Following on from last year’s policy documents (see A&O Shearman, Tax odyssey: the journey to a single securities tax), this publication represents an important milestone in the UK’s ongoing efforts to bring its transfer tax framework into the digital age. Interested parties have until September 7, 2026 to respond to the consultation, after which the draft legislation is expected to be incorporated into Finance Bill 2027.
It is worth emphasising at the outset that this proposed overhaul represents a highly significant reform, one that is arguably long overdue. The existing dual, and often overlapping, system is archaic and unduly complex, rooted in ancient legislation and shaped by piecemeal development over time.
This has produced an uneasy and frequently unworkable status quo that is ill-suited to modern markets and practice. The reforms will have a wide-reaching impact, affecting transactions ranging from private share sales to debt capital markets.
Overview
At its core, the STT constitutes a single, digital self-assessed tax on the transfer of securities—the current distinction between paper transactions subject to stamp duty and electronic or agreement-based transactions subject to SDRT will disappear. Transactions on CREST will continue to function in a very similar manner (although note comments at “Digitalisation, process and reporting” below); outside of CREST, HMRC is developing a new digital service through which taxpayers will report and pay STT.
The provisions of the draft legislation largely reflect the policy objectives set out in the government's 2025 announcements, although we note that its title has evolved from earlier iterations, having previously been referred to as the “securities transfer charge” and, before that, “stamp taxes on securities”.
The government's stated policy intentions are simplicity, ease of use, clarity and certainty. It has been clear throughout that the reforms are not intended to materially alter the scope or incidence of transfer tax as compared with the current regime.
Under the reformed structure, the “main charge” applying to agreements to transfer chargeable securities remains unchanged at 0.5%. A higher rate charge of 1.5% will continue to apply where chargeable securities are transferred to a clearance service provider or a depositary receipt issuer. Policy costings confirm that the reform is expected to be Exchequer-neutral, with no net impact on tax revenues.
The new regime is still expected to come into force in 2027, with additional detail to be announced in autumn 2026. Transitional provisions will apply to transfers of securities entered into before the commencement date to which stamp duty or SDRT applies, but is not due to be reported or paid until on or after that date.
Scope
Both the main charge and the higher-rate charge apply in relation to “chargeable securities”. These are defined as shares, equity-like debt interests and units in a unit trust scheme (other than an excluded unit trust scheme), as well as derivative interests, rights to allotment or subscription or options to acquire these securities.
The question of debt
In relation to transfers of debt, the new approach differs significantly from the existing regimes. Currently, stamp duty applies to “stock and marketable securities” and SDRT to “chargeable securities”. Each of these includes debt, but the scope is narrowed by the availability of the loan capital exemption and, for stamp duty, the exemption for non-marketable debentures.
Under the new regime, transfers and agreements to transfer loan capital and debentures fall outside scope unless they constitute “equity-like debt”, a concept defined broadly along the lines of the existing rules on non-exempt loan capital. In other words, transfers of pure debt will simply fall outside scope, removing the need to replicate the existing loan capital and debenture exemptions.
This produces one notable divergence. Under the existing regime, non-marketable private company debentures with equity-like terms fall outside stamp duty. This would typically apply to many conventional loan facility agreements. This will not be the case under STT; the draft STT legislation contains no reference to marketable securities, save in relation to certain transitional provisions.
This newly taxable category appears likely to be an unintended consequence of the drafting; and it may cause real difficulties in practice, particularly where large volumes of loans are transferred, as is often the case in loan portfolio transactions. Each instrument will presumably need to be reviewed individually for equity-type features, adding a layer of diligence that does not currently exist.
Bearer instruments
Stamp duty on bearer instruments will be repealed under the new regime. Although the charge on issue of bearer instruments was abolished with effect from January 1, 2024, bearer instrument duty is still payable at 1.5% on a transfer of a bearer instrument.
Under the new regime, the transfer of an in-scope security will generally be taxed in the same way whether the security is bearer, registered or dematerialised. This is an improvement on the current system, which comprises a patchwork of bearer-specific charges and exemptions.
Jurisdictional reach
The new STT defines “chargeable securities” by reference to the securities of a UK-incorporated company. This is a significant departure from the existing stamp duty approach, which has no express territorial limitation (although the practical consequences of not stamping a stampable document are limited where there is no UK nexus).
As with SDRT, the charge to STT will apply wherever the transaction is effected and wherever the parties to it are located (clause 65).
That said, the new regime does differ from the existing SDRT approach in that STT “chargeable securities” will not include the securities of foreign companies with a register in the UK. For securities issued by companies incorporated outside the UK, the location of the register becomes irrelevant. In a debt capital markets context, for example, it will no longer be necessary to check for the existence of a UK register, and this change is welcome.
There are, however, certain situations in which company residence may still be relevant. Specifically, depositary interests will fall within scope where the underlying securities are shares in, or equity-like debt interests in, a company that is UK tax resident (regardless of whether it is UK-incorporated).
Exemptions and reliefs
Leaving aside the question of loan capital, a broad suite of exemptions includes exemptions very similar to those in existence.
In relation to group relief, the draft legislation preserves the broad policy of stamp duty group relief, if not the exact tests which now cross-refer to the Corporation Tax Act (CTA) 2010 Part 5 definitions.
The revised rules may be more favourable than current SDRT in ordinary dematerialised intra-group transfers because group relief becomes a direct STT relief claimed through the return, rather than an indirect result obtained by executing and adjudicating a stamp duty instrument. It is also more explicit in dealing with joint venture and mortgage/security arrangements, which should reduce uncertainty if the drafting works as intended.
There are also specific reliefs for corporate reorganisations, intermediaries, public issues, central counterparties, recognised growth markets, new UK listings, capital-raising and listing arrangements, stock loans and repos, securitisation vehicles and hybrid capital instruments. Many exemptions carry anti-avoidance carve-outs and must be actively claimed in a return.
Calculating the charge to STT and meaning of "consideration"
The charge to tax is calculated by reference to the amount or value of the consideration in money or money’s worth, reflecting existing SDRT concepts as anticipated. There is therefore no equivalent to the existing stamp duty provision, which imposes a charge by reference to the amount of a debt in cases in which property is transferred subject to or in satisfaction of any debt (s.57 SA 1891). The amount of debt chargeable does not appear to be capped at the market value of the securities, which is a feature of the existing rules.
The new principles applying to uncertain consideration offer a significant improvement. Where part or all of the consideration has not or cannot be determined as at the charging time, clause 8 stipulates that STT should be paid on the basis of a “reasonable estimate” of the amount or value. When the exact amount becomes clear, the amount of tax is redetermined. This avoids the stark outcomes of the stamp duty contingency principle.
It will be interesting to understand HMRC’s view as to what makes an estimate “reasonable”. As this represents a material shift away from the existing “wait and see” principles for stamp duty, it may mean that the financial modelling for share purchases will be approached differently in the new world.
Of less appeal is the fact that STT includes no monetary floor or de minimis threshold below which the charge does not arise. This is unwelcome news for holders of small shareholdings and represents a material increase in administrative burden for comparatively little additional yield to the Exchequer. This appears to be an odd outcome.
The draft legislation includes anti-avoidance provisions which substitute market value for actual consideration for the purposes of the main charge where the parties are connected.
Partnerships, funds and fund secondaries
An important and very welcome development for the private funds industry is that it is proposed that the transfer of partnership interests will fall outside the scope of STT. This should ensure that fund secondary transfers of interests in funds that are structured as limited partnerships will not be subject to STT.
One of the idiosyncrasies of the existing stamp duty regime is the way in which it applies to partnership interests, especially with the overlay of the uncertainty of the jurisdictional scope of stamp duty.
As stamp duty is not an assessable tax, in many cases, the only practical effect of failing to stamp a document transferring a partnership interest is to limit its ability to be produced as evidence in English court proceedings.
As a result, stamp duty is not typically paid in funds secondaries transactions, even where a technical liability may have arisen. This still creates needless uncertainties and it is not uncommon for there to be extensive provisions navigating the challenges of offshore execution and retention of documents to try to mitigate the technical risk.
It should be noted that the draft legislation includes an anti-avoidance rule that can allow for STT to be chargeable in relation to the transfer of partnership interests where the partnership acquired shares or securities in circumstances with a main purpose of avoiding STT.
It is unlikely to be relevant to ordinary fund secondaries in practice, where the structure will have been set up as a partnership from the outset in a manner consistent with long-standing industry practice and the fund partnership will have acquired its interest in portfolio companies in the ordinary course of its business rather than as part of arrangements intended to avoid STT.
For funds, the draft legislation seeks broadly to re-enact the existing policy in relation to contractual schemes, open-ended investment companies (OEICs) and unit trusts. However, the drafting is not identical. Given that the draft legislation expressly provides that STT is not to be regarded as a re-enactment of existing stamp duty or SDRT legislation (clause 74), existing authorities and HMRC practice should not automatically be assumed to carry across where the new language differs.
Digitalisation, process and reporting
A central plank of the reform is full digitalisation. STT is intended to remove the remaining need for non-electronic instruments and paper-based reporting and payment, bringing all transactions within a single, self-assessed digital framework. For transactions settled through CREST, the process should remain broadly familiar.
Transactions outside CREST, however, will be reported through a new HMRC online portal. On submission of a return, HMRC will provide an acknowledgement that can be used to enable registration of the transfer without waiting for the tax to be paid—one of the most practically significant improvements under the new regime.
The reporting obligations for electronic transactions are nevertheless potentially much wider than under the existing regime. Clause 56 of the draft legislation requires a return for every electronic transaction, including a transaction in respect of which an exemption applies.
The system operator will ordinarily be responsible for making that return, although another accountable person may assume that responsibility where the system operator is not accountable. A single return may cover multiple transactions, which should allow the rules to be implemented through aggregated or system generated reporting.
This represents an important change for securities admitted to a clearance service. Although an exempt transaction will still produce no tax liability, it will now be a reportable transaction.
In other words, an exemption may determine the amount of tax due, but it will not necessarily take the transaction outside the STT compliance framework. System operators, exchange members, dealers and other intermediaries will therefore need to map the exemptions relied upon, identify the data required for the return and ensure that the relevant information can be captured and transmitted within the statutory timetable.
Clearance service providers, depositary receipt issuers and certain nominees will also face separate notification requirements. These include notifying HMRC when a relevant business begins and, in prescribed circumstances, when securities issued by a particular company first enter a clearance service or depositary receipt arrangement.
UK companies may themselves be required to notify HMRC when they first become aware that their securities are held through such an arrangement. These obligations are distinct from the transactional return and will need to be built into onboarding and ongoing compliance procedures.
Outside CREST, the change will be much more visible. The existing process of submitting instruments to HMRC will be replaced by self-assessment through the online portal. HMRC must provide a written acknowledgement when it receives a return for a non-electronic transaction, and a company will generally be prohibited from registering a transfer unless it receives that acknowledgement or a prescribed statement that no return was required.
This should permit same-day registration and remove the need for the cumbersome workarounds currently used where registration cannot wait for HMRC to process a stamping application. Much will, however, depend on the design, reliability and functionality of the portal, the details of which have yet to be finalised.
There is no statutory pre-clearance procedure in the draft legislation. HMRC’s non-statutory clearance service should remain available for cases involving genuine uncertainty, but it is not a substitute for self-assessment and will not provide a general transaction-approval mechanism.
Payment terms and liability; the "accountable person"
The filing and payment periods are aligned. For an electronic transaction, the return must be filed and the tax paid within 14 days, beginning with the day after the charging time. For any other relevant transaction, the corresponding period is 30 days. STT is recoverable as a debt due to the Crown, with late-payment interest and the wider compliance machinery applying in the usual way.
The buyer is primarily liable for the main charge, while the “interested party” is liable for the higher-rate charge. Where more than one person is liable, their liability is joint and several. The draft legislation then overlays a hierarchy of “accountable persons”.
For electronic transactions, this may include the system operator and a responsible exchange member or dealer. The latter is identified through a statutory hierarchy potentially encompassing the buyer’s agent, the seller or the seller’s agent, depending on their exchange-member or qualified-dealer status.
For a non-electronic transaction, an agent authorised to act for the liable person becomes an accountable person if the agent confirms that status to HMRC. Once given, that confirmation continues to apply to the particular transaction even if the wider agency relationship subsequently ends.
An accountable person is required to pay the tax as though jointly and severally liable with the buyer and any other accountable person. Relief is available only if HMRC is satisfied that the accountable person took, without success, all reasonable steps—both before and after the transaction—to obtain the tax from the liable person.
This is likely to be one of the more controversial aspects of the reforms. The facility for agents to submit returns should be helpful, particularly where purchasers are unfamiliar with the portal.
However, the accompanying exposure may discourage advisers and other agents from doing so. Firms willing to act as accountable persons will need appropriate engagement terms, funding arrangements, client due-diligence procedures and protections against non-payment. Others may conclude that the risk is disproportionate to the administrative assistance being provided.
Proceed with caution
There is much to welcome. Replacing the overlapping stamp duty and SDRT regimes with a single tax is a substantial and long-overdue simplification. The move to digital self-assessment—and, in particular, the ability to register a transfer promptly after filing—should make the system better suited to modern transactions.
For most acquisitions and trades in equities and securities, the headline tax cost should not materially change: the principal rate remains 0.5%, the higher rate remains 1.5% and many familiar exemptions and reliefs have been retained.
The reforms are not, however, merely a repackaging of the existing rules. Clause 74 expressly provides that the STT provisions are not to be treated, for the purposes of section 17 of the Interpretation Act 1978, as a re-enactment of the previous stamp duty or SDRT legislation.
That is a clear warning against assuming that existing statutory analysis, case law or HMRC practice can simply be carried across. Familiar language may assist, but every conclusion will need to be tested against the new provisions. It is understood that the existing stamp taxes manual will be withdrawn in its entirety, to be re-cast with a new manual.
That caution is particularly important in areas where the architecture of the charge has changed. The move to a single charging point should remove some of the complexity caused by overlapping taxes, but it may also alter the timing or outcome of transactions at the margins.
The treatment of equity-like debt, the absence of a freestanding debenture exemption, the distinction between automatic and claimed exemptions and the new rules for uncertain consideration all require rigorous analysis rather than reliance on existing labels or assumptions.
Existing transaction documentation will also need to be revisited. Share purchase agreements and related documents should address the new charging time, responsibility for filing, access to the portal, payment funding, evidence required for registration and the allocation of risk where consideration is contingent or subsequently adjusted. Standard form provisions, settlement procedures and internal review guides will need to be reconsidered rather than updated mechanically.
For CREST and other market infrastructure, the legal simplification will be accompanied by a significant operational project. HMRC, Euroclear UK & International, registrars, clearing houses, brokers and other market participants will need to co-ordinate systems development, data standards, testing and implementation.
Adequate lead time will be essential: a digital regime is only simpler if the relevant technology works reliably from day one. The detailed portal design, procedural guidance and secondary legislation remain to be finalised.
The draft legislation was published for technical consultation and is not yet settled law. The consultation closes on September 7, 2026. The government is aiming to introduce STT in 2027, and a further update on commencement is expected in autumn 2026. There is therefore still an important opportunity to identify unintended consequences and address practical concerns before implementation.
Overall, STT is a welcome and significant reform, but one that will require considerable preparation. Businesses should begin assessing its effect on transaction structures, documentation, settlement processes, relief claims and compliance systems, while resisting the temptation to assume that established stamp duty or SDRT answers will necessarily remain correct.
We will be engaging with HMRC on a number of points raised by the draft legislation. Please contact your usual A&O Shearman adviser if you would like to discuss any of the issues covered in this article or the potential implications for a current or proposed transaction.
