Stamp Taxes

(Responsibility / expense of buyer)

Stamp Duty
&
Stamp Duty Land Tax

Purchases of Shares and Securities Purchases and Lease of Land & Buildings

Stamp Duty (SD) Stamp Duty Land Tax (SDLT)

0.5% of consideration On Residential Property  Not Applicable

Rounded up to the multiple of £5 On Non-Residential Property  Applicable in the

“Bands” form as given below (also given in exam)
No SD,ifthe consideration is £1,000 or less
Consideration SDLT %

£150,000 or less NIL

£150,001 − £250,000 2%
£250,001 and above5%

Example:
Value of Non-Residential property is £475,000.

Stamp Duty

 Stamp duty applies to transfers of shares and securities transferred by a stock transfer form.
 It is payable by the purchaser.
 Transfers of shares are charged to stamp duty at 0.5% of the consideration unless they fall within
one of the specific exemptions. The duty is rounded up to the nearest £5. There is no charge if
consideration is £1,000 or less

Stamp Duty Land Tax

 This applies to transactions in UK property and lease premiums.

 The rate of SDLT varies depending on the purchase price and whether the land and buildings is
residential or commercial (although residential building is not examinable).
 SDLT is calculated on a stepped basis on the value falling within each band.

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Exemptions from Stamp Duty / Stamp Duty Land Tax

1. The main exemptions relate to transfers where no consideration has been given:

a. Gifts
b. Transfers of gift between 75% group companies (Capital Gains Group)
c. Divorce arrangements
d. Variations of wills
e. Takeovers, reconstructions, or amalgamations

2. Purchase of government stock

3. Purchase of company loan notes or qualifying corporate bonds (convertible loan notes are not
exempt)

4. Purchase of unit trusts(For example: Mutual Funds & Asset Management Companies Units)

Question

(a) Bobby Brown purchased a house as an investment property for £145,000 on 23 January 2023.

(b) Rose Red purchased a shop costing £130,000 on 24 June 2022.

(c) Oliver Orange purchased an office building for £1,200,000 on 20 July 2022.

(d) Chris Cream purchased 10,000 shares in BT plc costing £45,000.

(e) Graham Green purchased £6,500 of 4% Treasury Stock 2023, costing £9,000.

(f) Gary Grey received £100,000 of unquoted shares as a gift from his father.

(g) White Ltd and Black Ltd are members of a 75% capital gains group and Black Ltd transfers an
office building to White Ltd when the market value is £310,000.

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 Shares Buy Backing/ Re-Purchase
- Means, reducing the equity of company

- In most of the countries, a company can repurchase its share by dispersing the cash to existing
shareholders in exchange of shares

- For company’s shares buy backing concept, shareholders can be categorized into 02 categories.

Individual Shareholder Corporate Shareholder

For Example: For Example:
Company A’s shareholder is any individual person like Mr. X, Mr. Y Company A’s shareholder is
or Mr. Z. any other company like B Ltd, C
Ltd or D Ltd.

Capital Distribution IncomeDistribution

(Capital Gains) (Dividend Income)

If all of the *conditions are met If any of the *condition,not met

DP (Cash Received) XX Cash Received XX

L: Cost (X) L: Subscription Value(X)

Capital Distribution
(Capital Gains)
Gains XX Dividend Income XX

Taxed as Capital Gains Taxed as Dividend Income

CGT @ 10% or 20% IT @ 8.75%, 33.75%, 39.35%

Or
10% (if BADR or Investor’s Dividend Exemption £2,000
Relief)

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Question 1

Rosalindbought 5,000 shares in Brooklyn Ltd at the issue price of £1 per share in May 2015. In August
2022, Brooklyn Ltd buys back Rosalind’s shares at £10 per share. Assume A.E is available, and Rosalind is
a higher rate taxpayer.

What are the tax implications if the buyback:

(a) Do qualify as a capital distribution (b) Does not qualify as a capital distribution

D.P (Cash Received Per Share) Cash Received Per Share

L: Cost Incurred Per Share L: Subscription Value Per Share

Gain Per Share Amount Received Per Share

Total No. of shares Total No. of shares

Total Gains Total Dividend

Annual Exemption

Taxable Gains

CGT @ ___

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Question 2

Walter subscribed for 1,000 shares in BB Ltd, an unquoted trading company, at £1 per share. BB Ltd has
agreed to repurchase Walter’s shares for £15 each in March 2022.Walter has taxable income of £40,000
in 2022/23. He has made no other gains in 2022/23.

Show the tax payable by Walter if:

(a) The income treatment applies.

(b) The capital treatment applies and either:

(i) a claim is made for Business Asset Disposal Relief (BADR)
(ii) a claim is not made for Business Asset Disposal Relief (BADR).

(a) Income Treatment (b) Capital Treatment

Cash Received Per Share D.P (Cash Received Per Share)

L: Subscription Value Per Share L: Cost Incurred Per Share

Amount Received Per Share Gain Per Share

Total No. of shares Total No. of shares

Total Dividend Total Gains

Annual Exemption

Taxable Gains

BADR Claimed:

BADR Not Claimed:

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Company A is going to buy back its shares from Individual Shareholder

*Conditions

For Individuals For Company

1. 1.
Must be UK Resident Must be un-quoted trading company

2. 2.
Must own shares for at least 05 years Must be bonafide for the company

If share are Inherited, must own shares for at

least 03, including the shareholding period of
deceased person

3.
The shareholder must not be immediately, after
buy back, connected with the company

For example:

If employee  Leave / Resign

If Shareholder  Shareholding should < 30%

4.
Shareholder either dispose-off complete
shareholding OR shareholding must be
substantially reduced

Substantially reduced means, own less than 75%

of his shareholding, after buyback.

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Question 3

Wilma owns 16,000 of the 32,000 issued shares in A Ltd. The company buys back 4,000 of Wilma’s
shares.Is the share capital Condition 4 met?

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Question 4

Ben Cartwright was the founder of Bonanza Ltd and has owned 6,200 shares (62%) for the last 30 years.
Ben wishes to withdraw from the day-to-day management of the company. A partial repurchase of
Ben’s shares by the company will benefit its trade.

Requirements:

(a) How many shares must Bonanza Ltd repurchase from Ben for the purchase to satisfy the
conditions for chargeable gains treatment?

(b) What would the answer be if Ben’s shareholding in Bonanza Ltd were only 3,400 shares (34%)?