Lords ruling a blow to foreign companies

Foreign companies with UK subsidiaries can kiss goodbye to any hopes of
taking advantage of favourable European Court of Justice tax rulings following a
victory for HM Revenue & Customs in the House of Lords last week.

In a decision on the Boake Allen case, which saw the subsidiaries of non-EU
parent companies attempt to use EU non-discrimination rules to claim back tax,
the Lords ruled unanimously in favour of HMRC.

The companies leading the action were based in Japan, the US and Switzerland.
The claim arose because their UK subsidiaries paid dividends, which in effect
meant they paid corporation tax earlier than if they had had UK parents.

The non-EU companies argued that because they had taxation treaties with the
UK, they should be eligible for the same benefits afforded to those with EU
parents.

But the Lords ruled that the tax treaties were far more limited in their
scope than the EU treaty, which businesses with EU parents had used to win a
similar claim.

‘This case is likely to make it very much harder for foreign multinationals
to make claims based on EU tax cases,’ said Bill Dodwell, head of tax policy at
Deloitte.