Stamp Duty and Stamp Duty Reserve Tax (“SDRT”) changes – Finance Bill 2019/20


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.


Finance Bill 2019/20 announced a couple of changes to the sleepy realm of stamp duty and SDRT.

These are:

  • An extension to the existing market value rule to include unlisted shares; and
  • Restriction of the scope of anti-avoidance rules for partition demergers

Extending of the market value rule to include unlisted shares

The new rules apply from the time that Finance Bill 2019/20 receives Royal Assent,

There is already a market value rule applicable where there is a transfer of listedshares to a connected company.

This existing rule will be extended such that includes the transfer of unlistedshares to a connected company.

For SDRT purposes, it is extended to the agreement to transfer.

The new extension of the market value rule will only apply where the consideration to purchase the shares is wholly / partly an issue of shares by the purchaser. It will not affect transactions where, say, there is a dividend in specie of shares.

The new enhanced rule is squarely aimed at artificial and contrived arrangements used as a workaround where the usual stamp duty reliefs are not available.

Restriction of the scope of anti-avoidance rules for partition demergers

The preliminary step where one is undertaking a partition demerger (for example, a liquidation demerger or a capital reduction demerger) is usually the imposition of an purchasing company above the target company by means of share-for-share exchange.

Finance Act, s77 acquisition relief will usually apply where the shareholdings and share structure of the purchasing company mirror that of the target company.

However, s77A of the same Act fetters this position and will block the availability of this relief where ‘arrangements’ exist for a change of control of the acquiring company. IOf course, this could be one of the ultimate aims of the demerger.

If the demerger is not eligible under FA 1986, s75 (Reconstruction relief) then double stamp duty may arise.

The new draft legislation set out in Finance Bill 2019/20 is designed to restrict the scope of the anti-avoidance rule under s77A.

It is intended that those rules will not apply to someone who has held a minimum of 25% of the issued share capital of the target company. This test is applied over a t3 year period ending with the share-for-share exchange.


Both of the changes set out will take effect from the date of Royal Assent to Finance Act 2020.

If you have any queries about stamp duty, SDRT or any other tax matters then please do not hesitate to get in touch.

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