HSBC stamp duty ruling could cost HMRC £1bn

HM Revenue & Customs could lose around £1bn in tax revenues if HSBC’s
landmark stamp duty reserve tax (SDRT) ruling in the ECJ is extended beyond the
EU, accountants have warned.

Bill Dodwell, head of the tax policy group at Deloitte, suggests that HSBC
could expect a refund of £27m and notes that other companies could follow suit.

“How much the Revenue will eventually expect to lose will depend on if the
ruling covers shares outside the EU,” Dodwell said.

“At the moment, the ruling only covers shares issued to EU countries, but
companies may look at shares they’ve issued to the US. There could be even
bigger numbers [reclaimed] if cases went there… the Revenue could lose up to

However, Peter Cussons, head of the EU direct tax group at
PricewaterhouseCoopers, suggests that the figure of £1bn “could be an
underestimate” if issues to the US are considered.

The case centred on HSBC’s purchase of a French bank, paid for by issuing
their own shares via a clearance service.

French-based individuals bought the shares which HSBC then registered in
France. HMRC levied SDRT on them at 1.5%. The ECJ ruled this was unlawful under
the Capital Duty Directive.

The directive allows stamp duty to be levied on the transfer of shares
(currently 0.5% within the UK), but stamp duty is not applied on any new share
issues within EU states.

Prior to the ECJ ruling last week, SDRT was charged on shares in UK companies
issued into a clearance service, which are commonly used in the EU.

The decision could give strong support to companies that want to reclaim SDRT
charged on UK shares issued in depository receipt systems, which are typical in
the US.

HMRC say they are “considering the judgment in detail” and are looking to
issue anti-avoidance legislation.

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