The Observer: Multinationals hand taxman £20bn final demand (ShellNews.net)

Conal Walsh

Sunday August 15, 2004

The government is facing demands from multinational companies totalling up to £20 billion after the High Court allowed yet another legal challenge to the Inland Revenue's corporate tax rules.

More than 300 companies including BMW, Coca-Cola and Adidas have now filed legal actions in London, claiming that the British government has taxed them on their UK earnings in ways that break European law.

Siemens, Monsanto, AstraZeneca and Carlsberg are also among the corporate giants who are taking on the Inland Revenue.

If successful, their legal claims have the potential to derail Chancellor Gordon Brown's spending plans.

The multinationals complain that, for much of the Nineties, their UK subsidiaries were forced to pay corporation tax to the Inland Revenue before they were able to transfer their UK profits to parent companies abroad.

The European Court of Justice ruled in 2000 that this rule broke EU agreements and discriminated against non-UK corporations. The multinationals have since been engaged in a long-running legal battle to get their taxes back, and their final High Court showdown with the Inland Revenue is scheduled for next year.

Earlier this month a judge gave the go-ahead for a related piece of litigation in which the BT pension fund, Shell pension fund and others are also claiming multimillion-pound rebates.

The Inland Revenue has refused to disclose how much it would have to pay if it lost next year's vital test-case.

But a number of companies are claiming more than £50 million each, and experts believe that Whitehall could ultimately be faced with a bill of up to £20bn.

'Virtually every multinational company stands to benefit if the British government loses,' a leading tax accountant said.

http://observer.guardian.co.uk/business/story/0,,1283125,00.html