Test Claimants In The Franked Investment Income Group Litigation v Inland Revenue: SC 23 May 2012

The European Court had found the UK to have unlawfully treated differently payment of franked dividends between subsidiaries of UK companies according to whether all the UK subsidiaries were themselves UK based, thus prejudicing European subsidiaries, breach of EU Treaty guarantees of freedom of establishment and of movement of capital. The court was now asked as to the calculation of damages. Two remedies might be available: a demand for repayment of tax unlawfully demanded (under Woolwich), or for tax paid under a mistake of law (under DMG). The first would be time barred. The limit had been relaxed under the 1980 Act for the second. The Court of Appeal had found the Woolwich type remedy the appropriate one. The taxpayer appealed.
Held: As to whether Parliament had the right to amend the law in a way which disallowed access to both types of claims, the principle issue, a reference was made back to the European Court. The claimants’ appeal were dismissed on the issues of the application of section 32(1)(c) of the 1980 Act applied to their claims, and as to the significance of the difference between tax paid under demand or on filing a tax return.
The appeal succeeded in arguing that section 33 can be given an interpretation which conforms with EU law by not construing it as impliedly setting itself up as an exclusive provision. The common law claim in unjust enrichment remains available to the appellants. The appeal on this issue was allowed.
Lord Hope said: ‘I would hold that Parliament could not lawfully curtail without notice the extended limitation period under section 32(1)(c) of the Limitation Act 1980 for the mistake cause of action by section 320 FA 2004.’


Lord Hope, Deputy President, Lord Walker, Lord Brown, Lord Clarke, Lord Dyson, Lord Sumption, Lord Reed


[2012] UKSC 19, [2012] WLR(D) 161, [2012] STC 1362, [2012] 2 WLR 1149, [2012] 3 All ER 909, [2012] BTC 312, [2012] 2 AC 337, [2012] Bus LR 1033, [2012] STI 1707, UKSC 2010/0085


Bailii, SC, SC Summary


Limitation Act 1980 32(1)(c), Finance Act 2007 107


England and Wales


At First InstanceTest Claimants In the FII Group Litigation v HM Revenue and Customs ChD 27-Nov-2008
The claimants were companies with parent companies in the UK and other subsidiaries not so resident, both in the EU and outside. They complained of the differences in treatment under corporation tax of the payment of dividends between the . .
Appeal fromFranked Investment Group Litigation Test Claimants v Inland Revenue and Another CA 23-Feb-2010
. .
CitedAmministrazione Delle Finanze Dello Stato v Spa San Giorgio ECJ 9-Nov-1983
ECJ Questions submitted for a preliminary ruling – reference to the court – right of every national court – stage of the proceedings before the national court – nature of the decision to be given by the national . .
CitedACF Chemiefarma v Commission ECJ 15-Jul-1970
ECJ 1. The provisional character conferred by article 9(3) of Regulation no 17 on steps taken by national authorities in connexion with the implementation of article 85 of the EEC Treaty cannot call in question . .
CitedWoolwich Equitable Building Society v Inland Revenue Commissioners (2) HL 20-Jul-1992
The society had set out to assert that regulations were unlawful in creating a double taxation. It paid money on account of the tax demanded. It won and recovered the sums paid, but the revenue refused to pay any interest accrued on the sums paid. . .
At ECJTest Claimants In The FII Group Litigation v CIR ECJ 12-Dec-2006
ECJ (Opinion of Geelhoed AG) Interpretation of Articles 43 and 56 EC and Articles 4(1) and 6 of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent . .
CitedBrooksbank v Smith 24-Feb-1836
In this case, trustees under a will, who were solicitors, had by mistake transferred stock to a person not entitled. Baron Alderson said, this being under circumstances of mistake, it appeared clear to him that the Plaintiffs were entitled to . .
CitedBaker v Courage and Co 1910
The plaintiff had owned a public house. On selling the leasehold to the defendants brewers, they had overpaid him by andpound;1,000. He deposited a sum at interest with the defendants. When he came to withdraw the last of the deposit (by coincidence . .
CitedPhillips-Higgins v Harper QBD 1954
A claim was made to recover monies due under a contract where the plaintiff had failed to realise that the balance was due to her, and by that mistake the action was concealed from her.
Held: Pearson J said: ‘But that is not sufficient. . .
CitedMarleasing SA v La Comercial Internacional de Alimentacion SA ECJ 13-Nov-1990
Sympathetic construction of national legislation
LMA OVIEDO sought a declaration that the contracts setting up Commercial International were void (a nullity) since they had been drawn up in order to defraud creditors. Commercial International relied on an EC . .
CitedBrasserie du Pecheur v Bundesrepublik Deutschland; Regina v Secretary of State for Transport, ex parte Factortame and others (4) ECJ 5-Mar-1996
Member states may be liable to individuals for their failure to implement EU laws. The right of individuals to rely on directly applicable provisions of the EC Treaty before national courts is not sufficient in itself to ensure full and complete . .
CitedMorgan Guaranty v Lothian Regional Council SCS 1-Dec-1994
. .
CitedHM Treasury v Ahmed and Others SC 27-Jan-2010
The claimants objected to orders made freezing their assets under the 2006 Order, after being included in the Consolidated List of suspected members of terrorist organisations.
Held: The orders could not stand. Such orders were made by the . .
CitedDeutsche Morgan Grenfell Group Plc v Inland Revenue and Another HL 25-Oct-2006
The tax payer had overpaid Advance Corporation Tax under an error of law. It sought repayment. The revenue contended that the claim was time barred.
Held: The claim was in restitution, and the limitation period began to run from the date when . .
CitedBoake Allen Ltd and others v HM Revenue and Customs CA 31-Jan-2006
The claimant companies had paid corporation tax under rules which had later been found to be discriminatory. They now sought repayment by virtue of double taxation agreements with the countries in which the parent companies were based.
Held: . .
CitedKleinwort Benson Ltd v Lincoln City Council etc HL 29-Jul-1998
Right of Recovery of Money Paid under Mistake
Kleinwort Benson had made payments to a local authority under swap agreements which were thought to be legally enforceable when made. Subsequently, a decision of the House of Lords, (Hazell v. Hammersmith and Fulham) established that such swap . .
CitedNEC Semi-Conductors Limited and Other Test Claimants v The Commissioners of Inland Revenue ChD 24-Nov-2003
UK companies were subsidiaries of companies resident abroad, and complained that they were unable to make group income elections.
Held: The prohibition infringed non-discrimination provisions of double taxation agreements – non-discrimination . .

Cited by:

CitedRevenue and Customs v The Investment Trust Companies SC 11-Apr-2017
Certain investment trust companies (ITCs) sought refunds of VAT paid on the supply of investment management services. EU law however clarified that they were not due. Refunds were restricted by the Commissioners both as to the amounts and limitation . .
CitedLittlewoods Ltd and Others v Commissioners for Her Majesty’s Revenue and Customs SC 1-Nov-2017
The appellants had overpaid under a mistake of law very substantial sums in VAT over several years. The excess had been repaid, but with simple interest and not compound interest, which the now claimed (together with other taxpayers amounting to 17 . .
CitedFMX Food Merchants Import Export Co Ltd v Revenue and Customs SC 29-Jan-2020
This appeal concerns the meaning and effect of the phrase ‘Customs Debt’ in article 221(4) of the former Customs Code of the EU, contained in Council Regulation (EEC) No 2913/92. Customs duties may be due under ‘post-clearance demands’ and the Court . .
Lists of cited by and citing cases may be incomplete.

European, Corporation Tax, Limitation, Taxes Management, Damages

Leading Case

Updated: 27 May 2022; Ref: scu.459618