Evonik Degussa UK Holdings Ltd & Ors v Revenue And Customs

The FID regime was a separate and self-contained legislative code. Where FIDs had been matched with foreign profits which had borne underlying tax above the UK corporation tax rate, the whole of the ACT paid on those FIDs was unlawful and recoverable, including for third-country FIDs. HMRC could not apply general streaming or tracing methodologies to such claims.

Summary judgment could determine part of a restitution claim. It was appropriate where liability was established and there was no real prospect of a defence, but not for post-repayment compound interest while a related appeal remained pending, or for an unresolved underlying-tax issue before the First-tier Tribunal.

Seven claimant groups in the FII Group Litigation applied for summary judgment, or alternatively interim payments, concerning restitution of ACT paid on FIDs between 1 July 1994 and 5 April 1999.

The claimants relied on earlier decisions in the same litigation, including the Court of Appeal’s determination that the FID regime was not protected by the standstill provision. HMRC argued that those decisions were arguably wrong and that the FID claims should be analysed like ordinary ACT claims. The central issues were whether the unlawfulness of FID ACT had been conclusively established, whether summary judgment was procedurally available, and whether any parts of the claims remained unsuitable for final determination.

1. Summary judgment granted in principle. The FID regime had been held by the ECJ to infringe Articles 43 EC and 56 EC as a whole. The only unresolved issue concerning third-country FIDs, namely the standstill provision, had subsequently been determined against HMRC. The Court of Appeal’s decision in FII (CA) II also confirmed that the regime had to be considered as a composite whole.
2. Effect of the matching rules. The FID regime required matching with identified foreign profits that had borne underlying tax above the UK corporation tax rate. That matching supplied the necessary link between the ACT and the underlying profits. The claimants were therefore entitled to restitution of the whole ACT paid on matched FIDs, whether the underlying dividends were from EU or third countries. HMRC’s streaming and tracing methodologies had no application.
3. Procedural objections rejected. The word “claim” in CPR Part 24 included part of a claim, as confirmed by Practice Direction 24. HMRC had waived its objection based on the continuing GLO stay by participating in case management, agreeing directions and engaging with the listing process. The applications were consequently not barred by CPR rules 24.4(1A) and (2).
4. Limits of the order. Summary judgment was refused for compound interest accruing after repayment or utilisation of ACT, because the relevant issue was pending before the Supreme Court in Littlewoods Ltd v Revenue and Customs Commissioners. It was also refused for the disputed part of the Perkins claim pending before the First-tier Tribunal. The interim-payment applications therefore required no determination, including the issues arising under section 234 of the Finance Act 2013.

First-instance applications within the FII Group Litigation. Summary judgment was granted on the FID ACT claims subject to the excluded post-repayment or utilisation compound-interest claims and the disputed Perkins issue.