The Test Claimants in the FII Group Litigation v HM Revenue and Customs

The Test Claimants in the FII Group Litigation v HM Revenue and Customs

The UK tax regime breached EU law by failing to grant a dual credit (actual underlying foreign tax or FNR, whichever higher, capped at UK rate) for EU-source dividends, rendering the Case V charge and associated ACT unlawful to that extent. Claimants are entitled to restitution of unlawfully levied tax and ACT, including compound interest for the time value, with no reduction for change of position or actual benefit arguments. The appropriate quantification methodology is the claimants' CT61 method, and limitation periods for mistake-based claims are not curtailed by domestic legislation contrary to EU law.

Parties
Claimants: THE TEST CLAIMANTS IN THE FII GROUP LITIGATION; Defendants: THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS
Jurisdiction
England and Wales
Judgment Date
18 December 2014
Procedural Posture
Group Litigation (test Claims) / Judgment After Quantification Trial
Outcome
Claims for restitution of unlawful Case V tax and ACT allowed; claimants entitled to principal and compound interest; change of position and actual benefit defences rejected.
Legal Topics
Unlawful Taxation, Double Taxation Relief, Advance Corporation Tax (act), Franked Investment Income (fii), Mistake of Law, Woolwich Restitution, Limitation Periods, Change of Position Defence, Compound Interest, EU Law Remedies
Tax Law European Union Law Restitution Law Unlawful Taxation Double Taxation Relief Advance Corporation Tax (act) Franked Investment Income (fii) Mistake of Law +5 more

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Parties

THE TEST CLAIMANTS IN THE FII GROUP LITIGATION

Claimants

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS

Defendants

Procedural Posture

Group Litigation (test Claims) / Judgment After Quantification Trial

Legal Issues

  1. 1 Extent of unlawfulness of UK Schedule D Case V charge under EU law
  2. 2 Appropriate method for calculating foreign nominal rate (FNR) credit
  3. 3 Treatment of special cases (e.g. participation exemptions, mixer companies, silent partnerships)

Ratio Decidendi

The UK tax regime breached EU law by failing to grant a dual credit (actual underlying foreign tax or FNR, whichever higher, capped at UK rate) for EU-source dividends, rendering the Case V charge and associated ACT unlawful to that extent. Claimants are entitled to restitution of unlawfully levied tax and ACT, including compound interest for the time value, with no reduction for change of position or actual benefit arguments. The appropriate quantification methodology is the claimants' CT61 method, and limitation periods for mistake-based claims are not curtailed by domestic legislation contrary to EU law.

Court Disposition

Claims for restitution of unlawful Case V tax and ACT allowed; claimants entitled to principal and compound interest; change of position and actual benefit defences rejected.

Orders

  • Restitution of principal amounts of unlawful Case V tax and unutilised ACT to claimants
  • Restitution of time value of prematurely paid or utilised ACT (compound interest)