PROMINENT UK-based multinational firms are on the cusp of receiving enormous payouts from the Treasury after a European court yesterday ruled in their favour on a landmark tax case.
Lawyers now say the total bill owed by the government could reach billions of pounds, depending on how many applications follow the decision.
In a test case the European Court of Justice yesterday decided that British American Tobacco (BAT) had been unlawfully charged UK corporation tax on dividends received from overseas subsidiaries between 1973 and 1999.
The court ordered Her Majesty’s Revenue & Customs (HMRC) to return this money, saying it amounted to discrimination because during the same period British firms did not have to pay corporation tax on earnings from UK subsidiaries.
Jake Landman of law firm Pinsent Mason yesterday told City A.M. that HMRC would now have to fight further court cases to avoid the final bill spiralling out of control.
“Some claimants made claims as early as 2003 while some were made more recently. There is a possibility that later claims are time-barred,” he explained. “At this stage we’re looking at the government owing hundreds of millions.”
BAT said the ruling vindicated its decision to fight against historic cases of “double taxation” while HMRC said it was disappointed but vowed to fight on.
As a result the taxman said there is “currently no tax to be repaid following this judgment”.