- Penalties and appeals - Stamp Duty Reserve Tax
- HMRC enquiries into Stamp Duty Reserve Tax transactions
Penalties and appeals - Stamp Duty Reserve Tax
When Stamp Duty Reserve Tax (SDRT) is due on an agreement to transfer shares, HM Revenue & Customs (HMRC) must be notified and the tax must be paid by the due date - known as the 'accountable date'.
If the notice and payment are late, or if either is incorrect, HMRC will usually charge a penalty. In addition, interest is normally charged on the tax that's overdue.
This guide explains when penalties are charged for late or incorrect SDRT notices, and how these penalties are worked out. It also explains what to do if you think a penalty is too high.
Note that new penalty arrangements will be introduced in April 2010 to make the penalty system more consistent for different types of tax.
On this page:
- Stamp Duty Reserve Tax notification and payment deadlines
- Penalties for missing an SDRT deadline
- Penalties for incorrect SDRT notifications or payments
- If you disagree with a penalty amount
- Appealing against an Stamp Duty Reserve Tax penalty
- Interest on late payments of SDRT
Stamp Duty Reserve Tax notification and payment deadlines
Where SDRT is due on an agreement to transfer shares there is a deadline for notifying HMRC and paying the tax. The deadline depends on whether the transfer was made through the CREST electronic system or was 'off-market' (made outside of CREST).
If you're a stockbroker or a similarly qualified person buying shares for someone else then you're responsible for paying the tax on their behalf. If you're buying shares for yourself then you're responsible for paying the tax.
Deadline for share transfers that can or could be made through CREST
The deadline for notifying HMRC about a transfer of shares and for paying the tax is 14 calendar days after the date when the trade took place. This deadline applies to:
- CREST transfers (where notification and payment to HMRC is automatic)
- any transfer that could have been made through CREST but wasn't
Deadline for off-market share transfers
When shares are transferred off-market outside of CREST - and the transfer couldn't have been made through CREST - the deadline for notifying HMRC and paying any tax due is the seventh day of the month following the month when the trade took place.
For example, if a trade took place on 18 April 2009 then the deadline would be 7 May 2009.
If the transfer could have been made through CREST the deadline is 14 days after the transaction - the same as if it had been made through CREST.
You must work out the tax due and send the notification and payment to HMRC. There are several different ways of paying, including electronically. If you don't notify HMRC and pay any tax due by the deadline then it's likely that a penalty will be charged.
How to pay Stamp Duty Reserve Tax
Penalties for missing an SDRT deadline
Late payment and notification within 12 months of the deadline
If you notify HMRC and pay SDRT within 12 months of the deadline, the penalty will be the lower of £100 or the amount of tax that's due.
You'll usually also have to pay interest on the tax that's due - as well as the outstanding tax.
This penalty potentially applies to each transaction for which you miss the deadline.
Late payment and notification more than 12 months after the deadline
If you notify HMRC and pay the SDRT more than 12 months after the deadline an additional penalty will be charged.
This penalty can be as much as the total amount of tax that's due, but it may be reduced. The amount it's reduced by will depend on:
- the reasons for the delay or error
- how well you co-operated with HMRC to put things right
- the seriousness of the issue
You will have the opportunity to point out reasons why you think the penalty should be reduced and to negotiate an agreement with HMRC on how much the penalty should be.
So the penalty for notifying and paying HMRC for a transaction more than 12 months after the deadline would be the total of both of the following:
- £100
- another amount that could be as much as the tax that's due
You also have to pay interest on the tax that's due - as well as the outstanding tax.
Penalties for incorrect SDRT notifications or payments
An SDRT notification or payment might be wrong because of a mistake, negligence or fraud.
HMRC audits and inspects CREST users and others who are involved in the share transfer market. If they find you have made an error in an SDRT notification, or paid the wrong amount of tax, you will probably have to pay a penalty as well as any tax that's due. You will also have to pay interest.
This is also the case if you discover an error yourself. In this case you must contact HMRC to report the error and explain how it occurred.
How the penalty is worked out
The penalty can be as much as the total amount of tax that's due, but it may be reduced. The amount it is reduced by will reflect:
- whether or not you disclosed full details of your tax affairs
- how well you co-operated with HMRC to put things right
- the seriousness of the error
When they work out how much the penalty should be, HMRC will look at whether the error was a genuine mistake or a deliberate attempt to avoid paying tax. They will also take into account whether you told them about the error, or whether they discovered it during an audit or inspection.
If you disagree with a penalty amount
Negotiating an agreement with HMRC
You will have the opportunity to point out reasons why you think the penalty should be reduced and to negotiate an agreement with HMRC on how much it should be. In most circumstances agreements are reached. In this case you'll be asked to confirm the agreement in writing by signing and returning a formal letter.
If you can't reach an agreement
If you can't agree with HMRC over how much the penalty should be they will issue a 'determination notice'. This will state how much the penalty should be based on HMRC's best judgement. If you still don't agree you can appeal - see the section below for more information on appealing against an SDRT penalty.
(Note that you can't appeal against a late payment interest charge - read the later section on 'Interest on late payments of Stamp Duty Reserve Tax' to find out more.)
Appealing against a Stamp Duty Reserve Tax penalty
You have the right to appeal against any SDRT penalty that you disagree with. You must do this in writing within 30 days of receiving the penalty notice.
Include any reference number you have in your appeal letter. Mark your letter 'Stamp Duty Reserve Tax' and send it to:
Birmingham Stamp Office
9th Floor
City Centre House
30 Union Street
Birmingham
B2 4AR
Most appeals are settled by reaching an agreement with HMRC. But if you are unable to agree a settlement there are other options. You can ask HMRC to review their decision, or you can ask an independent tribunal to consider your appeal.
More about appealing against an HMRC decision
Interest on late payments of Stamp Duty Reserve Tax
If you pay SDRT late you will have to pay interest on the amount of tax that's overdue. HMRC charges interest at the official rate set by HM Treasury from the date when the tax became due until the date when it's actually paid.
You won't have to pay any interest if the total amount of interest due is less than £25.
Check the official interest rate charged by HMRC on late payments
If you disagree with a late payment interest charge
Interest isn't a penalty - it's a commercial charge to compensate HMRC for not getting the money when they should have. So you can't appeal against the charge.
But if you think you shouldn't be charged any interest, or if you think you've been charged too much, you can write to the Finance Team at the Birmingham Stamp Office to explain why.
Mark your letter 'Stamp Duty Reserve Tax' and include any reference number you have.
Send it to:
Birmingham Stamp Office
Finance Team
9th Floor
City Centre House
30 Union Street
Birmingham
B2 4AR
