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The taxpayer could be forced to pay back up to £20 billion in tax after a test case in the European Court of Justice today ruled a UK duty levied on certain share transactions contravenes EU law.
HSBC took HM Revenue & Customs to court over a 1.5% stamp duty reserve tax it was forced to pay when it bought French rival CCF in 2000.
Today the court said the tax, levied when cross-border M&A activity involves a British firm offering shares through a foreign clearing company, breaks EU law. “The claims could potentially go back to 1986, and the interest alone could be staggering if any firms take claims to the High Court,” said Craig Leslie, head of stamp tax at PricewaterhouseCoopers. “If that happened, the Treasury would have to pay compound interest.”
The ruling is a blow to Gordon Brown, who is already struggling to plug the massive deficit in the public finances.
Although it does not impact the tax payable on British share purchases, Leslie reckons it could lead to similar claims about duty paid on American Depositary Receipts, applicable when a UK company wants its shares issued in the US. He said: “The bill will be astronomical.”
