Britannia Radio

This is just one of many such rulings that have gone against the 
government for basically the same reason - Ministers - in this case 
Brown himself - don't know just how subservient they are to Brussels 
and gone on strutting their walk as though they were still in  charge.

It would be pathetic if it were not so horribly expensive.

PS.  Open Europe says "The Regeneration & Renewal magazine reports 
that the Commission has confirmed a £12.6 million fine for the UK 
Government due to 'poor management' of the Structural Funds in Wales."
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FINANCIAL TIMES   28.11.08
Treasury faces £5bn bill as British American Tobacco wins dividends 
tax case
Michael Herman

The Treasury is potentially facing a £5 billion black hole [they 
clearly don't know a black hole when they see one!  They've seen 
enough of their own making recently! -cs] after suffering a High 
Court defeat at the hands of British American Tobacco yesterday.

The ruling comes days after Alistair Darling, the Chancellor, 
admitted that Britain's public finances had deteriorated sharply 
since his March Budget and unveiled plans to borrow billions of pounds.

BAT, the world's second-largest cigarette maker, had challenged HM 
Revenue & Customs over its policy of taxing dividend payments from 
foreign subsidiaries. The verdict paves the way for a £1.2 billion 
tax refund for BAT and exposes HMRC to a far bigger payout. That is 
because BAT was fighting a test case on behalf of some 20 
multinational companies which, if successful, will spark similar cases.

The companies claim that HMRC's policy is illegal under European law 
because the UK does not tax similar payments from domestic companies.

Significantly, BAT was chosen by the 20 to fight the test case 
because the circumstances of its situation are more complex than 
those of the others. The 20 have been assuming that, if BAT succeeds, 
they too will.

Although BAT said that it expected to recover about £1.2 billion, 
HMRC declined to say how much it might lose from the decision. 
However, finding for BAT, Mr Justice Henderson said that the final 
sum claimed from HMRC could be as much as £5 billion.

In a 150-page ruling, the judge stated: "Almost without exception, 
these issues are both difficult and important, and huge amounts of 
money are potentially at stake. I was told that the maximum amount of 
the \claims is of the order of £5 billion."

The verdict applies to any UK company that paid tax on dividends from 
foreign subsidiaries from 1973 onwards, and is not limited to the 20 
companies that backed BAT's test case.

Jonathan Bridges, associate partner in KPMG, said: "This judgment 
makes absolutely clear that the UK dividend taxation rules breach EU 
law, opening the door for massive tax rebates."

Abandoning tax on foreign dividends was a major policy shift 
announced in Mr Darling's Pre-Budget Report this week, although the 
details have yet to be finalised and the move could still be watered 
down. Mark Persoff, a tax partner in Clifford Chance, said: "The 
judge has made clear that UK taxation of EU dividends is illegal and 
so the ruling is a further and very significant spur towards 
scrapping it."

Parties in a legal dispute typically receive a copy of the judgment 
about two weeks before it is made public, and so it is likely that Mr 
Darling and his advisers knew the High Court's view on their foreign 
dividend policy while preparing the Pre-Budget Report.

Last night experts gave warning that HMRC would be almost certain to 
appeal against the ruling, while BAT admitted that it could be four 
years before the issue was finally resolved. HMRC does not have to 
pay any refunds while the legal process is continuing. A spokesman 
for HM Treasury said: "We will need to consider the specific points 
in this judgment before responding further."

Yesterday's decision is the latest in a series of tax rulings to have 
gone against the Government in the past two years. In several of 
these, judges have ruled that the Government failed to take 
sufficient notice of European law when devising UK tax laws.

In the most recent of these Rank, the owner of Mecca Bingo, won a 
£36.3 million refund from HMRC after appealing against taxes levied 
on slot machines played by punters during intervals between bingo games