The Government has launched a legal challenge against plans for a European financial transactions tax (FTT) amid fears it could have a damaging impact on the UK.
Chancellor George Osborne said an application had been lodged at the European Court of Justice to challenge the decision allowing 11 members of the European Union to press ahead with the plans.
Osborne: 'we are concerned about the extra-territorial aspects of the Commission's proposal'
The UK has no intention of signing up, but is concerned that the FTT could be imposed on British firms trading with businesses based in countries which adopt the tax.
Osborne said: "Yesterday the UK launched a legal challenge to the European Commission's proposal for a financial transaction tax which a number of EU member states wish to take forward through enhanced EU cooperation.
"We're not against financial transaction taxes in principal but we are concerned about the extra-territorial aspects of the Commission's proposal and I think that concern is shared by some other countries.
"So we have launched a legal challenge against the authorising decision."
Ministers are not seeking to block the FTT entirely but have consistently called for safeguards to ensure the tax would not damage the European single market and would protect the rights of countries, such as the UK, which are not taking part.
The launch of the legal challenge indicates these concerns have not yet been met, although negotiations on the final form of the tax have not yet concluded.
The 11 countries going ahead with the tax are Germany, France, Italy, Spain, Belgium, Austria, Portugal, Greece, Slovenia, Slovakia and Estonia.
A Treasury spokesman said: "We have always said that we are not against the principle of a global financial transactions tax, but think that a European-only tax would hit people's savings and pensions and hit jobs and growth.
"While we will not participate in a Europe-only tax, we have also said we will not stand in the way of other countries, but only if the rights of countries not taking part are respected.
"The proposal currently on the table from the European Commission does not meet these requirements, which is why we have lodged the legal challenge."
Under the proposals, a small levy would be applied on transactions of currencies, bonds and shares, with campaigners in favour of the move claiming it would raise around 35 billion euros (£30 billion) a year in much-needed revenue.
But the City could be hit by the tax, with any trades with branches of German or French banks in the capital covered under the rules of the FTT because their headquarters are in countries adopting the tax. The Government would be required to collect the levy but would not be allowed to keep the revenue.
Given the complex nature of financial deals, the trade in an asset covered by the FTT would incur the levy at every stage in a "cascade effect".
But campaigners for the so-called Robin Hood Tax were dismayed by the Chancellor's action.
Owen Tudor, a spokesman for the Robin Hood Tax coalition of charities and campaign groups, said: "This isn't about defending British interests against Europe - it's about defending one rather rich square mile against the wishes of people in Britain and across Europe.
"Not content with letting our banks off scot-free, Osborne now wants to prevent European countries from making their financial sectors pay to repair the damage caused by the crisis.
"Resorting to lawyers is the last refuge of a Chancellor who has lost the argument.
"Not only is this morally wrong it's breathtakingly hypocritical - the UK's own £3 billion stamp duty on shares is collected wherever UK shares are traded and regardless of who is trading them."