HMRC To Avoid Paying £5BN In Refunds

Citywire reports that HMRC could avoid paying up to £5 billion in interest on tax refunds after a landmark Supreme Court judgement at the end of a 15 year legal battle with insurer Prudential (PRU).

The Supreme Court yesterday ruled against applying compound interest to the bulk of the refunds due to the insurer on taxes paid to HMRC over nearly two decades that was later judged unlawful.

Yesterday's judgement carries major implications for HMRC, which is facing a series of similar pending legal challenges over tax refunds. HMRC has estimated the cost of paying compound interest on all these claims at up to £5 billion.

HMRC had already conceded a refund was due on tax that was applied on dividends paid by foreign companies held in the funds managed by Prudential for policyholders.

This tax was ruled unlawful by the European Court of Justice, as it discriminated in favour of dividends from UK companies, on which insurers were not taxed.

The Supreme Court ruled on five issues, finding in favour of HMRC and Prudential in two each, with the fifth rendered redundant by those judgements.

Prudential was successful in arguing that the tax refund be calculated according to the ‘nominal’, or headline rate of tax paid on those dividends from foreign companies, rather than the actual tax paid, which could in many cases be lower due to tax reliefs and exemptions.

Tax does have to be taxing.

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HMRC Unjustly Enriched

Citywire reports that thousands of Prudential with-profits investors could be in line to receive a share of around £150M after a High Court judge ruled that HMRC had unfairly taxed ‘several thousand dividends’ between 1990 and 2009.

Quite remarkably this case has been running for 10 years, and might affect other providers of similar with-profits funds eg; Aviva, Royal Sun Alliance, Standard Life and Legal & General.

Mr Justice Henderson ruled that HMRC had unfairly taxed the funds in question, and should reimburse Prudential policyholders the tax paid with compound interest.

The judgement read:

‘The Revenue remains unjustly enriched until the date of actual repayment… the interest forms part of the restitutionary claim itself. I would reject the Revenue’s submission that the claimants’ only entitlement is to simple interest...compound interest forms part of the principal sum that needs to be awarded in order to achieve full restitution.’

The ruling is open to appeal by HMRC, which said it was considering the judgement ‘carefully’ before deciding whether to appeal.

Thus it may well continue to run for several more years!

Tax does have to be taxing.

Professional Cover Against the Threat of Costly TAX and VAT Investigations

Insurance to protect you against the cost of enquiry or dispute with HMRC is available from several sources including Solar Tax Investigation Insurance.

Ken Frost has negotiated a 10% discount on any polices that may suit your needs.

However, neither Ken Frost nor HMRCISSHITE either endorses or recommends their services.

What is Solar Tax Investigation Insurance?

Solar Tax Investigation Insurance is a tax-fee protection service that will pay up to £75,000 towards your accountant's fees in the event of an HM Revenue & Customs full enquiry or dispute.

To find out more, please use this link Solar Tax Investigation Insurance



HMRC Is Shite (www.hmrcisshite.com), also available via the domain www.hmrconline.com, is brought to you by www.kenfrost.com "The Living Brand"