BN27: Stamp taxes 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 where either company has purchased and holds some of its own shares.

General description of the measure

2. The effect of the measure will be that a company that holds some of its own shares will in future be able to claim relief from stamp duty and stamp duty land tax in respect of certain reconstructions and acquisitions without the need to cancel those shares.

Operative date

3. This measure will have effect from the day after the date that Finance Bill 2007 receives Royal Assent.

Current law and proposed revisions

4. Sections 75 to 77 of Finance Act (FA)1986 and Schedule 7 to FA 2003 relieve from stamp duty and stamp duty land tax certain company reconstructions and acquisitions where there is no real change of ownership. The reliefs require that the same persons own the company or business after the transaction and that the proportion of the company or business that is owned by each shareholder remains unchanged.
5. Following the introduction of this measure, a company that has purchased its own shares and holds them, will no longer be regarded as a shareholder for the purpose of the overall ownership test.
6. This will mean that companies that hold their own shares will no longer need to cancel them, or accept shares in the acquiring company, in order to qualify for relief.

Further advice

7. If you have any questions about this change, please contact Ian Burton on 020 7147 2788 (email: ian.burton@hmrc.gsi.gov.uk).