Stamp duty loophole abolished

The government has moved quickly to close down a loophole in stamp duty reserve rules which is thought to have cost it more than #2bn over the last year in lost tax. The duty would have been due from companies involved in mergers and acquisitions.

Combining oil giants British Petroleum and Amoco are among companies thought to have taken advantage of the loophole, which allowed them to escape a 1.5% rate of stamp duty reserve tax.

Bearer securities denominated in a foreign company and issued by UK companies are generally not liable for the tax. As the security has no identification as to its owner, it is more freely negotiable. The exemption is designed to help companies wanting to borrow overseas.

But Revenue officials have recently become alarmed that the exemption was being abused by UK companies involved in mergers with overseas companies.

A spokeswoman said: ‘It has become apparent that this exemption is now also being used to get round the spirit of one of the changes made in the 1998 Finance Act in connection with depository receipts and clearance services.’