Test Claimants In the FII Group Litigation v HM Revenue & Customs

Test Claimants In the FII Group Litigation v HM Revenue & Customs

The UK tax regime for foreign dividends (Case V of Schedule D) infringed Article 43 EC as it treated foreign-sourced dividends less favourably than domestic-sourced dividends, and the ACT and FID regimes were also incompatible with EU law. Claimants are entitled to restitution of unlawfully levied tax and associated interest under the San Giorgio principle, and UK limitation provisions (Finance Act 2004 s.320, Finance Act 2007 s.107) are disapplied for such claims due to lack of transitional arrangements. No sufficiently serious breach was established for damages. Change of position is available as a defence to mistake-based restitution claims beyond San Giorgio claims, but not to...

Parties
Claimants: The Test Claimants in the FII Group Litigation; Defendants: The Commissioners for Her Majesty's Revenue & Customs
Jurisdiction
England and Wales
Judgment Date
27 November 2008
Procedural Posture
Civil (taxation, Group Litigation) / Judgment After Trial of Liability Issues, With Quantum and Causation Reserved
Outcome
Partial judgment for claimants on liability for restitution of unlawfully levied tax and associated interest; damages claims dismissed for lack of sufficiently serious breach; certain issues reserved for further reference to the ECJ.
Legal Topics
Corporation Tax, Advance Corporation Tax (act), Franked Investment Income (fii), Foreign Income Dividends (fid), Mistake Based Restitution, Limitation of Actions, Change of Position Defence, State Liability for Breach of EU Law, Freedom of Establishment (article 43 Ec), Free Movement of Capital (article 56 Ec)
Tax Law European Union Law Restitution Administrative Law Corporation Tax Advance Corporation Tax (act) Franked Investment Income (fii) Foreign Income Dividends (fid) +6 more

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Parties

The Test Claimants in the FII Group Litigation

Claimants

The Commissioners for Her Majesty's Revenue & Customs

Defendants

Procedural Posture

Civil (taxation, Group Litigation) / Judgment After Trial of Liability Issues, With Quantum and Causation Reserved

Legal Issues

  1. 1 Whether the UK tax regime for foreign dividends (Case V of Schedule D) infringed Article 43 and/or Article 56 EC
  2. 2 Whether the ACT and FID regimes unlawfully discriminated against dividends from non-UK subsidiaries
  3. 3 Whether claimants are entitled to restitution or damages for tax paid under mistake of law

Ratio Decidendi

The UK tax regime for foreign dividends (Case V of Schedule D) infringed Article 43 EC as it treated foreign-sourced dividends less favourably than domestic-sourced dividends, and the ACT and FID regimes were also incompatible with EU law. Claimants are entitled to restitution of unlawfully levied tax and associated interest under the San Giorgio principle, and UK limitation provisions (Finance Act 2004 s.320, Finance Act 2007 s.107) are disapplied for such claims due to lack of transitional arrangements. No sufficiently serious breach was established for damages. Change of position is available as a defence to mistake-based restitution claims beyond San Giorgio claims, but not to...

Court Disposition

Partial judgment for claimants on liability for restitution of unlawfully levied tax and associated interest; damages claims dismissed for lack of sufficiently serious breach; certain issues reserved for further reference to the ECJ.

Orders

  • Restitution of unlawfully levied ACT and Case V corporation tax with interest to claimants, subject to quantum determination.
  • UK limitation provisions (Finance Act 2004 s.320, Finance Act 2007 s.107) disapplied for San Giorgio claims.