Accountants said the cash-strapped Treasury could have to pay back potentially billions of pounds in overpaid taxes after the Government conceded defeat tonight in a crucial test case.

HSBC took HM Revenue & Customs to the European Court of Justice over a 1.5% stamp duty reserve tax - £27 million - it was forced to pay when it bought French rival CCF in 2000.

The court today said the tax, levied when cross-border takeovers involve a British firm offering shares through a foreign clearing company, breaks EU law.

Having considered the defeat, Revenue & Customs announced it would stop levying the tax immediately.

Now it faces the prospect of a flood of claims for refunds from other companies.

Mark Persoff, a partner specialising in financial law at Clifford Chance said the bill could run into the "billions of pounds", while KPMG estimated a cost of between £500 million and £1 billion.

Revenue & Customs said the figure would be far lower - in the tens of millions for every year the tax was levied.

Craig Leslie, head of stamp tax at PricewaterhouseCoopers, said: "The claims could potentially go back to 1986, and the interest alone could be staggering if any firms take claims to the High Court."

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."