Franked Investment Income Group Litigation, The Test Claimants In v Revenue And Customs

Franked Investment Income Group Litigation, The Test Claimants In v Revenue And Customs

The UK’s ACT and Case V tax regime on foreign dividends breached EU law by treating foreign dividends less favourably than domestic dividends. Claimants are entitled to repayment and associated relief, including for periods back to 1973, with credits for the higher of actual foreign tax paid or the foreign nominal rate, subject to a UK cap. HMRC cannot reduce restitution by set-off for tax credits, actual benefit, or change of position defences, except in limited circumstances (e.g., double taxation treaty credits to non-EU parents). Limitation for mistake-based claims runs from the date the legal mistake was authoritatively established (here, 12 December 2006). Both Woolwich and...

Parties
Appellants: The Test Claimants in the Franked Investment Income Group Litigation; Appellants: Evonik Degussa UK Holdings Limited and Others; Respondents: The Commissioners of Her Majesty’s Revenue and Customs
Jurisdiction
England and Wales
Judgment Date
24 November 2016
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court
Outcome
Appeals and cross-appeals dismissed except HMRC’s appeal on issue 15 (set-off for double taxation treaty credits to non-EU parents) and issue 22 (actual benefit argument available in law, but not made out on facts); Claimants’ cross-appeal on issue 28 (discoverability date) allowed; permission to appeal granted on...
Legal Topics
Advance Corporation Tax (act), Corporation Tax, Franked Investment Income (fii), Mistake Based Restitution, Woolwich Claims, Limitation Periods, EU Law Remedies, Unjust Enrichment, Change of Position Defence, Set Off, Interest on Overpaid Tax
Tax Law European Union Law Restitution Advance Corporation Tax (act) Corporation Tax Franked Investment Income (fii) Mistake Based Restitution Woolwich Claims +6 more

Case Brief

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Parties

The Test Claimants in the Franked Investment Income Group Litigation

Appellants

Evonik Degussa UK Holdings Limited and Others

Appellants

The Commissioners of Her Majesty’s Revenue and Customs

Respondents

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court

Legal Issues

  1. 1 Whether the UK’s ACT and Case V corporation tax regime on foreign dividends breached EU law
  2. 2 How to quantify and remedy overpaid tax under EU law and English law
  3. 3 Whether credits for foreign tax and withholding tax must be given

Ratio Decidendi

The UK’s ACT and Case V tax regime on foreign dividends breached EU law by treating foreign dividends less favourably than domestic dividends. Claimants are entitled to repayment and associated relief, including for periods back to 1973, with credits for the higher of actual foreign tax paid or the foreign nominal rate, subject to a UK cap. HMRC cannot reduce restitution by set-off for tax credits, actual benefit, or change of position defences, except in limited circumstances (e.g., double taxation treaty credits to non-EU parents). Limitation for mistake-based claims runs from the date the legal mistake was authoritatively established (here, 12 December 2006). Both Woolwich and...

Court Disposition

Appeals and cross-appeals dismissed except HMRC’s appeal on issue 15 (set-off for double taxation treaty credits to non-EU parents) and issue 22 (actual benefit argument available in law, but not made out on facts); Claimants’ cross-appeal on issue 28 (discoverability date) allowed; permission to appeal granted on...

Orders

  • HMRC entitled to set-off for double taxation treaty credits granted to non-EU parents (issue 15)
  • Otherwise, HMRC’s appeals dismissed; Claimants entitled to repayment and associated relief as quantified