No stamp duty on the way in, if the share exchange is built for it.

In practice, the holding company as the buyer. Stamp duty is a charge on the stock transfer form, and the transfer can't properly be entered in the trading company's register of members until the form is duly stamped. So the holding company, which wants to be registered as owner, pays the 0.5% and any interest or penalties. A new holding company with no cash may need funds from its new subsidiary to pay it.

Stamp duty on shares is 0.5% of the consideration, rounded up to the nearest £5. On a share-for-share exchange the consideration is the value of the holding company shares issued, which broadly reflects the value of the trading company. So a company worth £8m would face stamp duty of around £40,000 if share acquisition relief were not available. Interest and penalties can be added if the form is sent to HMRC late.

In summary: the holding company acquires the whole of the target's issued share capital; the acquisition is for bona fide commercial reasons and not mainly to avoid tax; the consideration is only new shares issued to the target's shareholders; every shareholder of the target becomes a shareholder of the holding company; the share classes, the proportions of each class and each shareholder's holdings are the same, or as nearly as may be; and there are no disqualifying arrangements.

Treasury shares are dealt with by a specific rule. If, immediately before the acquisition, the trading company or the holding company holds any of its own shares, those shares are treated as cancelled when testing the share capital, same-shareholders and same-proportions conditions. So the company isn't treated as one of its own shareholders. It's still worth tidying up the share register and checking the treasury position before the exchange documents are drafted.

Not any more. Section 77 used to include a condition that the acquiring company had its registered office in the United Kingdom, but that condition was repealed by the Finance Act 2006. The current conditions focus on the consideration being shares only, the share structure mirroring the target's, commercial reasons and the absence of disqualifying arrangements. A non-UK holding company raises plenty of other tax questions, though.

They are arrangements where it is reasonable to assume that a purpose is for a particular person, or a group of people together, to obtain control of the holding company. A typical example is inserting a holding company with a buyer already lined up to acquire it. A person who held at least 25% of the target throughout the three years before the share issue is excluded from this test, so existing long-term owners don't trigger it.

No. Where section 77 share acquisition relief is claimed, the law requires adjudication, which is HMRC's formal decision on what duty, if any, the document attracts. Documents that need adjudication can't go through the same-day service. Instead, the stock transfer forms are sent to HMRC with details of the relief claimed. HMRC aims to deal with most forms within 15 working days, so build that into the completion timetable.

Stock transfer forms should be sent to HMRC within 30 days of being signed and dated. That applies even where you are claiming a relief and no duty will be payable. If the forms are sent late, a penalty and interest may be due if it turns out the relief isn't available. HMRC aims to deal with most forms within 15 working days and suggests allowing 20 working days.

It shouldn't. Under section 17 of the Stamp Act 1891, a person responsible for registering a transfer that is chargeable with duty but not duly stamped can be fined up to £300. For a share exchange claiming section 77 relief, the transfer is only duly stamped once it has been adjudicated. We include the order of these steps in the completion checklist.

Yes. Section 77 requires the consideration to consist only of the issue of shares in the holding company. If any shareholder receives cash, the relief fails for the whole acquisition, not just the cash element, and stamp duty is due at 0.5% on the full consideration. Where a shareholder wants to leave, alternatives such as a buy-back by the trading company before the exchange need to be considered.

Generally not. After the acquisition, the holding company's shares must be of the same classes as the trading company's, the proportion of each class must be the same, and each shareholder must hold the same proportion of each class, or as nearly as may be. Introducing new classes, such as alphabet shares, at the same time as the exchange usually breaks the relief. They are normally introduced in a separate step.

Yes. Section 77 relief needs the consideration to consist only of shares issued by the holding company. Loan notes are debt, not shares, so issuing them as part of the consideration means the relief is not available and stamp duty is charged at 0.5% on the full consideration. Loan notes can also raise transactions in securities issues for income tax, so they need careful thought on a holding company insertion.

That's a classic disqualifying arrangement. If it's reasonable to assume that a purpose of the arrangements is for the buyer to obtain control of the holding company, section 77 relief can be denied, unless the buyer is someone who held at least 25% of the target throughout the previous three years. A pending sale also raises questions under the capital gains tax main purpose test, so timing needs care.

It can. The holding company usually has one or more subscriber shares before the exchange. If those are held by the wrong person or in a different class, the final shareholdings may not mirror the trading company's, which can put the same-proportions conditions at risk. The usual answer is to plan who holds the subscriber shares from the outset, or to deal with them so the final position matches.

Not on the share exchange itself. Stamp duty land tax applies to land, and inserting a holding company only moves shares. The trading company still owns its property, so nothing passes for SDLT purposes. SDLT becomes relevant later, if property is transferred between companies in the group, for example from the trading company to a new property subsidiary, where the companies are connected and market value applies.

SDLT group relief, in Schedule 7 to the Finance Act 2003, can remove the SDLT charge on transfers of land between companies in a 75% group. It isn't available where there are arrangements for consideration to come from outside the group, for the buyer to leave the group, or where the transfer isn't for bona fide commercial reasons. The relief is claimed on the SDLT return rather than through advance clearance.

No. SDLT group relief only applies to transfers between companies in a 75% group. If the holding company owns 60% of the property company, a transfer of premises from the trading company to the property company won't qualify, and because the companies are connected, SDLT is charged on at least the property's market value. If an outside investor is coming in, the order of the property transfer and the share issue matters.

HMRC will assess stamp duty at 0.5% on the consideration, with interest and possibly penalties if the forms were submitted late. Because relief depends on facts at the time the transfer was signed, it usually can't be fixed afterwards by changing shareholdings. You can ask HMRC to reconsider, or appeal, if you think the decision is wrong. Getting the structure right before signing is far cheaper than arguing afterwards.

No. The section 138 and section 701 clearances deal with capital gains tax and income tax. Stamp duty share acquisition relief is decided separately, through adjudication of the stock transfer forms by HMRC's Stamp Taxes team after the exchange. A clean clearance doesn't guarantee stamp duty relief, so the section 77 conditions need checking in their own right before the documents are signed.