UK Referred To ECJ Over Tax Repayment Law

by Robert Lee, Tax-News.com, London

02 February 2012

The European Commission (EC) has referred the UK to the European Court of Justice for its abolition of a process allowing for the repayment of taxes which according to EU law have been levied illegitimately.

The Commission has already formally requested the UK amend its legislation to ensure compliance with European Union (EU) rules. It made the request in September, 2010, but the UK refused to change its law.

Under EU law, taxes that must be reimbursed when they have been levied in breach of EU rules should be repaid according to the national rules on internal tax reimbursements. This reimbursement should not be made impossible or excessively difficult. In this respect, a retroactive limitation of the rights of taxpayers without proper transitional rules goes against this principle.

The Commission notes that the UK retroactively abolished one of the remedies used by taxpayers seeking reimbursement of taxes paid in breach of EU law. It holds that consequently no proper transitional rules are provided for (except in certain limited circumstances).

As a result, the Commission deems it practically impossible in certain cases to exercise the rights conferred by EU law. This therefore goes against EU rules as this measure exceeded the limits of national procedural autonomy.

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