The pleasure is all mine, Sir Nicholas. May I start by saying how nice you look with your new haircut?
Clause 96 contributes to the reduction of the administrative burden on business of complying with stamp duty legislation by exempting from duty a variety of instruments that transfer ownership of shares where there is not a sale and purchase for consideration. Those instruments will therefore no longer need to be stamped by Her Majesty’s Revenue and Customs and may be sent directly to the company registrar to change the share register. The detailed provisions are set out in schedule 32. This deregulatory measure has been widely welcomed and I am sure that all members of the Committee will agree that it is sensible.
New clause 6 ensures that clauses 95 and 96 will achieve their intended effect with respect to instruments executed to gift stock or marketable securities by removing the requirement for those instruments to be presented to HMRC for denoting as not chargeable with stamp duty. Approximately 900,000 instruments are executed each year to transfer ownership of shares and securities. Previously, a range of transactions not involving sales or purchases could be certified under Treasury regulations as exempt from stamp duty, meaning that some 550,000 instruments did not have to be presented to HMRC for stamping. Of the remaining 350,000 instruments that had to be presented, two thirds were stamped only with the minimum £5 stamp duty because either the consideration given was £1,000 or less, or the instrument was of a type that attracted a nominal fixed £5 charge. That places a significant cost in resources on business for a comparatively small amount of duty. KPMG assessed the costs to business of complying with the stamp duty legislation as £49 million, of which some £41 million was attributed to the need to present instruments to HMRC for stamping.
The Government are keen to drive down as far as possible the administration costs of complying with tax legislation, and have therefore decided to remove the need for instruments attracting only the nominal £5 fixed stamp duty to be stamped. In future, those instruments will be exempt from stamp duty and may be passed direct to the registrar to update the register of shareholders. Together with clause 95, the new clause will reduce the number of documents that need to be seen by the Stamp Office by around 230,000, reducing the administrative burden on business by £13.8 million annually, while simultaneously achieving efficiency savings for HMRC.
One category of instruments impacted by these changes is instruments gifting stock or marketable securities. Previously, where the gift was for no consideration, the instrument was potentially chargeable with a £5 stamp duty but could be certified as exempt under Treasury regulations. Where the gift was for inadequate consideration, an ad valorem stamp duty charge at the rate of 0.5 per cent. of the consideration provided was chargeable. Clauses 95 and 96 of the published Bill will remove both the £5 stamp duty charge and the requirement to certify the instrument of transfer and also disapply the ad valorem charge for instruments where the consideration was less than £1,000.
Since the Bill was published, however, it has been pointed out that those changes have activated another provision that would prevent such instruments being regarded as duly stamped unless they were formally adjudicated by HMRC as non-chargeable for stamp duty. That would mean having to present them for stamping even though no duty is payable. That would reverse the intended effect of reducing the number of instruments that needed to be presented to the tax authority.
New clause 6 will ensure that the original aim is met by removing the provision that would strictly require instruments gifting stock or marketable securities to be adjudicated. The new clause will therefore enable the full amount of the projected reduction of business costs to be realised.