A third person is buying shares from two existing shareholders. The company has agreed to pay the stamp duty. My initial thought was that this would fall within CTA 2010, s 1064 (‘Certain expenses of close companies treated as distributions’). However, although stamp duty is normally paid by the purchaser, there is nothing in the legislation that actually imposes the liability on any particular person. Accordingly, I don't believe that section 1064 should apply in this case. What is your view?

Arthur Weller replies:
The legislation to which you refer (www.legislation.gov.uk/ukpga/2010/4/section/1064) states that if a close company incurs an expense on behalf of a shareholder it is treated as a distribution (dividend) in the hands of the shareholder. If you look at HMRC’s Stamp Taxes on Shares manual (at www.gov.uk/hmrc-internal-manuals/stamptaxes-shares-manual/stsm011010) you can see, as you have written, that the purchaser does not strictly have an obligation to pay the stamp duty on the share purchase. However, section 1064 does not state that the company is meeting a liability of the shareholder; all it says is that the company is incurring an expense from which the shareholder gets a benefit. So, I would disagree with your conclusion, and say that section 1064 does apply here. By the way, if the share purchaser is also going to be a director or employee of the company, HMRC will seek to tax the company expense as remuneration paid to the individual, as opposed to a dividend.