TaxAdministrationECJ to deliver tax blow to Treasury

ECJ to deliver tax blow to Treasury

The UK Treasury looks set to be handed a 'thoroughly unwelcome Christmas present' on Thursday, as the European Court of Justice finally delivers a ruling on the Lankhorst-Hohorst tax case.

link: Revenue fights it out in biggest ever tax case

The case has been described by City law firm Linklaters as one of the most monumental ECJ judgements in the taxation field and involves a challenge to German ‘thin’ capitalisation rules.

If the ECJ rules in favour of the taxpayer, multinationals could be looking at a windfall worth millions, and the chancellor a debt to the tune of billions.

In a preparatory opinion, the advocate-general of the ECJ came down in favour of the taxpayer. In almost all cases his opinion has been upheld by the ECJ.

Simon Whitehead, a partner at law firm Landwell, said the ECJ is extremely likely to favour the taxpayer. ‘It’s come around incredibly quickly compared to the usual waiting times for the ECJ,’ he said.

‘The expectation is that it will follow the opinion because there hasn’t been enough time to change it.’

Figures handed to Accountancy Age by a source close to one of the cases, show that if all ECJ cases are won by the taxpayer – and history shows the success rate at almost 100% – the Treasury will be out of pocket by some £5bn. Individual claims from multinationals average at £5m, but with some in the region of £100m.

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