Treasury faces massive refund bill on tax ruling

THE European Union&rsquo;s top court ruled yesterday that a British tax on share transactions breaks EU law, leaving an already cash-strapped UK Treasury potentially facing a refund bill running to billions of pounds.<br /><br />HSBC, Europe&rsquo;s biggest bank, argued in the European Court of Justice that when it bought French rival CCF in 2000, it had to pay a 1.5 per cent UK stamp duty reserve tax on shares it offered to CCF shareholders through a French clearing service.<br /><br />The court said the duty contravened the EU&rsquo;s capital duty directive in a ruling that British firms that have been involved in a cross-border takeover will study carefully.<br /><br />The directive &ldquo;must be interpreted as meaning that it prohibits the levying of a duty such as that at issue in the main proceedings, on the issue of shares into a clearance service,&rdquo; the court said in its ruling. The case goes back to a British court where HSBC is expected to ask for a refund of the duty, with other companies in a similar situation expected to follow suit.<br /><br />Vodafone is also thought to be trawling through its records in the hope of clawing back money.<br /><br />UKcompanies are thought to have paid &pound;25bn in stamp duty on share transactions.