Post-Prudential: Decision released by the FTT

13 January 2022

On 8 December 2021, judgment in the Post Prudential Group Litigation was handed down by the First-tier Tribunal (Tax Chamber) (“FTT”). These were appeals and applications for closure by approximately 200 taxpayers, who had made a variety of claims seeking repayment of unlawful DV tax imposed on dividends received from foreign portfolio holdings. The FTT considered the validity of these various statutory claims following decisions in test cases in the CFC & Dividend GLO, namely Claimants in Class 8 of the CFC and Dividend Group Litigation v Revenue and Customs Commissioners [2019] EWHC 338 (Ch), [2019] 1 WLR 5097 (“Class 8”) and Prudential Assurance Co Ltd v HMRC [2018] UKSC 39; [2019] AC 929 (“Prudential SC”).

The taxpayers succeeded in all the major issues raised. Some points were decided in HMRC’s favour but, as these were only argued in the alternative to the taxpayers’ main case, the ultimate result of the decision was that all of their claims succeeded.  It is of course now open for HMRC to apply for permission to appeal the decision.

In the meantime, following the Tribunal’s decision, it is now possible to make DTR claims under the extended time limit provided under s806(2), with the starting date in most circumstances being the Prudential SC decision in July 2018.  Taxpayers should note that where management expenses or other forms of losses or group relief were applied against DV income the DTR is not lost but carries forward automatically and applies against the next payment of CT on any income. Steps should be taken to ensure that the carried forward DTR is applied where it can be.  In addition, the FTT has held that EUFT can be claimed at the foreign nominal rate where s806(2) is engaged.

The full judgment in The Applicants in the Post Prudential Closure Notice Applications Group Litigation and Another vs The Commissioners for HM Revenue and Customs [2021] UKFTT 0459 (TC) (“Post-Prudential”) can be found here.

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Increased Investment in Personal Tax Compliance in the UK (Published in Thought Leaders 4 Private Client)

Advances in technology and increased international fiscal co-operation have made global personal tax compliance initiatives pop up in abundance in recent years. To compound the issue, the Russian invasion of Ukraine and the corresponding economic fallout prompted domestic governments to increase transparency in relation to investments held by wealthy foreign individuals (with a focus on oligarchs).

In the UK, in the context of the cost-of-living crisis, public opinion certainly seems to be in favour of increased accountability for high-net-worth individuals (eg, on 9 October 2022, 63% of Britons surveyed thought that “the rich are not paying enough and their taxes should be increased”).1

HMRC is one of the most sophisticated tax collection authorities in the world and the department is making significant investments in technology in the field of compliance work; they are well placed to take advantage of new international efforts to increase tax compliance, particularly considering the already extensive network of 130 bilateral tax treaties in the UK (the largest in the world).2 The UK was also a founding member of the OECD’s Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC) forum.

This article discusses the main developments in support of the increased focus on international transparency and personal tax compliance in the UK. There are other international fiscal initiatives, particularly in the field of corporate taxation, but such initiatives are beyond the scope of this article.

It should be noted that a somewhat piecemeal approach, with constant tinkering makes compliance difficult for the taxpayer and is often criticised for lacking the certainty that a stable tax system needs to thrive.

This article was first published with ThoughtLeaders4 Private Client Magazine

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