A leading figure at the European Court of Justice has supported a case
brought by HSBC against HM Revenue and Customs which could net the retail bank a
tax refund of £27m on a shares transaction.
Paolo Mengozzi, the advocate general acting on behalf of the ECJ, where the
case is being heard, found application of the UK’s stamp duty reserve tax of
1.5% on shares used as part of the acquisition of a French bank was illegal
under EU law. The advocate general’s opinion is not a ruling but is rarely
HSBC paid the tax upfront in 2002 after offering shareholders of Crédit
Commercial de France – the French bank it was acquiring – either cash or shares.
To make its shares more attractive to French investors, HSBC arranged for them
to be traded on the Paris stock exchange and included within the French Sicovam
An entry charge is typically payable by the clearance service, however, HSBC
paid the charge itself and is now seeking the £27m from HMRC. Shares worth
£1.8bn were issued to Crédit Commercial de France shareholders in the
Andrew Loan, tax partner at City law firm Macfarlanes, said, if the judgment
of the ECJ follows the opinion, taxpayers who have paid the 1.5% charge in past
years should be entitled to a refund of the tax.
‘The UK tax authorities resisted HSBC’s request for a refund of the tax in
2002. HMRC sought to justify the 1.5% charge on the grounds that it was
effectively a season ticket, an advance payment on account of the tax foregone
on transfers within the system,’ he said.
A spokesman for HMRC said the opinion issued by the advocate general is not
conclusive in the final decision handed down by the ECJ.
‘As an opinion, it is in no way binding on the court. We will, of course,
study the opinion in detail, and await with interest the decision of the court,’
he said. The final decision is expected from the ECJ within two or three months.
A spokesman for HSBC said while the bank welcomes the advocate general’s
opinion, it is not appropriate to pre-empt the ECJ’s final decision.
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