This decision relates to claims by taxpayers in the FII GLO in relation to ACT paid on FIDs.
A recent High Court judgment considered applications for summary judgment and/or interim payment made by seven claimants enrolled in the long running FII Group Litigation whose claims included sums of advance corporation tax (ACT) paid on foreign income dividends (FIDs). Their claims include the period from 1 July 1994, when the FID regime was introduced in the UK, to 5 April 1999, when the ACT regime was abolished. This judgment is likely to be of interest to taxpayers seeking repayment of overpaid UK corporation tax arising on the receipt or onwards distribution of overseas dividends from EU group subsidiaries.
The FID regime ran from 1994 to 1999, and the specific sums of ACT paid on the onward distribution of FIDs were repaid after a certain period of time under these specific rules. In 1999 the ACT regime (including FIDs) was repealed.
The principal sums at stake in this decision relate to the time value of the ACT paid from the date the taxpayers paid over the ACT to HMRC up to the date this ACT was deemed to be utilised or repaid, calculated on the basis that the sum of tax would have attracted compound interest throughout this period.
FID claims are different from general FII GLO claims which may relate to unlawful ACT which was never offset (“surplus ACT”) or was offset against mainstream CT or DV tax liabilities, as well as claims for repayments of unlawful Schedule D Case V tax.
For an application for summary judgment to succeed a taxpayer with a High Court restitutionary claim needs to satisfy the Court that HMRC would have no reasonable prospect of defending the claim.
In his decision, Mr Justice Henderson concluded that this was the case and granted summary judgment for payment of the principal sums, but not for the further compound interest element of the claims arising following the date of utilisation and up to the present while HMRC have held on to the principal sums (due to Littlewoods now being appealed to the Supreme Court). In addition, one of the claimants with ongoing parallel proceedings due to be heard at the First-tier Tribunal was also denied summary judgment for the affected amounts pending the outcome of those FTT proceedings.
Summary judgment applications such as this can only be made by taxpayers with High Court claims for repayments of tax, rather than those with pending statutory claims or open periods who may be awaiting the final outcome of the cross border dividend litigation. However, all taxpayers with any type of a FID repayment claim should now consider approaching HMRC for payment of the principal sums to which they are entitled in light of this judgment. Please speak to your usual contact if you have any questions on the implications of this case.
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