FII and Dividend Tax Update

02 January 2014
Author: JHA

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. The Claimants were granted permission to appeal on the issue of whether dividend income should be exempt as opposed to carrying an additional credit. The court has also ordered that the quantification of Prudential’s claim for sample years be undertaken so that remaining disputes relating to computation are identified.

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. One of these defences was the contention that the recovery of unlawfully paid tax should be reduced by the hypothetical tax saving that would derive from the increased interest deductions available as a result of the payment of the unlawful tax. The second defence was that the Claimants would have to prove that their subsidiaries were “genuinely established” in the terms of the Cadbury Schweppes case. Although HMRC was refused the ability to introduce these defences into the FII case, they implied that they might well be raised beyond the context of the GLOs. The trial of the FII test cases is set for May.

This article appears in the JHA January 2014 Tax Newsletter, which also features:

  1. Tax Credit Claims Made Out Of Time by Alice McDonald
  2. Exit Taxes by Amita Chohan
  3. Unjust Enrichment Defence Compatible with Equal Treatment by Alice McDonald

You can download the complete newsletter as a PDF below: 

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