Treasury and Europe in £20bn corporate tax battle

The colossal figure would amount to almost £670 for every UK taxpayer, or nearly £340 for every man, woman and child. It also exceeds total council tax receipts for 2003-04.

A source close to the tax cases told Accountancy Age that Inland Revenue officials keeping tabs on the potential cost privately calculated the enormous figure. The Revenue this week said the figures were ‘massively exaggerated’, but refused to comment further.

The sum arises from bringing together the potential refunds from six pieces of litigation ð or group litigation orders (GLOs) ð which pits hundreds of the world?s most well-known companies against the Revenue.

The cases involve challenges to six separate areas of the corporate tax regime and all contest that they contravene EU law. The latest, the so-called foreign income dividends GLO, which includes the Royal Mail and Shell pension funds, was last week given the go-ahead at the High Court.

Heinz, British Telecom and Caterpillar are part of the GLO pursuing claims on loss relief, while M&S has its own separate case before the European Court of Justice in early 2005.

Coca Cola is participating in a claim on advanced corporation tax, and is joined by BMW and Esso in the action, according to papers lodged at the Royal Courts of Justice.

Alistair Craig, a research fellow for the Institute of Policy Studies, carried out detailed research on the claims last year and concluded that the ‘cost of those cases… is in the region of £10bn’ and that if all other avenues were pursued ‘the loss to the Exchequer could be a further £8bn annually’.

But many more company groups have since jumped on the GLO bandwagon. ‘The purpose of the research was to say “look this is not a one billion problem, it is likely to be a double- figure problem”,’ Craig said this week.

Howard Flight, shadow chief secretary to the Treasury, said: ‘ECJ decisions interfere with the UK tax system and have led to companies claiming back billions of pounds of UK tax.’

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