Stamp duty tax violates EU law

26/03/12

In HSBC Holdings and Bank of New York Mellon v HMRC, the First-Tier Tribunal (Tax) held that charges to stamp duty reserve tax (SDRT), which had been paid by HSBC in connection with its acquisition of Household International Inc, were levied in violation of EU law. The Tribunal held that the levying of SDRT on HSBC was a tax on the raising of capital and, as such, contrary to articles 10 and 11 of the Capital Duties Directive. The Tribunal further held that, had it considered the tax to arise on the transfer of shares under article 12 of that Directive, the SDRT charges would, in any event, have been contrary to the free movement of capital under Article 56 of the EU Treaty (now Article 63 TFEU).

HMRC contended that the issues in the case ought clearly to be resolved in its favour and, as such, no reference to the ECJ was required. The Tribunal agreed that no reference to the ECJ was necessary, but on the basis that the issues of law were clearly to be resolved in favour of the taxpayer.

A Group Litigation Order raising related issues has been ordered in the High Court.

The judgment is here.