AXA SUN LIFE PLC & Ors. v COMMISSIONERS OF INLAND REVENUE & Anor.
[2023] EWHC 944 (Ch)
BAT Industries PLC & Ors v Commissioners of Inland Revenue & Anor
5 February 2024
[2024] EWHC 195 (Ch)
High Court
Companies sued the UK government for wrongly taxing their overseas dividends. A key question was when they should have known they had a case. The court decided that a smart company should have known by June 6, 2000, because a major European court ruling made it clear that the UK's tax rules were likely wrong.
Key Facts
- •Claimants are members of the FII Group Litigation Order (GLO), challenging UK tax treatment of overseas dividends (1973-1999) as incompatible with EU law.
- •The core issue is determining the limitation period for claims under s32(1)(c) of the Limitation Act 1980, concerning discovery of the mistake.
- •Two challenges are central: the 'DV Challenge' (tax on income under Case V of Schedule D) and the 'ACT Challenge' (advance corporation tax).
- •The Supreme Court in *FII SC2* ruled that s32(1)(c) applies but remitted the question of when the mistake was discoverable to the High Court.
- •The court considers the actions a 'well-advised multinational group' would have taken to discover the mistake, considering advice from an 'Appropriate Adviser' with expertise in UK tax and EU law.
Legal Principles
Claims in unjust enrichment must be brought within six years after the cause of action accrues, unless varied by s32(1)(c) of the Limitation Act 1980.
Limitation Act 1980, s32(1)(c)
Section 32(1)(c) postpones the limitation period until the plaintiff discovers, or could with reasonable diligence have discovered, the mistake.
Limitation Act 1980, s32(1)(c)
The 'reasonable diligence' standard is objective, judged by how a 'well-advised multinational group' would act.
*FII SC2*, [213(16)], [255]
The focus is on when the claimants could have discovered their mistake ('the mistake' being that UK tax law was incompatible with the Treaty), not when they could have been certain of success.
*FII SC2*, [199]
Outcomes
Constructive discovery for both the DV Challenge and the ACT Challenge occurred on 6 June 2000, the date of the CJEU's judgment in *Verkooijen*.
The *Verkooijen* judgment undermined the prevailing professional consensus that challenges to the UK's tax regime would be unfruitful. This created sufficient confidence for a well-advised multinational to begin the preliminary steps of bringing a claim.
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