While stamp duty land tax (SDLT) and stamp duty reserve tax (SDRT) have been handled online for some years for most share transactions via the CREST settlement system, there remain 103,000 transactions each year which involve impressing documents with physical stamps. These relate to the tax charged on certificated share transactions taking place outside the CREST settlement system.

Currently, on execution, a stampable document must be posted to the Stamp Office in Birmingham, alongside a cheque or bank transfer for the duty. Once stamped, the document is returned by post and then sent to the relevant company registrar.

HMRC aims to process straightforward stock transfer forms within five working days, and more complex applications (for example claims for reliefs) within 15 working days. These targets were met in 70% of cases in 2016/17, so in that year over 30,000 documents were received by taxpayers after longer periods than this.

Angela Knight, chair of the OTS board, said: ‘In this digital age it is anachronistic to still be stamping paper documents as we did on the 17th century. This results in delays and can cause commercial difficulties, particularly when there is a commercial requirement to register a transfer on the same day as the transaction takes place. This report points the way to both modernise and speed up the process.’

Following its review, the OTS has made a series of core recommendations which it says should be implemented as a package. These propose replacing the process that requires sending a paper document to the Birmingham Stamp Office to be stamped, with a digital process, and updating the rules governing company registrars so that they are able to register transactions on the same day as and when required.

This would involve providing taxpayers with a unique transaction reference confirming that the transaction has been notified to HMRC (thereby retiring the stamping machines). The OTS says stamp duty should also be made an assessable tax, ending the sense in which it is ‘voluntary’ at present, and its scope should be changed, for example by narrowing the territorial scope to exclude non-UK shares.

The agency also wants a number of policies reviewed, such as whether or not stamp duty should apply to instruments granting options for consideration, the extent to which stamp duty should be payable on instruments transferring partnership interests, and the approach to documents relating to pre-2003 land transactions.

The OTS’s report contains a number of further recommendations which relate to some more technical simplification proposals. They include addressing the present archaic way in which stamp duty is calculated in relation to consideration that is difficult to value at the time of the transaction concerned. It favours a change to the ‘money or money’s worth’ used for SDRT.

Any digital system should be designed so that it is simple to operate and easy to become compliant. OTS suggestions include having an online return, rather than scanning documents, offering regular users an account option so they do not have to enter personal details repeatedly, and a way of following up on submissions.

The agency also wants the government to bring stamp duty legislation into one place and within the umbrella of the already digitised SDRT and then repealing the present stamp duty legislation which is spread across many acts of Parliament.

The OTS report, Stamp duty on paper documents: a way forward to reform, digitise and simplify, is here.