Skip to main content

HMRC set to lose up to £7bn

HMRC may have to pay back up to £7 billion in taxes after a European court found it guilty of breaching EU rules.

The judgement, which was delivered on Tuesday, threatens to allow companies to claim for refunds as far back as 1973 and comes amongst a raging battle over major tax avoidance by large multinational companies.

British American Tobacco is amongst the other litigants who have been fighting a class action lawsuit against HMRC both in the UK and in Europe since 2006. The claimants are simply arguing that they have been unfairly taxed by HMRC for decades.

The case rests on the tax treatment of dividends received by UK-resident companies from companies in other EU member states. Although abolished by Gordon Brown, companies are complaining that when operating under the advance corporation tax rules, they were subjected to double taxation in paying an advance tax on dividends distributed to shareholders as well as paying tax on dividends received from an EU subsidiary.

The rules were contradictory in that they allowed EU companies to offset dividend payments against its corporation tax if received from a UK subsidiary.

When approached for comment, HMRC simply stated that further court proceedings were underway and that there was currently no ruling on having to pay back tax.

Growth Company Investor: free trial