The House of Lords today ruled that companies which claimed a tax credit on a
dividend paid to a foreign parent cannot claim a refund of advanced corporation
The case centred on tyre maker Pirelli, which was in dispute with HM Revenue
& Customs over tax on a dividend paid to a Dutch parent.
HMRC claimed it could offset half the tax credit claimed by the Dutch parent
against any payment it had to make to Pirelli UK, in accordance with the
principle established in a European Court of Justice ruling in the Hoechst case.
The Lords have ruled in favour of HMRC, overturning an earlier court of
Chris Morgan, head of KPMG’s EU tax group, said; ‘This is a commonsense
approach. The House of Lords is saying the group [Pirelli] can’t have their cake
and eat it.’
He also said the ruling shows how far EU law goes in the way it can affect UK
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