HM Revenue & Customs has released guidance setting out temporary changes to its stamping procedure, which will apply for the duration of the coronavirus (COVID-19) measures in the United Kingdom.
UK stamp duty is payable on transfers of shares and other “marketable securities,” unless an exemption or relief applies. In the case of share transfers, completed original stock transfer forms must be submitted to HM Revenue & Customs (HMRC) for physical stamping within 30 days of the date of transfer. Stamping (where applicable) is required to perfect the transfer of legal title, and company secretaries are only permitted to register a transfer once it has been duly stamped. Stamp duty is normally paid by cheque or electronically, and the original forms (with any supporting documents) are posted to the Stamp Office. HMRC then returns the stamped forms by post in due course.
For the time being, HMRC is applying the following divergences from the normal rules.
- Taxpayers must only send HMRC electronic copies (for example, scanned PDFs) of properly executed stock transfer forms or other instruments of transfer by email, together with electronic copies of any supporting documents. Originals or copies delivered by post will not be accepted.
- If any original documents have already been posted to HMRC in recent days, these should be resubmitted by email, together with details of any payments made in respect of the relevant transactions, and will not otherwise be stamped until after the temporary COVID-19 measures in the United Kingdom end (by which time the stamping may be late, and a penalty and/or interest may become due).
- Stock transfer forms must still be fully completed, signed, and dated (using a power of attorney where necessary). HMRC is accepting e-signatures for the time being, but this relaxation may only be for the duration of the COVID-19 measures. Any such e-signatures must comply with applicable corporate and contract laws. This is an area that has seen recent developments in the United Kingdom.
- HMRC is not currently stamping stock transfer forms. Instead, it will send the taxpayer an email that will include a copy of a letter, confirming receipt of stamp duty for the relevant transaction. The published guidance implies that company secretaries will be able to rely on this email from HMRC to update the company register and issue new share certificates (if applicable).
- Stamp duty must still be paid within the existing 30-day deadline. There is no suggestion that HMRC will allow interest or penalties to be mitigated on the basis of the COVID-19 measures.
- All payments to HMRC must be made electronically, and not by cheque.
- In some cases, stamp duty is paid under a “wait and see” procedure. This may arise if the consideration is not ascertainable within 30 days of completion; for example, where a sale agreement contains provisions for the consideration to be adjusted by reference to completion accounts. Stock transfer forms are provisionally stamped under this procedure, and must normally be resubmitted when the consideration is finalized. If the consideration has increased, additional duty may be due, and if it has reduced, there may be a refund. Any requests under this procedure must also be made by email during this period, and consequently this change of procedure can affect transactions that completed well before the COVID-19 measures came into effect.
Contacts
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
London
Kate Habershon
Grace Tan