HMRC SDLT: SDLTM09280 – Transfer of shares or securities: Section 75C (1)
Principles and Concepts of SDLTM09280
This section of the HMRC internal manual discusses the transfer of shares or securities under Section 75C (1). It outlines the principles and concepts governing such transfers, providing guidance on compliance and legal obligations.
- Details the legal framework for transferring shares or securities.
- Explains the tax implications and requirements.
- Guides on documentation and procedural compliance.
- Clarifies the roles and responsibilities of involved parties.
Read the original guidance here:
HMRC SDLT: SDLTM09280 – Transfer of shares or securities: Section 75C (1)
Transfer of Shares or Securities: Section 75C (1)
This page outlines the rules around the transfer of shares or securities under HMRC guidelines, referencing SDLTM09280. It explains when such transactions are considered ‘scheme transactions’ and what that means for taxation purposes.
Definition of Terms
Scheme Transaction: This refers to transactions that are part of a series of arrangements, usually designed for tax benefits. These transactions are looked at closely by HMRC to ensure compliance with tax laws.
Consideration: This is the amount agreed upon between parties for the transfer. It essentially represents the payment or value exchanged in a transaction.
Chargeable Consideration: This refers to the amount on which Stamp Duty Land Tax (SDLT) is calculated. It’s important to determine this correctly to fulfil tax obligations.
Key Principles
1. Non-scheme Transactions:
– If the transfer of shares or securities is the only transaction, it will not be viewed as a scheme transaction according to Section 75A.
– This means that even if this transfer is the first step in a series of actions that could be regarded as a scheme, it stands alone and is not subject to the same scrutiny.
2. Sequential Transfers:
– When there are multiple transfers of shares or securities, whether they are identical or different, these will not be classified as scheme transactions if they take place before any other transaction that is considered part of a scheme.
3. Unit Trust Schemes:
– Transfers of units in a unit trust are regarded similarly to shares. Therefore, the rules that apply to shares also apply to these units, confirming that they are not treated as scheme transactions when isolated.
Impact on Chargeable Consideration
– Since the transfer of shares or securities is not treated as a scheme transaction, the amount given for that transfer (consideration) will not be included when calculating the chargeable consideration for transactions between the transferor (V) and the transferee (P).
Pre-Transfer Tasks and Exemptions
– Administrative actions necessary before the transfer of shares or securities, such as obtaining shareholder approval, are typically not considered scheme transactions.
– These pre-transfer tasks can be ignored when determining if the first transaction is a transfer of shares or securities.
Exceptions to the Rules
– If there is a prior scheme transaction that occurs before the transfer of shares or securities, then this exclusion will no longer apply. In this instance, the transfer would be classified as a scheme transaction under Section 75A.
Important Clarifications
– It is essential to note that this exemption only applies to the transfer of existing shares. Any new shares or securities that are issued do not qualify for this exemption in the context of Section 75A.
Examples Illustrating the Rules
1. Example of a Non-Scheme Transaction:
– Assume Company A transfers shares directly to Company B without any other transactions involved. Since this is a standalone transfer, it is not subject to scrutiny under Section 75A.
2. Example of Sequential Transfers:
– If Company A transfers shares to Company B first, and then Company B transfers the same shares to Company C, neither of these transfers will be regarded as scheme transactions as they do not precede any other transaction that might fall under the scheme category.
3. Example of a Unit Trust Scheme:
– If an investor switches their investments from one unit trust to another, this transfer is treated like a share transfer and is not seen as a scheme transaction.
4. Administrative Tasks Ignored:
– A company might need to get approval from its shareholders before a major transaction. This step alone does not qualify as a scheme transaction and can be ignored when considering whether the subsequent share transfer falls under Section 75A guidelines.
5. Counter Example – Previous Scheme Transactions:
– If Company A has previously engaged in a series of transactions that are classified as scheme transactions, and then it attempts a share transfer to Company B, the later transfer would be considered part of the overall scheme and would be treated as a scheme transaction.
Additional Considerations When Applying These Rules
– When deciding the tax implications surrounding share or security transfers, careful consideration of any additional transactions related to the shares is necessary.
– It is also worth noting that, even if you believe your transaction is not a part of a scheme, HMRC can investigate to ensure compliance. Keeping thorough records of each transaction is advisable in case there are queries later.
– If you are uncertain about whether your transaction qualifies as a scheme transaction or need help calculating chargeable considerations, consulting a tax professional or legal advisor may be beneficial.
Final Thoughts
– Understanding how the transfer of shares or securities is classified can significantly affect tax responsibilities, particularly regarding Stamp Duty Land Tax.
– It is essential to remain informed about both the specific rules around scheme transactions and the broader implications of transfer considerations.
If you require further guidance, consider accessing additional resources or reaching out to HMRC directly.