This note is a short guide on how to make a claim to relief from Stamp Duty in respect of instruments effecting certain transactions between companies in the same group. It does not cover all the points that can arise, so if further information is required please contact the Stamp Office. Alternatively, more detailed information is in the Stamp Taxes Manual which is available on the HMRC internet site www.hmrc.gov.uk/so
An instrument which has the effect of passing a beneficial interest in property between bodies corporate in the same group, which would otherwise be chargeable with ad valorem Stamp Duty as a transfer on sale, will not be chargeable with duty provided that a valid claim for relief is made under the provisions of Section 42 Finance Act 1930, as amended by Section 27 Finance Act 1967 and Section 123 Finance Act 2000.
A “body corporate” is one which has perpetual succession and a legal personality distinct from that of its members. In the United Kingdom a body corporate includes companies with limited or unlimited liability, companies limited by guarantee, charter companies and bodies created by statute. The relief is not restricted to a body corporate situated in the United Kingdom and is available to non-UK companies which the applicant can show are bodies corporate within the meaning of the legislation.
One body corporate is associated with another if the following conditions are met:-
(a) the first is the beneficial owner of not less than 75% of the ordinary share capital of the second, or a third body corporate is the beneficial owner of not less than 75% of the ordinary share capital of each;
(b) the first is beneficially entitled to not less than 75% of any profits available for distribution to equity holders of the second body; and
(c) the first would be beneficially entitled to not less than 75% of any assets of the second available for distribution to its equity holders on a winding up.
Ordinary share capital means all the issued share capital of whatever description except capital the holders of which are entitled to a fixed dividend but have no other right to a share in the profits of the body corporate.
The association can be direct or through intermediate companies. A claim can, for example, be made for transactions between A and B if there is a direct relationship or between B and C which are both associated with A provided that the relationship with A meets the required test.
In cases of doubt applicants are encouraged to read the section ‘Bars to Relief’ in the Stamp Duty Manual 6.169
Write to the Stamp Office. The letter of claim needs to be signed either by a named board member of the company through which the associated company relationship is being established, or a named solicitor or accountant acting on behalf of the parent company who is aware of the full facts and circumstances of the transaction as set out in the letter from personal knowledge. Phrases such as “I am advised” or “To the best of my knowledge and belief” are not acceptable.
With your letter include
All instruments on which a claim to relief under Section 42 is made need to be lodged with the Stamp Office for formal adjudication under Section 12 of the Stamp Act 1891, together with all relevant supporting documentation. One consequence of the provisions of Section 12 is that the Stamp Office may require the evidence in support of a claim to relief to be provided in the form of a Statutory Declaration, rather than in plain letter form. In general the Stamp Office will not insist that a Statutory Declaration is sworn in support of a group relief claim although we do reserve the right to require this where we deem it to be necessary.
The letter of claim needs to include all of the following:-
1. It should state that a claim for relief from Transfer on Sale duty is made under Section 42 Finance Act 1930, as amended, in respect of specified instruments.
2. Details of the dates of all instruments on which relief is claimed.
3. Details of the authorised and issued share capital of the parent and subsidiary companies and of any intermediate companies through which the relationship required under the legislation is traced. In the case of non-UK companies, include sufficient information to show that they qualify as bodies corporate for the purposes of the relief. A list of non-UK entities previously accepted as bodies corporate can be found in section 6.124 of the Stamp taxes manual. If the parties to the document(s) on which relief is claimed are indirectly associated a family tree diagram should also be supplied, showing percentage of ownership for each branch.
4. State whether any class of share detailed at 3 above carries a right to only a fixed dividend and no other share in the profits.
5. If there is more than one class of share in issue, set out the profit rights attached to each class of share and set out the asset distribution rights attached to each class of share in any winding up of the company.
6. State whether any of the bodies corporate is in liquidation.
7. Show details of the shareholders of all the issued shares in each subsidiary company and any intermediate company through which the relationship required under the legislation is traced. If the relationship between companies is dependant upon shares held by nominees, documentary evidence of the beneficial ownership of the shares should be provided.
8. Confirm that at the date of execution of the instrument on which relief is being claimed no arrangement was in existence by virtue of which at that or some later time any person had or could obtain, or any persons together had or could obtain, control of the transferee but not the transferor.
9. Say whether it is intended that:
10. Give the amount of the consideration and say whether it was satisfied from cash resources (see note 4 below), through an inter-company loan account or by way of a third party loan (see note 5 below).
11. Give an assurance that none of the documents were executed in pursuance of or in connection with an arrangement described in Section 27(3) Finance Act 1967.
The completed and signed letter of claim should be accompanied by:-
Send your claim marked “Stamp duty – Group relief claim”
to
Birmingham Stamp Office
9th Floor
City Centre House
30 Union Street
Birmingham B2 4AR
or DX 15001 Birmingham 1
