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ACCA Strategic Professional · Advanced Taxation (UK) · Stamp taxes (stamp duty, stamp duty reserve tax and stamp duty land tax)

Dev sells 10,000 shares in Larch plc, a UK company, to a friend for £5.00 per share. The transfer is by stock transfer form. Dev's chargeable gain computation is being prepared alongside the stamp duty. Which statement is correct?

Stamp duty is £250, paid by the buyer, so it does not affect Dev's gain computation. The consideration is £50,000 and the rate is 0.5%. The seller bears none of the duty, so there is no deduction in his gain.

  1. AStamp duty is £250 and the buyer bears it; it is not deductible in Dev's gain computationCorrect
  2. BStamp duty is £250 and the seller bears it; it is deducted in Dev's gain
  3. CStamp duty is £500 and the buyer bears it; it is not deductible in Dev's gain computation
  4. DStamp duty is £250 and the buyer bears it; it is deducted from the buyer's income tax liability

Explanation

Consideration is 10,000 x £5 = £50,000, and 0.5% gives £250. The buyer pays the duty, so it does not reduce the seller's proceeds or gain. Duty of £500 would apply a 1% rate, which is wrong. The buyer cannot set it against income tax.

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