As part of his Autumn Statement, the Chancellor yesterday announced the government’s intention to put an end to the practice of avoiding stamp tax charges on UK company takeovers by structuring them as ‘cancellation’ schemes of arrangement.
A ‘cancellation’ scheme of arrangement works by cancelling the target company’s shares through a reduction of capital and the reserve created is then applied in paying up new shares which are issued direct to the acquiring company. As there is no transfer of the target company’s shares in a ‘cancellation’ scheme, the normal stamp duty of 0.5% payable on a transfer of shares in UK companies is avoided.
The government has announced that it will bring forward regulations by early 2015 to prohibit the use of ‘cancellation’ schemes in takeovers and bring an end to the avoidance of stamp tax charges in this way.
We will report further on this once the regulations have been presented. However if you have any questions or concerns please do not hesitate to contact the Edwin Coe Corporate team.
Our Private Client and Tax team have also produced an update following the Autumn Statement. To read this please click here.
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