Upper Tribunal: DTR claims and overseas dividends

This decision is on ancillary matters for group litigants in relation to double tax relief and the taxation of overseas dividends

Taxation of overseas dividends and DTR

The Upper Tribunal (UT) has determined an appeal primarily in relation to procedural matters arising out of the Prudential/CFC & Dividend group litigation. Various issues were before the Tribunal, with a number of taxpayers party to the dispute. The issues focused on the validity of claims for double tax relief (DTR) or repayment of overpaid tax on overseas dividends. 

The appeals follow from long-running litigation which broadly relates to the taxation of overseas dividends in breach of EU law. The key substantive issues, in relation to whether the UK’s system of taxation of overseas dividends in previous periods was in breach of EU law, have been determined. However, there are a number of ancillary issues which remain for various taxpayers who made historic claims. The present appeals concern issues primarily of procedure, for example, in relation to the validity of claims for DTR. Such issues need to be determined to allow taxpayers to give effect to the jurisprudence in the group litigation orders to date.

Where taxpayers had submitted returns originally treating overseas dividend income as exempt, HMRC accepted that relevant taxpayers were in time to make claims for DTR following receipt of closure notices (issue 1). This issue did not need to be determined by the UT as a result.

There were many further issues considered (issues 2 to 14 and issues A to E); the majority of which were found in favour of HMRC, in contrast to the First-tier Tribunal (FTT). The issues concerned, inter alia, matters such as the extended time limit for DTR claims, giving effect to amendments to a return and management expenses and the carry forward of DTR.

The effect of the decision was to determine issues in principle and set aside the decision of the FTT where the decision is inconsistent with first instance. The appeals were remitted to the FTT to apply the UT’s findings, to the extent there are any disputes as to the effect of the decision on taxpayers.

The number of issues involved and complexity of the decision and litigation history to date illustrates that consideration of the factual and procedural background to claims is important. Taxpayers with claims which are yet to be resolved and may be affected by the decision should give careful consideration to their fact pattern and procedural history.