Stamp duty reliefs on share for share reorganisations

Two reliefs in the Finance Act 1986 stop stamp duty arising when a business is reorganised without any real change of ownership. Section 77, which HMRC calls acquisition relief, covers the share transfers when a new holding company acquires all the shares of an existing company in exchange for a mirror image issue of its own shares; section 75, reconstruction relief, covers the transfer of all or part of a company’s undertaking to a new company owned by the same shareholders in the same proportions. Both must be claimed from HMRC, and both fail if the shareholdings do not match.

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What do the two reliefs cover?

Both reliefs remove the 0.5% charge on a transfer on sale, and HMRC’s Stamp Taxes on Shares Manual at STSM042350 lists what they share: they apply only to companies, refer to a target company and an acquiring company, require the acquiring company to issue shares as consideration, have no clawback period, and make adjudication by HMRC compulsory.

	Section 77 (acquisition relief)	Section 75 (reconstruction relief)
Typical use	Inserting a new holding company above an existing company	Moving a business, or part of one, into a new company with the same owners
What is acquired	The whole of the target’s issued share capital	The whole or part of the target’s undertaking
Consideration allowed	Only an issue of shares in the acquiring company	An issue of non redeemable shares to all the target’s shareholders, plus assumption or discharge of the target’s liabilities
Change of control test	Yes, section 77A	No equivalent section

Property transferred in the same transaction falls under SDLT, which has its own reconstruction and acquisition reliefs in Part 2 of Schedule 7 to the Finance Act 2003 with a separate withdrawal regime. The company law steps for a holding company are covered in setting up a holding company, and the capital gains side in share for share exchange.

What conditions apply when a holding company is inserted?

Section 77(3) requires that:

the transfer is part of an arrangement by which the acquiring company acquires the whole of the target’s issued share capital
the acquisition is for bona fide commercial reasons and not part of a scheme with a main purpose of avoiding stamp duty, stamp duty reserve tax, income tax, corporation tax or capital gains tax
the consideration is only the issue of shares in the acquiring company to the target’s shareholders
afterwards every former shareholder of the target is a shareholder of the acquiring company, the share classes are the same, and the proportions of each class, and each shareholder’s proportion, are the same or as nearly as may be the same
no disqualifying arrangements under section 77A exist when the transfer is signed.

HMRC applies these strictly. STSM042410 says the relief needs a single bid for the entire share capital, so it is not given if the acquiring company already held shares in the target, and shares registered to a nominee of a target shareholder are not treated as issued to that shareholder. Class is judged by the rights attached, not the label. STSM042400 adds that “issue” means allotment completed by entry in the register of members.

The phrase “as nearly as may be the same” allows only unavoidable differences. HMRC’s example at STSM042420 is a shareholder with 101 of 10,000 shares in one company and 1 of 100 in the other, since 1.01 shares cannot be issued. It will not accept a change of control, a material change in economic interest, or a shareholder joining or leaving.

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When does a planned change of control block section 77?

Section 77A, added by the Finance Act 2016, treats arrangements as disqualifying if it is reasonable to assume that a purpose of them is for a particular person, or particular persons together, to obtain control of the acquiring company. “Arrangements” includes any agreement, understanding or scheme, enforceable or not, and control follows section 1124 of the Corporation Tax Act 2010.

The Finance Act 2020 softened this for instruments executed on or after 22 July 2020. A person who has held at least 25% of the target’s issued share capital throughout the three years before the consideration shares are issued is ignored when deciding who obtains control. The share exchange itself and certain relevant merger arrangements are not disqualifying, unless they form part of a wider scheme that is. HMRC also says at STSM042510 that appointing a liquidator in a voluntary liquidation is not a change of control for this purpose.

What conditions apply when a business is split?

Section 75 applies where the acquiring company acquires the whole or part of the target’s undertaking in pursuance of a scheme for the reconstruction of the target. The consideration must include an issue of non redeemable shares to all the target’s shareholders and nothing else except the assumption or discharge of the target’s liabilities. Afterwards each shareholder of each company must be a shareholder of the other, in the same proportions or as nearly as may be the same. The same bona fide commercial test applies, without the reference to stamp duty reserve tax.

Two definitions do most of the work. An undertaking is a business carried on as a going concern and continued substantially unchanged; a mere investment held by a trading company is not part of its undertaking, although a holding large enough to make a parent and subsidiary relationship may be a business (STSM042380). A reconstruction requires that, at the end, there is no change in the real ownership. STSM042390 is explicit that splitting a company into two parts that go to different shareholders is not a reconstruction. A pro rata demerger can qualify; a partition between shareholder groups cannot. The corporation tax and capital gains routes for demergers are compared in demergers: statutory and liquidation demergers.

How do the reliefs play out in practice?

Illustration only. Two founders own a trading company 60:40, worth £3 million. A new holding company issues shares to them 60:40 in the same class in exchange for all their shares, for genuine commercial reasons. Section 77 relieves duty that would otherwise be 0.5% of £3 million, £15,000. If one founder also took £100,000 in cash, the condition that consideration is only shares would fail and duty would be due on the transfers.

HMRC’s own example at STSM042530 shows the 2020 change at work. Targetco has three shareholders: Priti and Jay with 30% each and Sienna with 40%, all held since formation five years earlier. A new holding company is inserted, then a capital reduction demerger leaves Sienna owning the holding company and the property business, and Priti and Jay owning a new company with the widget business. Section 77 relief is available on the first step because Sienna, who obtains control, has held over 25% for the whole three year period. Section 75 relief is not available on the demerger step, because the shareholdings in the two resulting companies do not mirror each other.

How is the commercial reasons test satisfied?

STSM042360 says HMRC accepts the bona fide commercial test is met where advance clearance has been obtained under section 138 or 139 of the Taxation of Chargeable Gains Act 1992, section 701 of the Income Tax Act 2007 or section 748 of the Corporation Tax Act 2010, provided the facts given in the clearance match what happened. Copies of the clearance correspondence go with the claim. HMRC notes that the capital gains anti avoidance rules for share exchanges and reconstructions were amended by the Finance Act 2026, and clearances under the revised rules are still accepted. Without a clearance, STSM042450 requires the target’s latest accounts, full details of any wider scheme, confirmation that the target’s shares are still held, and a detailed note of the commercial reasons.

How do you claim the relief?

The claim is made by letter signed by a responsible officer of the acquiring company, such as a director or the secretary, or by its professional advisers. HMRC publishes suggested claim letters at STSM042430 for section 77 and STSM042440 for section 75, and the checklist at STSM042450 asks for:

names, registered numbers and share capital of both companies
details of the transaction and the consideration
confirmation that the consideration shares have been issued and entered in the register of members
for section 75, confirmation that no redeemable shares were issued; for section 77, confirmation that no disqualifying arrangements existed
certified registers of members of the target immediately before and the acquiring company immediately after
the agreement or offer document and the transfers.

Claims are emailed to stampdutymailbox@hmrc.gov.uk with electronic copies of the documents. HMRC’s letter confirming relief makes the transfer duly stamped. Send the claim within 30 days of the transfers being signed, because if relief is refused the duty is then late and penalties and interest can follow.

What mistakes cost the relief?

Overlooking a subscriber share or a small holder when issuing the new shares. STSM042400 says omitting even one shareholder bars relief.
Issuing consideration shares to a nominee or a family member instead of the registered holder.
Creating new share classes in the holding company or adding cash, loan notes or a director’s loan credit.
Using redeemable shares as consideration under section 75.
Treating a partition between shareholder groups as a section 75 reconstruction.
Planning a sale or change of control of the new holding company without checking section 77A.

Where intra group transfers are part of the same reorganisation, see stamp duty group relief for share transfers, and for the general charge see stamp duty on share transfers.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.