UK Scrapping International Issuance Tax

October 5, 2009 Taxation in UK  No comments

Following a European Court of Justice (ECG) ruling, the UK Government has ceased levying 1.5% on all shares issued or transferred to a clearance service by British companies, internationally.

The 1st of October saw the ECG rule against the HM Revenue & Customs (HMRC), saying that the 1.5% Stamp Duty Reserve Tax (SDRT) is against European Community Law. The tax was levied on British companies which issued or transferred securities through a clearance service within the EU or the US. Typically such a situation would arise in merger or takeover situations. Estimates have placed the annual income figure from the SDRT to the British Government at over £10 million, though the HMRC have refused to confirm such figures.

The ECG ruling came as part of court action taken up by British-based HSBC, which had contested £27 million worth of SDRT charged for issuance of HSBC shares in the takeover of French-based CFF bank in 2000. The ruling awarded HSBC the £27 million, along with interest charged.

The SDRT has been levied by the HMRC since 1986. It ceased imposing the tax for EU transactions immediately after the ruling. Michael Quinlan, head of stamp taxes at Deloitte, has stated that this ruling would prove to be significant for businesses throughout the UK, with many expected to take up legal action in light of the ruling.

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