UK - The Treasury's legal battle with 19 schemes over foreign income dividends will be resolved in the European Court, lawyers close to the case believe.
The High Court has given the BT Pension Scheme, Universities Superannuation Scheme, Coal Pension Trustees and 16 other schemes leave to pursue a class action lawsuit against the Treasury for £100m, which the schemes say belongs to them.
The case centres on the Inland Revenue’s treatment of foreign income dividends, which were part of the tax regime between 1994 and 1997. During that period, schemes could claim back tax credits on the dividends that UK companies paid to investors. The tax credits were worth up to 25% of the dividends paid.
At the same time, if a company earned most of its revenues outside of the UK, it could pay a foreign income dividend.
However, schemes that held foreign income dividends were not entitled to tax credits, a practice they say effectively discouraged foreign investment and therefore contravened EU legislation.
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