Treasury publishes regulations to repay CFC Finco State Aid recovery
HM Treasury publishes regulations to repay the recovery of CFC Finco ‘State Aid’ following the EU Court of Justice judgment
Regulations to repay the recovery of CFC Finco ‘State Aid’ following CJEU judgment
Following the European Court of Justice’s judgment on the UK’s CFC Group Financing Exemption (CFC Finco) of 19 September 2024 which annulled the European Commission’s decision that the UK’s CFC Group Financing Exemption constituted unlawful State Aid, HM Treasury has issued regulations to provide for the repayment of the ‘State Aid’ and interest paid by affected companies.
The Controlled Foreign Companies (Reversal of State Aid Recovery) Regulations 2024 are due to come into force on 31 December 2024. Under the Regulations, the ‘State Aid’ recovery will be reversed by means of HMRC giving ‘reversal notices’ to any company affected by Schedule 7ZA of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) and cancelling any interest charging notices given to any affected company. This must be done by HMRC as soon as reasonably practicable after the Regulations come into force.
A reversal notice must put the company into the position it would have been in if: (i) the Commission Decision had not been made; and (ii) Schedule 7ZA had not had effect. Appeals against charging notices or consequential amendment notices will be treated as withdrawn when a reversal notice is given to an affected company.
The Regulations also make provision for appeals against reversal notices issued by HMRC. Affected companies will need to look out for reversal notices being issued from 31 December 2024 and consider whether the effect of any reversal notices they receive is to put them into the position they would have been in if: (i) the Commission Decision had not been made; and (ii) Schedule 7ZA TIOPA 2010 had not had effect, as well as considering, within the relevant timescales, whether any consequential adjustments might need to be made.
The requirement on HMRC to put an affected company back in the position it would have been in, suggests that any reversal notice (or adjustment) should include some compensatory element for those affected. It will be important for those affected to consider whether any reversal notice issued by HMRC (or adjustment) achieves this.
