The advocate general of the European Court of Justice (ECJ) has issued a ruling allowing members of a long-running group action which includes companies from the British American Tobacco and Aegis groups to continue their action the UK Supreme Court.
The companies are now entitled to continue their preliminary hearing over a case centring around the tax treatment of dividends, which was suspended on 23 May 2012 pending the opinion of the ECJ.
It marks the third time the request has been made to the court - the first was made in October 2004 by the High Court of Justice (England & Wales), Chancery Division (UK) - over the compatibility of the tax treatment of dividends paid to parent companies established in the UK by subsidiaries established abroad.
The opinion has been welcomed as a 'significant success' for a number of UK corporates which have collectively submitted tax reclaims of several billion pounds.
Mark Whitehouse, PwC's head of tax litigation at PwC Legal, said: 'Today's opinion sees another significant stride forward in these claims for a refund of several billion pounds of tax on the grounds that parts of the UK's tax regime were contrary to EU law.
'The advocate general has said that the retrospective legislation, which effectively cancelled taxpayer rights overnight, cannot be relied on by the UK Government to avoid refunding overpaid tax. This is a clear ruling in the taxpayers' favour and will directly assist taxpayers in other circumstances, such as the Stamp Taxes Group Litigation, which has been on hold pending a decision on this point.'
PwC Legal is the lead firm for the Stamp Taxes Group Litigation - a group of some 30 taxpayers who are looking to recover of Stamp Duty Reserve Tax (SDRT) and Stamp Duty on capital raising transactions. This group litigation will now proceed.
The original 2004 request rumbled on until May 2012 when the Supreme Court unanimously found that section 107 of the Finance Act 2007 was incompatible with EU law. But it was divided on compatibility with EU law of the retroactive amendment, introduced without notice by section 320 of the Finance Act 2004, to the applicable limitation period. The Supreme Court decided to stay the proceedings and to make the present request for a preliminary ruling.