High Court finds UK’s double tax rule unlawful

HMRC building

HMRC may appeal against decision

Companies may not be able to reclaim millions of pounds in tax on foreign
dividend payments from the Treasury after a High Court ruling on ‘double tax’
rules failed to clarify how far claims can be backdated.

The High Court ruled last week that the UK’s system of taxing company
dividend payments in the European Union twice – when the payment is made in the
EU and when the dividend profits are remitted to UK shareholder – was unlawful.
It confirmed a 2006 ruling from the
Court of Justice

However, there is still confusion over how many years companies can make
claims for tax rebates under the double tax rules. Under current EU rules,
companies can claim tax rebates for the past six years, but the High Court has
referred a final decision on this matter to the ECJ.

Jonathan Bridges, associate partner at
KPMG, said the High Court
had given the Treasury time to introduce ‘blocking legislation’ which could
restrict the number of companies making rebate claims.

The Treasury has said it could have to pay £7bn in rebates over the double
tax dividend system, but tax experts believe it will be much lower.

spokesman said it is likely to appeal against the High Court decision.

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