Brown faces £10bn bill after tax ruling


The Treasury could face a bill running to more than £10bn after a landmark ruling by the House of Lords saying that foreign companies should be refunded for tax unlawfully collected from them years ago.

Gordon Brown

Deutsche Bank today won the backing of of the highest court in the land that it can recoverms of pounds of 'advance corporation tax' it paid to the Revenue in the 1970s and 1980s.

Gordon Brown abolished ACT almost immediately after Labour came to power in 1997, primarily to remove a £5bn-ayear tax break from pension funds and other institutional investors in UK shares. But the abolition also had an effect on

foreign companies with businesses in the UK who had remitted dividends to their overseas parents.

They successfully claimed in the European Court of Justice in 2001 that they had been overcharged tax but the Revenue said that it would not refund payments beyond a six-year limitation because the overcharging had been a 'mistake'.

Today's ruling means Deutsche Bank and many other foreign companies can now claim for overpayments stretching back more than two decades.

Few people have a definitive view on how much the Treasury may be forced to pay back. PricewaterhouseCoopers tax partner John Whiting said he believed it could be anywhere between £10bn and £20bn.

In today's judgment, Lord Robert Walker said: '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 uncovered. If that is thought to be too generous in some cases, Parliament can change it.'

The Revenue said it was 'considering the implications of the decision for existing claims' but pointed out that any new claims had been outlawed in the 2004 Finance Act.

Brown faces £10bn bill after tax ruling