Lords Rule Against HMRC Over Advance Corporation Tax

by Robin Pilgrim, LawAndTax-News.com, London

26 October 2006

The UK's House of Lords on Wednesday backed a High Court decision which found against HM Revenue and Customs in a dispute over advance corporation tax.

Deutsche Morgan Grenfell, the German bank's UK investment banking operation argued that an European Court of Justice ruling on the levy - which was abolished in 1999 - meant that it was entitled to claim back millions of pounds paid in ACT in the 1990s.

An earlier judgement had argued that claims could only be made within six years of payment of the tax. However, the Lords panel rejected that decision by 4-1, overturning the government's assessment that taxes paid due to a "mistake in law" are only recoverable when certain legislative provisions are in place.

Writing on behalf of his fellow peers, Lord Robert Walker reportedly stated that:

"Parliament has enacted that where there is an action for relief from the consequences of a mistake, time should not run so long as the mistake remains undiscovered. "If that is thought to be too generous in some cases, Parliament can change it."

The UK authorities, in anticipation of such a defeat, had already put in place legislation preventing similar claims being made. However, it is widely expected that the legislation in question will now come under fire from companies which feel they have overpaid advance corporation tax.

Deutsche Morgan Grenfell DMG was one of 65 companies from various countries which filed a group litigation claim in the UK following the ECJ's ruling.

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