The UK’s Court of Appeal has ruled that companies hoping to claim refunds on unlawfully enforced taxes have only 6 years to do so after the taxes have been collected, potentially saving the Treasury billions of pounds.
The ruling was in connection with a widely publicised test case between HMRC and British American Tobacco (BAT) who have debated HMRC’s policy of taxing dividend payments from foreign subsidiary companies.
The Treasury’s liability was due to stand at billions of pounds but, even if they eventually lose to BAT, it is understood that their liability will be greatly reduced now thanks to the ruling from the Court of Appeal.
It is a big win for HMRC and although they welcomed the decision, it is believed that they may still appeal.
BAT brought the case on behalf of 20 companies and argued that the taxation of foreign dividends is inconsistent with European law as dividends from UK subsidiaries are not subject to similar taxes.
It is thought that the case will now head to the European Court of Justice or the UK’s Supreme Court for further debate.
However, unless the courts overturn the ruling by the Court of Appeal, the rest of the claims will be rendered invalid as they refer to payments dating back more than the 6 years. Some of the claims are believed to relate to payments from the 1970s.