Repayment of taxes charged in breach of EU law
HMRC have considered the comments of the Court of Appeal concerning ‘prevailing practice’ in the Franked Investment Income Group Litigation.
The Court highlighted an important qualification that limits HMRC’s resistence to the repayment of tax under ‘error or mistake’ claims. This resistence often relies on the argument that the tax was originally paid in accordance with the practice generally prevailing at the time.
The Court concluded that the ‘practice generally prevailing’ argument cannot be used to reject claims for repayment of taxes paid in accordance with UK legislation that is found to be in breach of EU law.
HMRC understand this principle also applies to the new overpayment relief. Therefore HMRC will not seek to disallow such claims on the basis that the tax liability was calculated in accordance with the prevailing practice.
The other conditions for error or mistake relief and overpayment relief, such as time limits, will still need to be met in all cases.