In 2010, the High Court granted a group litigation order (GLO) in respect of stamp duty reserve tax (SDRT) reclaims made by a number of persons. The claims are for restitution and/or damages against HMRC regarding payments of higher (1.5%) rate SDRT on the transfer or issue of shares to providers of depositary receipt and clearance service arrangements. The payments were made before having been declared unenforceable under EU law. This case is the test claim for the purposes of resolving some of the remaining issues in the Stamp Taxes GLO.
The High Court held that tax payments made before 8 September 2003 could be recovered. HMRC were unjustly enriched by the claimant’s mistake in paying the tax, but tax payments made on or after 8 September 2003 were time barred.
The significance of that date relates to a change of UK law that took effect then. That change of law removed an exception to the standard six-year limitation period that applied to mistake-based restitution claims. It means that tax reclaims based on a mistake cannot be brought more than six years after the date of payment.
The High Court held that the change of law was retrospective and, as such, infringed EU law. The remedy required to avoid the infringement was to declare ineffective the change of law as it relates to rights that accrued before the change of law. The accrual of rights to recover the tax stem from the payments made mistakenly under the unlawfully levied tax. So the tax payments made by the company before 8 September 2003 were recoverable; those made by the company on or after that date were not as they were time-barred.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.