The move in the High Court was intended to allow lawyers to make claims that go back beyond a six-year limit imposed by paymaster general Dawn Primarolo, and could hugely increase the number of claims the taxman will have to answer.
If successful, the move would add hundreds of additional claims to six so-called group litigation orders, currently being fought over by government tax officials and lawyers representing big-name companies including Coca Cola, IBM and BMW.
Existing claims could cost the Treasury £20bn in rebates.
On Friday the judge, Mr Justice Park, said the claim to remove the six-year rule would have to be dealt with as part of one of the existing GLOs, which has already been referred to Europe. Despite this, it would still be heard at the High Court.
Meanwhile, the lawyers before Justice Park, Dorsey and Whitney, are waiting for the outcome of a Court of Appeal hearing in which the Inland Revenue is challenging an earlier High Court ruling that allowed Deutsche Morgan Grenfell to go back more than six years in its own advanced corporation tax claim.
A win for DMG in this case would go some way to support the Dorsey and Whitney claim.
The paymaster general imposed the six-year rule after the High Court ruled in DMG’s favour last year.
Announcing the legislation, Primarolo said: ‘For many years there has been symmetry within the direct tax system. A recent High Court case has the potential to upset this. The proposed legislation is designed to restore this.’
Lawyers argue that refusing claimants the right to reclaim tax is contrary to the EC Treaty, and Primarolo’s actions contravene the Human Rights Act.
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