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UK government loses European Court of Justice Case

The UK government could be forced to pay back as much as £20 billion after HSBC was victorious in a case brought against the UK government at the European Court of Justice. It relates to "UK stamp duty reserve tax" which was introduced back in 1986 to cover cross-border mergers and acquisitions. Rather than attempting collect 0.5% stamp duty from shares issued through a foreign clearinghouse, or other methods, the UK government introduced a one-off 1.5% charge on the value of the transaction.

While the UK government was adamant that this particular charge was legal and above board, HSBC cited a 1969 Capital Duty Directive which effectively banned capital duty on the issue of shares. While HSBC itself is apparently in line for a potential £27 million tax refund (assuming the UK government does not launch a successful appeal) experts believe the total figure could be as high as £20 billion with other companies queuing up to take similar action.

If the UK government is forced to repay all stamp duty reserve tax going back to 1986 this will be yet another blow to the UK's finances which have taken a pounding over the last couple of years.

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