Unjust Enrichment Defence Compatible with Equal Treatment
Section 3 of the Finance Act (No.2) 2005 introduced an unjust enrichment defence against claims for repayment of VAT. This defence came into force on 26 May 2005. The claimant challenged the application of the defence to pre 2005 claims on the basis that the defence was incompatible with the EU law principle of equal treatment. The Court of Appeal found that the defence introduced in section 3 did not breach EU law and that HMRC could rely upon it.
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Exit Taxes
The ECJ ruled that Article 63 TFEU should be interpreted as meaning that the legitimate objective of maintaining the balanced allocation of the power to impose taxes between Member States may justify a difference in the treatment of investors but only if it was impossible for Germany to tax capital gains, once realised. It was further ruled that where the taxation of unrealised capital gains is concerned, it is proportionate for the taxable person to be provided with the following payment options: (1) staggered; or (2) immediate.
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FII and Dividend Tax Update
In the Prudential case (Portfolio Dividend Tax and Life Assurance) the High Court has now given permission to both parties to appeal to the Court of Appeal. HMRC’s permission however was restricted, so that it cannot appeal on the issues connected with its “change of position defence” or the nominal rates of tax to apply. In the FII Group Litigation yesterday the High Court refused permission for HMRC to run two new defences on the grounds that they had been raised too close to trial and would impose extreme evidential burdens on the Claimants. The trial of the FII test cases is set for May.
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The M&S Case followed again: C-322/11 K
K, a Finnish taxpayer, sought to deduct losses that were incurred in respect of the transfer of immovable property in France from taxable shares that were transferred in Finland.
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Transfer of Pensions – HMRC Guidance responding to the ROSIIP GLO
HMRC will not raise assessments from transfers from a registered pension scheme to an overseas scheme provided that 1) the transfer took place before 24 September 2008; and 2) the scheme was included on the list as a QROPS when the transfer took place (or at a time reasonably proximate to the transfer). This is subject to an obvious proviso in case of dishonesty, abuse, artificiality, etc.
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Autumn Statement
Deep within the press notices accompanying both the budget and pre-budget review has in the past been a likely place to announce retrospective changes limiting claims for the recovery of tax or changes responding to ECJ decisions. Examples include the changes following Cadbury Schweppes, Marks and Spencer and DMG. The notices accompanying today's statement however contained no such announcements of legislative changes affecting EU tax claims. The Chancellor did announce a number of measures relevant to cross border groups to be included in Finance Bill 2014 which have immediate effect.
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Prudential, dividend tax and compensation for breach of EU law
Under the credit system in place before 2009, non-resident dividend income from the EU/EEA is not to be regarded as exempt but as taxable with credit, in addition to withholding tax, for the higher of the tax actually paid on the profits or the nominal (statutory) rate of the jurisdiction of the dividend paying company. The same outcome applies where the investment is below a controlling interest for dividends from all jurisdictions outside the EU/EEA as well. Where possible, tax returns must be amended to claim the enhanced credit, rather than to show the non-resident income as exempt. The claimants are entitled to compound interest on overpaid tax. HMRC’s ‘change of position’ defence is contrary to EU law. Originally printed in Tax Journal on 1 Nov 2013.
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UK taxpayers should amend open returns to benefit from High Court Prudential ruling
UK tax payers will need to amend any open returns to show foreign portfolio income as carrying a tax credit following the England and Wales High Court's ruling in the Prudential case last week. Nicola Hine, of Joseph Hage Aaronson, the firm acting for the claimants in the case, explains why the judgment should be welcomed by tax payers with claims for interest on overpaid tax. Originally printed in International Tax Review Premium, 31 October 2013.
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Advocate General opinion in FII GLO encourages claimants
The Franked Investment Income Group Litigation (FII GLO) concerning claimants’ rights to recover overcharged tax from HM Revenue & Customs (HMRC) has been batted back and forth between the UK courts and the European Court of Justice (ECJ) since 2006. Philippe Freund explains why an Advocate General’s opinion on the third reference to the ECJ has given taxpayers cause to be optimistic. Originally printed in International Tax Review Premium, 1 October 2013.
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Adviser Q&A: AG’s opinion in FII Test Claimants
The advocate general’s opinion on Test Claimants in the FII Group Litigation v HMRC (Case C-362/12) was delivered on 5 September. Simon Whitehead takes a look. Originally printed in Tax Journal, 13 September 2013.
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