U.K. Loses EU Court Fight on Corporate Tax Refund Claims

The U.K. unlawfully curtailed the deadline for companies to claim refunds for wrongly paid tax under a system ruled illegal more than a decade ago, the European Union’s top court said.

The U.K. violated EU law by depriving companies “without notice and retroactively” of the right to recover taxes that they shouldn’t have had to pay, the EU Court of Justice in Luxembourg ruled today. The decision is final and can’t be appealed.

It’s the third time the U.K. courts sought the EU tribunal’s guidance in a challenge by a group of twenty companies, including British American Tobacco Plc (BATS), against the country’s advance corporation tax system, which ran from 1973 to 1999. While London-based Aegis Group Plc, which has since been taken over by Dentsu Inc. (4324), is the only company in that group to be affected by today’s case, many other pending claims depend on today’s decision, said Chris Morgan, head of tax policy at KPMG U.K.

“The issue is whether or not companies could make claims that go back as far as 1973, in which case several billion pounds of refunds would be at stake,” said Morgan, who has been involved in bringing some cases to the EU court over the disputed tax system. “The whole argument is that this is a tax that should never have been collected.”

At issue today was the legality of the U.K.’s decision to curtail an extended deadline to make claims for taxes that were incorrectly levied, once the mistake was discovered.

The U.K. government in 2004 limited that extended period for mistaken tax claims, applying the change retroactively from Sept. 8, 2003, in effect canceling any claims made on or after that date. This also included Aegis’s claim, which was made on that same day.

Britain faces a wave of tax refund claims over unlawfully levied tax after a 2001 ruling by the EU’s top court said certain aspects of the U.K,’s advance corporation tax violated EU law.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at sbodoni@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.