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BUSINESS life: Taxman may have to return pounds 1billion in corporation tax.

THE Inland Revenue has lost another major court case which could see it having to repay an estimated pounds 1 billion in advance corporation tax.

The recent High Court case ruled against the Inland Revenue and upheld a claim by Deutsche Morgan Grenfell for refunds on tax payments made by them in the mid-1990s from dividends paid to their German parent.

This decision extends the period for which a refund claim can be made to include the whole period for which the mistake of law continued.

John Hodgson, international business partner at Grant Thornton in Coventry, said: "This case is similar to another involving Pirelli and the dividends it paid to parent companies in Italy and Germany, which the Inland Revenue also lost.

"This is the tip of an enormous iceberg. These cases have arisen because British tax law has been overturned by a European Court of Justice ruling in 2001.

"This decided that it was unlawful for the Inland Revenue to impose advance corporation tax on dividends paid by UK companies to parent companies based elsewhere in Europe."
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Title Annotation:Business
Publication:Coventry Evening Telegraph (England)
Date:Aug 26, 2003
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