper-based transactions, with a UTRN issued immediately upon payment of any tax due or where relief is claimed. CREST will continue to be used for those transactions where it is possible to do so
• a statutory pre-clearance service will not be introduced. Customers will have access to HMRC’s non-statutory clearance facility where they have fully read the applicable guidance, contacted the relevant helpline, have been unable to find the information they need, are genuinely uncertain about how the legislation applies to a transaction they intend to pursue and it is not for the purposes of avoiding tax
• retaining the requirement for registrars to have evidence of the reporting or payment of STS before updating share ownership on company registers. Registrars will be able to register changes in ownership upon immediate receipt of the UTRN

Question 1: Do you agree that the government should pursue a single tax on securities instead of maintaining two separate taxes?

Question 2: Do you agree that any new single tax should be self-assessed with transactions that are not processed through CREST being reported and paid via a new HMRC online portal?

There was strong support for these proposals with high response rates to each question and of those 94% of responses in favour of a single tax, 87% in favour of self-assessment and 85% in favour of an online portal.

Views expressed were around the desire to ensure that, where necessary for practical purposes, differentiation would still be made for listed and unlisted shares and that there shouldn’t be additional burdens placed on business or registrars as a result of the changes. There was also a desire for the name of any single tax to be relevant to the scope and execution of the tax and for the legislation to be in a single Act.

It was noted by respondents that the current situation is unnecessarily confusing and was described as not being fit for the modern business world. A single tax would reduce that confusion as well as reducing complexity, cost to the customer and the risk of double charges. The reduction or removal of delays in processing Stamp Duty was highlighted as a significant benefit of the proposals, as was clarity on geographical scope.

It was suggested that an online portal would be more time efficient and user friendly than the current process, though the need for contingencies to be in place if the system was unavailable was highlighted.

Government response

The government intends to introduce a single tax replacing the current Stamp Taxes on Shares framework of Stamp Duty and SDRT. It is the government’s intention that any single tax will be self-assessed and the reporting and paying of that tax will be served by an online portal developed by HMRC.

Question 3: Do you agree that having a non-statutory pre-clearance system is an appropriate approach? If not, why not?

There were 43 responses to this question with 65% of those agreeing with the consultation document proposal to have a non-statutory pre-clearance system only.

Concerns were raised about not being able to get timely responses, that motive tests would not be covered and about whether there would be a loss of access to the level of expertise currently available.

Government response

The government intends to proceed with the proposal set out in the consultation and provide access to the non-statutory pre-clearance system for the single tax.

Question 4: Do you agree that the need for a UTRN to be presented to registrars is an appropriate assurance and detection measure to have in place?

42 respondents answered this question with 64% of those supporting keeping the link between the tax and registrars.

Those that disagreed with keeping the link felt that it was unnecessary for a tax where there is a liable person. Among all respondents there were concerns raised about the UTRN not being issued until after payment of the tax, because this may delay same day transfer of the share ownership, which is considered to be a key benefit of the modernisation project.

Government response

The government intends to keep the link with registrars as an appropriate assurance and compliance measure. The government also intends for the UTRN to be issued upon the submission of the tax return on the portal rather than after the tax has been paid to ensure that there are no undue delays. This approach should enable same day transfer of share ownership and ensure the achievement of a key benefit of the modernisation project.

Liable and accountable persons

Currently within the Stamp Duty framework, there is no liable or accountable person. Within SDRT, the purchaser is the liable person, and the accountable person can be the purchaser or another person depending on the facts of the transaction.

The government proposed that the purchaser would become the liable and accountable person for non-CREST transactions, and that the current SDRT liable and accountable persons rules would be retained for CREST transactions.

Question 5: Do you agree with the proposed approach in respect of the liable and accountable persons? If not, why not and what would you suggest instead?

42 respondents answered this question, with 95% of those agreeing with the approach that was outlined in the consultation document.

There were no substantial concerns raised with the proposals.

Government response

While undertaking early stages of portal development, it has become clear that, where an agent is used, having them as an accountable person as well as the purchaser as the liable person would be useful for non-CREST transactions.

The government intends for all transactions under a new single tax to have the purchaser as the liable person and the accountable person as the purchaser or another person depending on the facts of the transaction, as it is for SDRT currently.

Charging point and accountable date

Currently within Stamp Duty, the chargeable point is the execution of the document that completes the transaction. Within SDRT, it is the point that an agreement to transfer is made.

The government proposed having a single charging point at the relevant date, and a single accountable date of 14 days from the relevant date. The relevant date is either the point of agreement, or where there are conditions on the agreement, the date those conditions are fulfilled, with an overall 2-year time limit.

Question 6: Do you agree that a single charging point as outlined can work and is the correct approach in any new single tax? If you do not think it is the best approach, what would you propose and why?

47 respondents answered this question, with an equal split between those supporting the single charging point and those against it, some responses did not give a clear answer either way.

Concerns were raised around what would be considered acceptable conditions or not for tax purposes and the impact that a single charging point would have on non-listed shares transactions. The proposed 2-year backstop to deter resting on contract was also raised as an issue with suggestions that it should either be a longer time period or removed altogether.

Government response

The government intends to set the charging point as the earlier of substantial performance or completion, with substantial performance defined along the lines of:

• for shares transferred in electronic settlement systems, when the details of the transfer are submitted and matched within the settlement system (as per current agreement to transfer)
• for shares being transferred outside of a settlement system, when benefit of those shares are exercisable by the purchaser or their nominee/intermediary (dividend payments or voting rights)

This should remove the need for any backstop to prevent resting on contract.

Question 7: Do you agree that a single accountable date of 14 days from the charging point would work and is the correct approach? If not, what would you do differently and why?

47 respondents answered this question with 74% of those being against a single 14 day accountable date.

Concerns were raised around complex transactions, those being financed by debt and those where valuations were involved not being able to meet a 14 day deadline, along with concerns about the impact of holiday periods and bank holidays.

Government response

The government intends to allow different accountable dates for transfers carried out in electronic settlement systems (14 days) and those taking place outside of electronic settlement systems (30 days). This should account for the feedback that has been given and enable customers to meet their deadline obligations more easily.

Geographical scope

Currently Stamp Duty and SDRT have different geographical scopes. The government proposed that the current SDRT geographical scope rules will apply to any single tax. This would mean that transactions involving UK securities would be in scope no matter where they are traded or where the parties involved are based. The government also proposed that the key factor for determining whether shares are in scope of any new single tax should be whether the shares are in a UK incorporated company, rather than defining where an electronic share register is located.

Question 8: Do you agree that the current SDRT geographical scope rules should apply to any new single tax on security transactions? If not, what would you suggest and why?

44 respondents answered this question with 64% of those agreeing that we should use the existing SDRT geographical scope.

There were concerns raised that although this approach would be an improvement, there was still some ambiguity within the SDRT geographical scope with 57% of respondents to this question suggesting that UK incorporation should be the only factor involved when deciding whether securities were in scope of the tax or not.

Government response

The government is minded to use the existing SDRT geographical scope for a single tax. However, it will give further consideration as to the potential impacts if UK incorporation were to be the only relevant factor.

Question 9: Do you agree it is not necessary to define where an electronic share register is kept under any new single tax on securities? If not, why not?

42 respondents answered this question with 67% of those agreeing that no definition is necessary.

The biggest issue raised was that there would be a need to define where an electronic register is kept if that is going to be a factor in the geographical scope of the new single tax. If the tax is going to be based on UK incorporation only, then there would not be a need to define where an electronic register is kept.

Government response

The government intends to take a final decision on whether to define where an electronic share register is kept or not at the point of legislating, considering all relevant factors.

Tax Base

Currently the scope for Stamp Duty and SDRT is securities (including stocks and bonds), interests in partnerships where the partnership assets include stock or marketable securities, and certain instruments relating to the transfer of land. There are carve outs within the scope which exclude debt, except for particular types of debt that have equity like features, as well as specific exemptions for particular sectors.

The government proposed that the scope of any new single tax would be non-government equity in UK companies, including stock and bonds with equity like features. Equity-like features would be defined along similar lines to the loan capital exemption, enabling its removal by including its parameters in the overall rules for the scope of the tax. This should therefore enable the current SDRT scope to be recreated but in a manner that is simpler and easier to understand.

The government also proposed specific rules tailored to various areas of the tax base

Question 10: Do you agree that the proposed scope is appropriate, captures what you would expect it to capture and excludes what you would expect it to exclude?

38 respondents answered this question with 68% of those agreeing that the proposed scope was appropriate, it captured what they would expect and excluded what they would expect.

Concerns were raised around clarity on marketable securities, loan capital, the meaning of stocks and bonds and non-marketable debentures. The key message raised in the concerns was the need for absolute clarity about what is and isn’t in scope of the tax.

Question 11: Is there anything that is currently captured by Stamp Duty and SDRT that would not be captured through this approach to scope?

25 respondents replied to this question with 44% agreeing that we had captured everything, 24% disagreeing and 32% not giving a clear answer either way.

Several items were raised as being considered missing that would currently be captured through this approach to scope. Some of these items had been purposefully excluded where it was considered a better approach could be taken under a single tax, such as partnership interests.

Question 12: Do you agree that the government should explore a different approach to the loan capital exemption? Do you foresee any issues with such an approach?

33 respondents answered this question with 76% of those agreeing that we should explore a different approach to the loan capital exemption through using the scope to exclude most loan capital rather than including it and then carving it back out.

Comments were made about the need for absolute clarity around equity-like features with calls for debentures and all debt to be excluded, with anti-avoidance legislation using an intent test to be put in place as an alternative.

Government response

The government intends to proceed with the proposed approach to scope as laid out in the consultation document. The list of suggested missing from scope items will be considered and included or excluded as appropriate when legislating. The government also intends to explore the possibility of using the scope of the single tax to legislate for the loan capital exemption in a different way, making it simpler and easier to understand.

Security interests

Currently the granting of a security interest generally falls outside of scope of STS, but in cases where a lender requires evidence that this is the correct tax treatment, the analysis that has to be undertaken by lawyers is cumbersome and difficult for customers to understand. The government proposed that any legislation for a single tax specifies that the granting of a security interest is out of scope.

Question 13: Do you agree that the granting of security interests is currently out of scope?

32 respondents answered this question with 97% of those agreeing that the granting of security interests is out of scope.

There were several requests made that this is made explicitly clear in legislation because there can currently be some uncertainty and that leads to additional cost and delay for customers from clarifying the position.

Question 14: Do you think that the government should specify that the granting of security interests is out of scope in legislation and that it wouldn’t open up any route for avoidance?

31 respondents answered this question with 87% of those of the opinion that government should specify that the granting of security interests is out of scope in the legislation.

Feedback suggested that government should be mindful about what else falls into this category if legislating and that guidance may be a more appropriate place for this to be specified. It was also pointed out that SDLT does have a specific exclusion for security interests.

Question 15: If we chose not to specify that the granting of security interests is out of scope, can you share how much time you would expect to spend establishing and showing the correct tax position for lenders and how often you would be likely to do this?

There were 24 responses to this question with 46% of those unsure of how much time they would spend on this, while 29% said they would spend a significant amount of time establishing and showing the correct tax position.

It was noted by respondents that this is a matter that would usually be dealt with by lawyers rather than tax advisors.

Government response

The government intends to make it clear in the legislation that the granting of security interests is out of scope, while being mindful of not putting anything out of scope that should not be. The government will ensure that the guidance is clear on this point.

In specie contributions and redemptions

Transferring property ‘pro rata in specie’ means to transfer the ownership of that property from one person/company/entity to another person/company/entity in its current form (for example, without the need to convert the property to cash), in proportion to the respective amounts of the same kind of property already held by the recipient. There is therefore no transfer on sale, or an agreement to transfer, as the transaction represents, in effect, no change of beneficial ownership. Consequently, there are no SDRT (or Stamp Duty) implications.

The government proposed bringing non-UK equivalent funds onto an equal statutory footing with UK funds for pro rata in specie contributions and redemptions. The government also proposed giving further consideration to the treatment of pro rata and whether further clarity can be given on its definition.

Question 16: Do you agree that non-UK fund equivalents should have an equal statutory footing to UK funds? What are the benefits and disadvantages of doing so in your view?

18 respondents answered this question with all of them in favour of putting non-UK funds on an equal statutory footing with equivalent UK funds.

Suggested benefits were removal of a barrier to non-UK funds investing in UK securities, simplification, clarity and fairness. A list of non-UK equivalent funds was requested.

Question 17: Do you have any alternative suggestions for how the government might deal with in specie contributions and redemptions, bearing in mind the need to guard against significant losses to the Exchequer?

12 respondents answered this question with various suggestions for change. These suggestions included issues around unit trusts, open ended investment companies, the cliff edge created by current pro rata rules and seeding relief.

Government response

The government intends to put non-UK funds on an equal statutory footing with equivalent UK funds and to further consider the suggestions made in response to question 17 at the point of legislating.

Mergers

Mergers are currently within the scope of Stamp Duty and SDRT and the rules around how they should be conducted is laid out in Company Act legislation. The STS treatment of mergers is laid out in the STS legislation. The government proposed keeping the current legislative policy on mergers while ensuring that any legislation for a single tax reflects current market practice and case law.

Question 18: Do you agree this is the correct approach to mergers? If not, why not and what would you propose? If you are proposing an alternative what are the benefits and disadvantages of that option?

24 respondents answered this question with 46% of those agreeing that the approach outlined in the consultation was the correct approach, 42% disagreed and 12% did not give a definitive response either way.

Concerns outlined by respondents were the lack of clarity in existing legislation and there being a lack of useful case law. Requests were made for there to be absolute clarity about what gives rise to an STS charge and what does not, along with requests to minimise the need to approach HMRC for clearance for non-UK mergers.

Government response

The government intends to proceed with the approach to mergers that was laid out in the consultation, while taking into account the points made about clarity and will endeavour to give as much clarity as possible both in legislation and guidance.

Call options and warrants

The grant of call options and warrants can fall into scope under Stamp Duty, but not SDRT. The secondary transfer of existing call options and warrants to a third party can be chargeable to both Stamp Duty and SDRT. The government proposed that any single tax would adopt the current SDRT treatment of warrants and call options.

Question 19: Do you agree that this is the correct way to deal with call options and warrants

30 respondents answered this question with 87% of those supporting the approach as outlined in the consultation document.

Respondents requested greater clarity for options and warrants.

Question 20: Do you think that this treatment of options and warrants may open up any routes to avoidance?

27 respondents answered this question with 63% of those suggesting there was an avoidance risk.

‘Deep in the money options’ (where, for a call option, there is a high (non-taxable) premium and a (taxable) strike price which is significantly lower than the market value of the underlying shares) was highlighted as a risk by respondents.

Question 21: If you do not think the government’s proposal is the correct way to deal with options and warrants, what would you do differently and why?

13 respondents answered this question.

Those that made a suggestion recommended anti-avoidance measures.

Government response

The government intends to take the approach outlined in the consultation document, aiming for maximum possible clarity in both legislation and guidance. The government also intends to ensure that there are suitable anti-avoidance measures in place.

Pre-2003 interests in land

Prior to the introduction of Stamp Duty Land Tax (SDLT) in 2003, the transfer of interests in land were within the scope of Stamp Duty. SDLT was not applied retrospectively, and transitional provisions were introduced. There are therefore still land transactions that remain within the scope of Stamp Duty, either because they were completed before 1 December 2003, or because contracts were exchanged on or before 10 July 2003, but the transaction had not yet completed.

The government proposed retaining the effect of those transitional provisions. This would mean that such transactions would retain their existing treatment after the introduction of any single tax.

Question 22: Is there any reason why you think the government should not retain the existing treatment of land transactions that are currently in the scope of Stamp Duty rather than SDLT?

22 respondents answered this question with 82% of those against retaining the existing treatment of land transactions that are currently in scope of Stamp Duty rather than SDLT.

Suggestions made were to bring these transactions into SDLT through repealing the SDLT transitional provisions and any relevant Stamp Duty provisions.

Government response

The government intends to bring any remaining land transactions that currently fall into the scope of Stamp Duty into the scope of SDLT so that the single tax can be focused purely on the taxing of the transfer of securities without the added complexity of trying to deal with old land transactions within it or having to leave parts of the old legislation in place. The government intends to keep the rates that would have applied under Stamp Duty for these transactions.

Consideration

Under Stamp Duty, chargeable consideration is defined as including cash, debt or the value of any other stock or marketable securities. Under SDRT, consideration is defined as money or money’s worth. The government proposed that the current SDRT consideration of money or money’s worth is used for any single tax, subject to certain exceptions for the pensions and life insurance industries.

Transfers of partnership interests

Where a partnership’s assets include stock or marketable securities, transfers of partnership interests are within the scope of Stamp Duty. The government proposed taking partnership interests out of scope under any single tax, either through the way scope is legislated or through a relief or exemption. The government also set out its intention to introduce anti-avoidance legislation to prevent partnerships being used as a method of transferring share ownership in order to avoid STS.

Question 23: Do you agree that taking partnership interests out of scope and dealing with any potential avoidance issues through anti-avoidance legislation is the correct approach? If not, what approach do you think we should take, why, and how would that approach deal with any potential abuse?

35 respondents answered this question with 83% of those agreeing with the approach set out in the consultation document.

Where concerns were raised, they were around the potential for things that weren’t currently in scope to be brought in, along with questioning the need for anti-avoidance legislation or about the appropriate targeting of any such measures.

Government response

The government intends to proceed with the approach outlined in the consultation document while giving due regard to the points made about any anti-avoidance measures being appropriately targeted.

Obligations to pay pension benefits

In order to provide certainty to the pensions industry, the government proposed introducing a relief or exemption to ensure that it remains the case that assuming the liability to pay pension benefits does not lead to an STS charge in respect of any relevant transferred assets following modernisation.

Question 24: Do you agree with this view on the payment of pension benefits and agree with the proposed approach?

18 respondents answered this question with 89% of those agreeing with the view laid out in the consultation document and 78% agreeing with the proposed approach.

Those that disagree with the proposed approach suggested the need for it to be made clear that pension benefits are not considered to be chargeable consideration and are therefore exempt from the charge.

Question 25: Do you think there is any potential for avoidance with the government’s proposed approach to the payment of pension benefits?

15 respondents answered this question with 80% of those suggesting there wouldn’t be any potential for avoidance.

Comments made were around the potential for consideration to be policies that could be quickly unwound after inception and the need to consider anti-avoidance measures to address this possibility.

Question 26: If you don’t agree with the government’s view on the payment of pension benefits and the proposed approach please explain why?

Only 4 respondents answered this question. Half of them commented about codifying Swayne (Stamp Duty caselaw that means where assets are transferred which include an inherent liability, the assumption of that liability by the purchaser is not considered chargeable ‘debt’ consideration) and the other comments were that an exemption was unnecessary and that we should ensure we include non-UK pension funds.

Government response

The government intends to ensure that obligations to pay pension benefits are excluded from STS charges but will consider at the point of legislating whether this can or should be implemented through using the scope of the tax or applying a specific relief or exemption. The government will also consider, at the point of legislating, whether there is a need for anti-avoidance legislation or whether existing anti-avoidance legislation would be sufficient to ensure any potential avoidance is dealt with.

Life insurance policies

Currently, the issuing of a life insurance policy is not regarded as chargeable consideration for Stamp Duty purposes but would be brought into scope if the SDRT definition of consideration of ‘money or money’s worth’ were to be adopted for any single tax. In order to prevent disruption to the insurance industry, the government proposed introducing a relief or exemption to ensure these transactions remain out of scope.

Question 27: Do you agree that life insurance policies would fall into scope and do you agree with the proposed approach? If not, why not?

19 respondents answered this question with 89% of those agreeing with the view and approach laid out in the consultation document.

Government response

The government intends to proceed as outlined in the consultation document.

Question 28: Do you support the proposal to use money or money’s worth for consideration under any single STS tax?

32 respondents answered this question with 91% supporting the proposal to use money or money’s worth for consideration in a single tax.

Those that disagreed were keen for the Stamp Duty definition to be kept. Other comments were requesting more clarity around the definition of money or money’s worth, particularly around services being provided as consideration.

Government response

The government intends to proceed as outlined in the consultation document and will provide as much clarity as possible on the definition both within the legislation and guidance.

Question 29: Are there any further instances that are not captured where transactions would be brought into scope where adding a charge would be disruptive that you think we should consider? When telling us of further instances, please illustrate the impact of adding a charge and the extent of the disruption.

11 respondents answered this question with funds, reinsurances and Lloyds syndicates being raised as issues.

Government response

The government will consider the points made in answer to this question at the point of legislating.

Question 30: Are there any further instances where transactions would be brought into scope by using the SDRT definition of consideration that wouldn’t naturally fit into the system as outlined that government needs to consider?

4 respondents answered this question, with reductions in share capital, distributions in exchange for unit cancellations, inheritance and divorce being raised.

Government response

The government will consider the points made in response to this question at the point of legislating.

Question 31: Is there anything proposed in this section on consideration that could open up a route for avoidance?

11 respondents answered this question with 73% stating that they couldn’t see any routes for avoidance.

Comments to the contrary were around the potential for people to argue that there was no value to anything that couldn’t be traded on the open market.

Government response

The government will consider the point made around value at the point of legislating.

Contingent, uncertain and unascertainable consideration

Currently, Stamp Duty and SDRT deal with contingent, uncertain and unascertainable consideration differently, with feedback from stakeholders suggesting that neither treatment is ideal. The government proposed that the rules for any single tax would largely follow the existing SDLT rules for uncertain and unascertainable consideration.

This included the ability to apply for a deferral, but with the addition of a 2-year time limit for deferment.

Question 32: Do you agree with the government’s proposals for dealing with uncertain and unascertainable consideration?

40 respondents answered this question with 85% of those supporting the proposals laid out in the consultation document.

Feedback from this question was that the 2-year deferment backstop that was outlined in the consultation document was not long enough, with suggestions that it should either be removed altogether or extended to 5 years. It was suggested that deferrals should be able to be applied to a transaction, where the criteria to qualify was met, without having to seek HMRC approval for it and that further deferrals beyond the initial period should be able to be applied for. There were also requests that any valuations involved should be reasonable estimates rather than having to seek formal valuations.

Government response

The government intends to proceed as outlined in the consultation document with some key modifications. Having considered the representations on the 2-year deferment backstop, the government has decided to extend the backstop to 4 years initially and allow for extension applications beyond the 4-year period up to an absolute maximum of 12 years, in 4-year reapplication periods. This will help manage extended approval and development periods that occur within some industries that the contingency can be dependent upon. The government intends that the request for deferment will be able to be made online and will be applied where the criteria are met with confirmation of the application of deferment being sent to the customer rather than there being a separate offline application process. The government has no intention of introducing a need for formal valuations as part of the reporting process for a single tax.

Question 33: If not, how do you think we should deal with uncertain and unascertainable consideration for any single tax on securities?

20 respondents answered this question with the same suggestions on the 2-year deferral backstop, the need for further deferral periods and valuations that were outlined under question 32.

Government response

The government intends to make clear in guidance what would be acceptable as a reasonable estimate and will seek to do so in a way that doesn’t require a formal valuation.

Exemptions/reliefs

There are many exemptions and reliefs within the Stamp Duty and SDRT regimes, though they don’t all apply to both taxes. Overall, the government proposed:

• removing those that will become redundant by moving to a single tax
• removing those that are unused
• modernising the language used in legislation for all retained reliefs and exemptions to ensure that they are as clear as possible

The government also sought views on a number of specific reliefs/exemptions.

The de minimis

Currently, there is a £1,000 de minimis within Stamp Duty, which means that any transactions that have a certified consideration of less than £1,000 fall out of scope. For SDRT, there is no current de minimis, although in practice any consideration under £1 leads to a less than 1p tax liability and so does not need to be paid.

The government proposed the removal of the £1,000 de minimis that currently exists for Stamp Duty.

Question 34: Do you agree with the reasoning behind the proposal to remove the de minimis? If not, what justification can you give for retaining it?

42 respondents answered this question with 86% against the removal of the de minimis and 14% agreeing with removing it.

The arguments made for retaining the de minimis are around its removal creating an additional burden for the customer due to a need to fill out a stock transfer form for company law purposes and additionally report the transaction through the portal.

Government response

The government still intends to remove the de minimis. It notes the concern expressed about the potential additional burden. The government also notes that the de minimis was designed to alleviate the administrative and compliance burden associated with smaller transactions for both HMRC and customers. This rationale no longer applies under the new single tax and portal for reporting.

There is a question around the fairness of the tax applying to transactions which take place ‘on market’ whatever the consideration value is, but for it not to apply to transactions which take place ‘off market’ under a particular value, particularly when the reason for introducing the de minimis will no longer apply.

The government intends to design out the potential for additional burden to be created by removing the de minimis, through providing the facility for the portal to produce the STF, SH03 or certificate of confirmation with the UTRN included.

Intermediary relief

Currently, intermediary relief is available to approved UK intermediaries and any person who is authorised under the law of an EEA state or Gibraltar, or has permission under the Financial Services and Markets Act 2000 to carry on any of the investment services or activities in paragraph 2 or 3 of Part 3 of Schedule 2 to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 to execute orders on behalf of clients or deal on their own account, where they have successfully applied for intermediary status by making an application direct to HMRC. The government proposed to retain the current geographical application of intermediary relief.

The government also proposed exploring whether there is a better way to deal with reporting in circumstances where an intermediary undertakes transactions that both attract and do not attract intermediary relief.

Question 35: Is there anything that you do not think has been sufficiently considered in relation to the geographical application of intermediary relief?

16 respondents answered this question with 69% of those suggesting that expanding the geographical scope of intermediary relief had not been considered sufficiently with 31% suggesting that this matter had been sufficiently considered. There was also a request for the removal of some of the complexity around intermediary relief.

Government response

The government considers the geographical expansion of intermediary relief out of scope of this project. However, tax policy is kept under continual consideration and review and as such the points made will be taken into account as part of that continual process.

Question 36: Do you think that the government should explore whether there is an easier way for intermediaries to apply or not apply intermediary relief to particular transactions?

14 respondents answered this question with 57% of those suggesting the government should explore whether there is an easier way for intermediaries to apply or not apply intermediary relief.

Comments were made about geographical application, simplification and removing the excluded business condition. Requests were made for ensuring that the route to apply through HMRC is maintained and a list of qualifying intermediaries to be published.

Government response

The government intends to keep under review whether the application (or not) of intermediary relief can be made easier for intermediaries and has noted the other points made in answer to this question.

Stock lending and repurchase relief

The geographical application of stock lending and repurchase relief is the same as for intermediary relief. The government proposed retaining the current geographical application of stock lending and repurchase relief.

Question 37: Is there any reason why you think the government should change the geographical application of Stock lending and repurchase relief that it may not be aware of?

17 respondents answered this question with 71% of those expressing the view that it should be changed.

The reasoning behind those views were that they couldn’t see a reason why equivalently regulated countries outside the EU shouldn’t be able to access this.

Government response

The government considers the geographical expansion of stock lending and repurchase relief out of scope of this project. However, tax policy is kept under continual consideration and review and as such the points made will be taken into account as part of that continual process.

Debentures

There is no specific exemption for debentures from STS – whether they are in scope depends on whether or not they are marketable securities. If the scope of any single tax is focused on equity and debt with equity-like features, then this matter should be dealt with through that definition. As such the government proposed that a specific relief or exemption for debentures would not be introduced.

Question 38: Do you agree that this is the correct approach to debentures? If not, why not and what would you do differently?

31 respondents answered this question, with 71% agreeing with the approach as outlined in the consultation document.

Those that disagreed with the approach suggested that there was a need for a specific exemption or relief to ensure absolute clarity.

Government response

The government intends to proceed with the approach outlined in the consultation document and will seek to provide as much clarity as possible within the legislation and guidance.

Share buy backs

Share buy backs are defined as the purchase of shares by a company from its shareholders. The government proposed that any single tax retains the current rules for share buybacks.

Question 39: Do you agree that this is the correct approach to share buybacks? If not, why not and what would you do differently?

26 respondents answered this question with 58% of those agreeing with the approach outlined in the consultation document.

Comments made were around overseas branch registers, the 1.5% charge and the charge on buybacks being a factor when considering a listing vehicle.

Question 40: If outlining an alternative approach to share buybacks, what are the benefits and disadvantages of that approach?

9 respondents answered this question, with the majority suggesting the charge on share buybacks should be removed for companies listed on recognised stock exchanges as they considered it would make the UK companies more attractive as listing vehicles. There was also the suggestion that the rate that is charged should be higher as that would remove a bias towards debt funding and encourage foreign direct investment or the release of equity sooner.

Government response

The government intends to proceed with the proposal outlined in the consultation document and continue to treat share buybacks in the same way as they are currently treated.

Group relief

Group relief is currently available in Stamp Duty but not in SDRT. The government proposed that group relief will be available under any single tax. The current rules will be retained, and consideration given to whether the anti-avoidance rules can be made clearer.

Question 41: Do you agree that we should include group relief in any new single tax?

40 respondents answered this question with 100% of them agreeing that group relief should be included in a single tax.

Government response

The government intends to include group relief in the single tax.

Reconstruction and acquisition reliefs

These reliefs are also currently only available in Stamp Duty. The government proposed retaining these reliefs with their current rules under any single tax. The government also set out its intention to ensure that the legislation is clearer and reflects case law.

Question 42: Do you agree that the government should include reconstruction and acquisition reliefs in any new single tax?

40 respondents answered this question with 100% of them agreeing that reconstruction and acquisition reliefs should be included in a single tax.

Question 43: Is there anything you would like to highlight with regards to making the legislation for reconstruction and acquisition reliefs clearer?

33 respondents answered this question with requests being made around simplification, alignment with Capital Gains Tax and clarity or removal of particular terms that people find confusing.

Government response

The government intends to retain these reliefs in a single tax, the government will further consider the points that were made in answer to question 43 at the point of legislating.

Growth market exemption

Instruments relating to stock or marketable securities admitted to trading on a recognised growth market but not listed on any recognised stock exchange are exempted from STS. The government proposed retaining this exemption with its current rules under any single tax.

Question 44: Do you agree that the growth market exemption should be retained under any new single tax? If not, why not?

27 respondents answered this question with 89% of those agreeing that the growth market exemption should be retained.

There was also the suggestion that the growth market exemption is not sufficiently targeted in its current form.

Question 45: In light of the consideration of reliefs and exemptions and their continued functionality, are there any market developments that should be considered?

10 respondents answered this question with an even split between those that considered there had been market developments that should be considered and those that did not. Dematerialisation was one suggestion of something that needed to be considered, along with suggestions that the growth market exemption should be expanded to multilateral trading facilities and that it should be re-targeted.

Government response

The government intends to retain the growth market exemption under a single tax. Tax policy is kept under continual consideration and review and as such the points made under in response to question 45 will be taken into account as part of that continual process. The government notes that with effect from 1 January 2024 the growth market exemption was extended to include FCA-regulated multi-lateral trading facilities.

Penalties and compliance

There are currently no compliance powers for Stamp Duty. For SDRT, there is a full and enforceable compliance regime. The government proposed that the SDRT compliance regime, including penalties and interest, apply to any single tax, with some tweaks to address specific issues.

Question 46: Do you agree that the compliance regime as outlined above is appropriate and proportionate for any new single tax on shares?

27 respondents answered this question with 74% agreeing that the compliance regime outlined in the consultation document is appropriate and proportionate.

Question 47: If not, what do you think should be different, how would you change the proposed compliance regime and why?

17 respondents answered this question with suggestions for the assessment time being shortened, late notification penalties being scrapped and a penalty cap being put in place.

Government response

The government has further considered the penalty regime and the need to strike a balance between incentivising notification and payment of tax, providing certainty and proportionality and ensuring a minimal level of burden in relation to penalties for both customers and HMRC. The government intends to implement the majority of the penalty regime as outlined in the consultation document.

The government intends to make some changes for notification penalties and in the interest of proportionality, certainty and minimising the administrative burden, have a percentage based regime. The intention for notification penalties is as shown in the table below. The ‘penalty date’ is the day after notification should have been made:

When liable to penalty	Type of penalty	Amount of penalty
On the penalty date	Initial fixed penalty	5% of the tax liability or, where a relief is applicable, 5% of the tax liability prior to the relief being applied.
3 months after the penalty date	Daily penalties	£10 per day, up to a period of 90 days. HMRC decides whether this penalty is payable, it is not automatically applied. This measure is included to discourage persistent offenders and will be applied if there is a pattern of consistently late returns.
6 months after the penalty date	6 months further penalty	10% of the tax liability or, where a relief is applicable, 10% of the tax liability prior to the relief being applied.
12 months after the penalty date	12 month further penalty	If information is deliberately withheld and concealed 100% of the liability that would have shown in the return. If information is deliberately withheld but this is not concealed 70% of the liability that would have shown in the return or document. Otherwise 10% of the liability that would have shown in the return or document. Where a relief applies then the penalty is applicable to the amount that would be due prior to the relief being applied.

The government believes this is the most appropriate approach to provide certainty for the customer, while ensuring that notification penalties remain proportionate to the tax liability and minimising the administrative burden.

Redundant legislation

The consultation highlighted a number of redundant legislative provisions due to them not being relevant to the modern market or by newer legislation now covering that provision’s original function. The government proposed that equivalent legislative provision is not made for any single tax.

Question 48: Do you agree that these provisions are now redundant and no longer needed? If not, can you explain why not including them in legislation for any new single tax would be an issue?

23 respondents answered this question with 83% agreeing the provisions outlined in the consultation document are redundant.

There was some disagreement around section 90 of the Finance Act 1965.

Question 49: Are there any other existing provisions that are now redundant and no longer needed?

14 respondents answered this question with 79% suggesting there are more existing provisions that they would consider to be redundant with some specific examples being given.

Question 50: Are there any other existing provisions that do not work in practice?

16 respondents answered this question with 75% suggesting there are other existing provisions that do not work in practice. Many of these mentioned the STS implications of the Retained EU Law (Revocation and Reform) Act 2023 (REUL), which have since been resolved, with others mentioning bearer instruments, archaic language and financial services companies that operate in the UK but are owned overseas.

Government response

The government intends to consider further the points that have been made in responses to questions 48, 49 and 50 while in the process of preparing legislation.

3. Next steps

Further consultation

The government has today published a consultation covering the 1.5% charge regime as the next step in this long term project.

The government intends to publish draft legislation in due course, before legislating for a single tax on securities to replace Stamp Duty and SDRT.

Alongside the legislative work, the government is designing and building an online service for the reporting and payment of the single tax; the timing of the legislation and the new online service being in place will be aligned. Stakeholders have been contacted for their input to ensure that the design of the new online service meets customer needs.

The government is aiming to introduce the single tax, its legislative framework and the portal in 2027.

Annex: List of stakeholders consulted

The government is grateful to all those who took time to send written responses to the consultation, each of which has been carefully considered. The government is also grateful to those who took time to participate in a consultation meeting.

The businesses and organisations that submitted written responses or took part in a meeting are as follows:

• Addleshaw Goddard LLP
• Ade Tax
• The Association for Financial Markets in Europe
• Alpine Edge Consulting
• Alternative Investment Management Association
• Archax
• Ashurst LLP
• Association of British Insurers
• Association of Investment Companies
• Avenir Registrars
• Baker & McKenzie LLP
• BioIndustry Association
• Black Graf LLP
• BNY Mellon
• British Private Equity & Venture Capital Association
• Chartered Governance Institute Registrars’ Group
• Chartered Institute of Taxation
• City of London Law Society
• Cleary Gottlieb Steen & Hamilton LLP
• Computershare
• Confederation of British Industry
• Cooley (UK) LLP
• Deloitte LLP
• DWF Law LLP
• Equiniti
• Ernst & Young LLP
• Euroclear UK & International Limited
• Fox Williams LLP
• Freshfields
• FTI Consulting
• Grant Thornton
• Herbert Smith Freehills LLP
• Hogan Lovells
• Institute of Chartered Accountants in England and Wale
• Interactive Investor Services Limited
• International Securities Lending Association
• Investment Association
• Jerroms Miller
• Keystone Law
• KPMG LLP
• Latham & Watkins
• Law Society
• Law Society of Scotland
• Legal & General Group PLC
• Linklaters LLP
• Lloyds of London
• London Stock Exchange Group PLC
• Macfarlanes LLP
• Managed Funds Association
• Moore Kingston Smith LLP
• Norton Rose Fulbright
• Personal Investment Management & Financial Advice Association
• Pinsent Masons LLP
• Proskauer Rose (UK) LLP
• PricewaterhouseCoopers LLP
• Quoted Companies Alliance
• R&R Bespoke Accountancy
• RSM UK Tax and Accounting Limited
• ShareSoc (UK Individual Shareholders Society)
• Sheridans
• Sidley Austin LLP
• Simmons & Simmons LLP
• Slaughter and May
• Squire Patton Boggs (UK) LLP
• Stamp Taxes Practitioners Group
• Travers Smith LLP
• UK Finance
• Wiggin LLP
• Willkie Farr & Gallagher (UK) LLP
• Two individuals responded to the consultation