Originally printed in International Tax Review Premium on 31 October 2013
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.
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Originally printed in International Tax Review Premium on 1 October 2013
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.
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Originally printed in Tax Journal on 13 September 2013
The advocate general’s opinion on Test Claimants in the FII Group Litigation v HMRC (Case C-362/12) was delivered on 5 September. The advocate general’s opinion expressly follows the reasoning of the majority in the Supreme Court. The principle of effectiveness, he considers, is engaged whenever a domestic remedy is used to enforce an EU right. That principle prohibits the reduction in a time limit without both notice and transitional arrangements: ‘a legal remedy cannot offer “effective” protection unless the conditions in accordance with which it may be used and achieve a positive outcome are known in advance’ (para 47). The existence of another remedy would not cure an incompatibility with EU law.
He also concludes, again in keeping with the majority of the Supreme Court, that the principles of legitimate expectation and legal certainty are also offended. The claimants were entitled to expect that their claims would be ruled upon on the basis of what the law was determined to be and not to be deprived of that right by statute.
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C-350/11 Agenta Spaarbank NV v Belgische Staat
On 4 July 2013, the CJEU held that the Belgian notional interest deduction regime is contrary to EU law. Under the rules, Argenta Spaarbank was denied the notional interest deduction on its equity to the extent of the net asset value of its permanent establishment situated in the Netherlands. Had the permanent establishment been established in Belgium, no reduction in respect of the permanent establishment’s assets would have to be made. The Court concluded that the regime discouraged a Belgian company from carrying out its activity through a permanent establishment situated in another state and, consequently, amounted to a breach of the freedom of establishment in Article 49 TFEU.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
The 3rd reference in the FII GLO took place in the ECJ on 26 June. The reference concerned whether the retrospective reduction in the limitation period for mistake claims issued on or after 8 September 2003 (s320 FA 04) offended EU rights. The Supreme Court concluded in May 2012 that the like provisions which hit claims issued before that date (s107 FA 07) infringed EU law principles but could only reach the same decision for s320 FA 04 by a majority (5:2) and therefore referred the matter to the ECJ. The Advocate General’s opinion is expected to be released on 5 September 2013.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
A last minute amendment to the Finance Bill 2013 announced on 26 June 2013 has significantly limited the ability to make an interim payment application in High Court proceedings for repayment of tax. Such applications can now only be made in cases of financial hardship (where the payment of the sum is necessary to enable the proceedings to continue) or where “the circumstances of the claimant are exceptional and such that the granting of the remedy is necessary in the interests of justice.” Applications made before 26 June are not affected.
The legality of the changes seems questionable given their abrupt and retrospective introduction and the fact that in practice they target EU law claims.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
The ROSIIP GLO concerned the imposition of a 55% tax charges against pension-holders who had transferred their UK pensions into the Singapore ROSIIP Pension Fund. At the time of transfer, ROSIIP had been listed on HMRC’s website as a QROPS – transfers to which attract no charge to tax. The fund was retrospectively withdrawn from HMRC’s list in 2008 so that transfers made prior to its withdrawn were said to be “unauthorised payments” and were assessed to the 55% charges.
The pension holders argued that HMRC could not impose the tax charges against them because they had obtained a legitimate expectation from HMRC that they would not be subject to tax on their transfers. On the fifth day of the hearing, HMRC accepted that they could not maintain their assessments against the claimants and the assessments were withdrawn. The background to the withdrawal of these assessments suggests that HMRC may not be able to impose tax charges against individuals who make transfers into other funds which appeared on the QROPS list and were later removed retrospectively.
If you or your clients receive an assessment or enquiry in circumstances similar to those described above, please contact us.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
The High Court hearing concluded on 19 July. The hearing dealt with issues arising out of corporation tax charges on foreign-source portfolio dividends, ACT charges on their onward payment and a number of issues specific to life assurance and pension business, as well as remedies, including the availability of compound interest, and HMRC’s contention that unlawful tax paid under a mistake could not be recovered where the UK had applied its tax revenues against government expenditure (“the change of position” defence). Judgment has been reserved.
Similar issues will be considered in the context of dividends from subsidiaries at the hearing of the FII GLO, which is listed for 29 April 2014.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
C-261/11 Commission v Denmark
The CJEU, following recent case law, concluded that the Danish rules on exit taxation of cross-border transfers of assets within a company are contrary to the freedom of establishment within the meaning of Article 49 TFEU. Under the rules, a transfer of assets internally within a company, but to a permanent establishment outside Denmark having the effect that the assets are no longer subject to Danish tax, is regarded as a sale and is taxed as if the assets had been sold in the year of the transfer. A transfer of assets between a company’s different establishments within Denmark is not taxed. The CJEU affirmed its decision in C-371/10 National Grid Indus, and rejected Denmark’s argument that the rule established in that case is limited to financial assets that are disposed of, or intended to be disposed of, after the cross-border transfer. However, the CJEU confirmed that Denmark can still tax assets that are not intended to be realized, provided the trigger for such taxation constitutes a measure less restrictive to the freedom of establishment than immediate recovery of the Danish tax at the time of transfer.
This article appears in the JHA July 2013 Tax Newsletter, which also features:
Originally printed in Tax Journal on 24 May 2013.
Claims for group relief for the losses of companies in the group in other EU Member States must meet the condition that the possibilities for past, present and future use of the losses locally must be exhausted. The Supreme Court has concluded, in the latest stage of the M&S case, that the date upon which that condition must be met is the date of the claim and not, as HMRC has advocated, the end of the accounting period in which the loss was incurred. Steps taken by taxpayers, such as the liquidation of the loss making subsidiary, will not exclude the making of a claim.
The author acts on behalf of Marks and Spencer in this case.
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