Cross-border private company acquisitions: UK tax

A Q&A written by Nick Cronkshaw and Gary Barnett as “Tax (private company acquisitions) Q&A: UK (England and Wales)”. Reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com or call +44 (0)20 7542 6664.

1. Are transfer taxes payable on the sale of:
   • (a) shares in a private company which is incorporated in your
     jurisdiction (a Share Sale), or
   • (b) a business (or a collection of assets)
     which is either carried on in your jurisdiction, or by a company
     which is tax resident in your jurisdiction (a Business/Assets Sale)?
   • How is any such applicable transfer tax
     calculated and what are the applicable rates?

Share Sale

Stamp duty. Stamp duty must be paid on an instrument transferring shares at the rate of 0.5% of the consideration (rounded up to the nearest £5).

Market valuation provisions were introduced with effect from 29 October 2018 for transfers of listed securities between connected parties (where they do not benefit from group relief) and the government proposes to extend the market value rules to transfers of unlisted securities to connected persons in consideration of an issue of shares in the Finance Act 2020 (UK budgetary legislation enacted for each fiscal year).

Stamp duty reserve tax (SDRT). SDRT is charged at the rate of 0.5% of the consideration on an agreement to transfer shares. If an instrument of transfer is subsequently executed and stamp duty paid on that instrument, the charge to SDRT is cancelled and any SDRT already paid is repaid or credited against the stamp duty payable. This avoids a double charge to stamp duty and SDRT.

Business Sale

Stamp duty land tax (SDLT). SDLT must be paid on transactions involving the transfer of land or buildings at a rate of up to 5% on business properties (SDLT up to a rate of 12% must be paid on residential properties and up to 15% in some cases involving a purchase by a non-natural person of property for more than £500,000 or on an additional residential property).

No SDLT is payable on the transfer of a business property for £150,000 or less and the 5% rate applies where the consideration is over £250,000. An intermediate rate of 2% applies where the consideration is between these figures.

The sale of almost all other assets may now be made without incurring transfer taxes.

Read the Q&A in full here.