More NewsEuropean ‘decision’ could be worth billions to companies

European 'decision' could be worth billions to companies

Advocate general finds tax charged by UK government on foreign subsidiaries unlawful

Companies could reclaim billions of pounds after the European advocate
general said today tax charged by the UK on foreign subsidiaries was unlawful.

If the European Court of Justice follows Leendert Geelhoed’s advice companies
may also be able to bring tens of billions of pounds stored offshore into the UK
free of tax.

He gave his opinion on a case involving franked investment income which the
government has warned could be worth £7bn in terms of a hit to the Treasury.

He said if a parent company has paid tax in a foreign country then it cannot
then be charged advanced corporation tax in the UK. Where ACT acts as a
secondary tax it is unlawful, he said.

He also said that it was unfair that if a UK company wants to move cash from
a foreign subsidiary it is charged 30% tax on any dividends it then pays out,
but does not if it has a UK subsidiary.

The ECJ now has to decide whether to accept the advocate general’s view, and
then the UK government will respond.

Chris Morgan, head of the European tax group at KPMG, said: ‘This opinion is
highly favourable to the tax payer.’ He was unsure how HM Revenue & Customs
would respond, but called for a ‘proper discussion’ between all the interested
parties.

The claimants have disputed the government’s £7bn figure, saying it will be
worth between £100m and £2bn.

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