Stamp duty acquisition relief and capital reduction demergers

The measure

A relaxation to an anti-avoidance provision currently applying to stamp duty acquisition relief in respect of share-for-share exchanges will be introduced. A relief from stamp duty is currently available when a company acquires all the shares in a target company in consideration for the issue of shares in the acquiring company. The anti-avoidance provision can currently prevent relief from applying on a share-for-share exchange that is to be followed by a capital reduction demerger resulting in one of the existing owners acquiring control of the acquiring company. The relaxation will mean that such a demerger will not be caught by this provision if that owner previously held at least 25% of the issued share capital of the target company for a period of at least three years prior to the share-for-share exchange.


Who will be affected?

This provision will affect partition demergers which are a type of reorganisation which can involve a change of control of the acquiring company. A stamp duty double charge can currently arise on partition demergers. This clause will prevent this from happening provided the conditions are met. 


When will the measure come into effect?

The provision will have effect for transfer instruments executed on or after Royal Assent of the Finance Bill 2020.

Our view

This is a welcome change to the current anti-avoidance provisions which will prevent a double charge to stamp duty arising on a partition demerger.