Top British companies have overpaid billions in tax - EU Court

BRUSSELS Tue Nov 13, 2012 7:33pm GMT

A man smokes as he passes the British American Tobacco offices in London May 6, 2009. REUTERS/Luke MacGregor

A man smokes as he passes the British American Tobacco offices in London May 6, 2009.

Credit: Reuters/Luke MacGregor

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BRUSSELS (Reuters) - The British government might have to repay billions of pounds in multinational companies' corporation tax after the EU's highest court found in favour of British American Tobacco in a judgment delivered on Tuesday.

The European Court of Justice (ECJ) found that by taxing dividends earned from companies based in Britain differently from income gained abroad, Britain's treasury overcharged companies for decades.

"The UK legislation must be regarded as a restriction on freedom of establishment and on capital movements," the ECJ said in a statement, referring to basic tenets of the EU free market.

The case concerns differing treatment of income received in Britain and abroad.

When a company resident in Britain received nationally sourced dividends, it was not liable to corporation tax on those dividends, the ECJ said. But when the company received dividends from a non-resident company, it was liable to tax.

Some companies established in Britain said that these rules resulted in less favourable tax treatment when they had subsidiaries in other EU countries, something that dissuaded investment abroad.

They brought a group case that led to a long English court battle on the taxation of multinationals. The High Court referred the case to the ECJ in 2006, and later asked the EU court for further clarification.

Tuesday's decision was a test claim in the group case and is expected to be re-examined by Britain's High Court next year.

It is not yet clear how far back companies might be able to claim retroactive repayment of taxes, with claims dating back to 1973. This question is scheduled to be examined in a separate ECJ court case in 2013.

"If (companies) did set up any foreign subsidiaries, the corporation tax they paid is potentially repayable," said Jake Landman, an associate at British law firm Pinsent Masons.

Britain's tax authorities said they were disappointed by the ruling, but were not giving up.

"We will consider the implications of the ruling in the overall context of the case, which has a number of aspects and complexities that remain to be settled in the domestic courts," a British government spokesman said.

(Editing by Sebastian Moffett, Gary Hill)

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Comments (5)
Raymond.Vermont wrote:
The President of the Constitutional Court of Belgium, Marc Bossuyt, has said that both the European Court of Justice and the European Court of Human Rights are taking on more and more powers by extending their competences, creating a serious threat of a “government by judges”. Stating that “they fabricate rulings in important cases with severe financial consequences for governments without understanding the national rules because they are composed out of foreign judges.”

This is what happens when nation states give away far too much for far too little in return.

The UK needs to pull the plug entirely to its EU membership, the cost towards its own citizenship, simply is no longer of positive value and being at the mercy of a foreign courts decision making process, is utterly unpalletable.

Enough is enough Mr Cameron!

Nov 13, 2012 8:22pm GMT  --  Report as abuse
Raymond.Vermont wrote:
Lets hope (for its sake) that the ECJ has NOT been open to hostile lobbying from Multinationals, whom may have not been paying a fair share of Corporation tax via avoidance through EU derived ‘dodgy’ tax laundering haven schemes.

Further for the ECJ to try and pretend that it can retrospectively look at the tax legislation situation from as far back as 1973 for UK Companies, is simply extracting the urine.

The ECJ is overstepping the mark once again… Its time that the UK govt told the judges what the score is and whom calls the shots

Nov 13, 2012 8:28pm GMT  --  Report as abuse
ritchard wrote:
Tirez l’autre jambe car elle a des clochettes Monsieur le Juge.

Nov 13, 2012 10:07pm GMT  --  Report as abuse
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