The Treasury has written a letter to the to the
European Court of
Justice , ahead of today’s ruling on the franked investment income
case, urging it to take account of the financial impact of the decision.
According to the Financial
Times , the Treasury told the ECJ that the FII case could cost
the UK as much as £9bn in the worst case scenario.
The government had already taken steps to limit the damage of the FII case,
which deals with the taxation of foreign dividends, by introducing new time
limits for tax refunds in last week’s pre-Budget report.
The PBR move has been described as ‘the legislative equivalent of a mugging’
by legal experts, who have predicted that the new time limits will inevitably
lead to further legal wrangling.
The new rules mean that companies can only claim refunds on tax paid
mistakenly six years from the date the tax was paid, rather than from the date
that it was established that the tax was paid in error.
The immediate concern for the
Treasury , though,
is tomorrow’s decision. In April the advocate-general gave an opinion in favour
of the taxpayers, lead by British American Tobacco; and experts believe that the
court is likely to follow this opinion.
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