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Insight

Stamp duty on inserting a new top company or holding company

The short point is: do not assume that there will be no stamp duty on a share for share interposing a new topco or holdco.When interposing a new topco or holdco, for example in connection with a float The short point is: do not assume that there will be no stamp duty on a share for share interposing a new topco or holdco.

When interposing a new topco or holdco, for example in connection with a float (or a general restructuring), it has generally been the case that the transaction has been stamp duty free, subject to ensuring a mirror image shareholding and obtaining adjudication from the Stamp Office under section 77 Finance Act 1986.

The Stamp Office have over recent months been taking a tougher stance on analysing that mirror image requirement, and in particular are looking at the extent to which debt should be taken into account.  Debt of course comes in many shapes and forms, and it can be seen how certain sorts of debts are rather more like equity/long term capital structure than others.  The legislative language in question, which refers to funded debt, is very old and case law on it is not much younger and not in line with the development of the debt markets.

The difficulty therefore is the uncertainty of the Stamp Office's position.

Some guidance on simpler forms of debt has been promised for some months, pending a fuller consideration by the Stamp Office of more complex debt structures.

The latest from the Stamp Office is that "issued funded debt" (in their words) is taken to be debt that takes the form of the capital structure of the company and that this would not include such short term debt as overdrafts.  The use of ‘issued’ implies something put out by the company (such as loan notes) as opposed to debt which it simply receives from a lender.  The Newsletter won’t contain a comprehensive list but will outline the principles to be adhered to.  Questions remain as to the Stamp Office's stance on longer term bank debt, and of course on the various different kinds of issued debts that companies routinely have.  We will have to await the Newsletter.

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