Tax experts predict that the case brought by two German companies could trigger a surge of claims against the Revenue from companies wanting to reclaim interest on Advance Corporation Tax payments.
The case brought before the Advocate General of the ECJ by Hoescht and Metallgesellschaft, centred on whether ACT, now abolished, should have been paid by a UK subsidiary for a dividend paid to a German parent when no payment would have been due to a UK parent. The companies argued that the tax was discriminatory and against the EU principle of ‘freedom of establishment’.
The decision, if ratified by the Court of Justice itself, could open the floodgates for other UK subsidiaries of EU parent companies to claim lost tax from the Revenue.
UK subsidiaries would be able to claim for compensation if paying ACT had hit their cashflow. Peter Cusson, tax partner at PricewaterhouseCoopers, said: ‘Any such company would be wise to review their situation, especially if they had surplus ACT at the time they paid the dividend.’
Tax practitioners were quick to draw parallels with other cases. Deloitte & Touche’s Chris Fitzgibbon said: ‘In light of the recent ICI v Colmer decision, there was little doubt how this case would turn out.’
PwC’s Cussons claimed that the case could be followed by many others brought by multinational companies frustrated by the inconsistencies between EU member states’ tax laws.
‘We’ve identified at least a dozen further examples in UK tax law alone that could arguably contravene the Treaty of Amsterdam, including aspects of the new double taxation relief regime. The ECJ is emerging as a potent force of influence in European taxation.’
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