BN 24 - Stamp Duty Reconstruction Reliefs

Who is likely to be affected?

1. Companies acquiring either;

• the whole or part of a business of another company, or
• the entire share capital of another company.

General description of the measure

2. The measure will amend the rules under which certain company reconstructions and acquisitions may qualify for relief from stamp duty. The requirement that the acquiring company must be registered in the UK will be removed.

3. The strict rules concerning the proportion of shares held by any shareholder will also be changed so that relief may be given provided that, as nearly as is practical, there is no change in overall ownership of the reconstructed business.

Operative date

4. From Royal Assent to Finance Bill 2006.

Current law and proposed revisions

5. Sections 75 to 77 Finance Act 1986 relieve from stamp duty certain company reconstructions and acquisitions that result in no overall change of ownership of the company or its business. One requirement is that the registered office of the acquiring company is in the UK. On 22 July 2005 HM Revenue and Customs announced that it would, from then on, accept claims to relief when shares are acquired by a company anywhere in the European Economic Area, provided that all other conditions for the relief were met. This measure will extend the scope of the relief further, so that it will be available to acquiring companies world -wide.

6. Sections 75 and 77 also require that the reconstruction shall not change the proportion of the company or its business that is owned by each shareholder. A minor change is being made to this rule so that relief is not denied because the proportion of shares in the new structure held by each shareholder has to change slightly for practical reasons.

Further advice

7. If you have any questions about this change, please contact Ian Burton on 020 7147 2788.