Prudential has moved closer to receiving a £100 million refund from HM Revenue & Customs (HMRC) over claims the taxman broke EU rules.
The life company and HMRC have been engaged in a legal battle since 2003. Prudential claims the tax body demanded more tax on dividends in overseas companies than on those based in the UK. This contravened EU law because it treated cross-border transactions less favourably than domestic transactions.
As a result, some Prudential with-profit policyholders overpaid tax.
In 2013, a High Court judge ruled in favour of Prudential. However, HMRC has continued to challenge the decision.
Yesterday the life company came a step closer to finally receiving a refund from the taxman, reports the Financial Times.
Judges in the Court of Appeal rejected most of the tax body’s arguments against the ruling, meaning that Prudential with-profits policyholders could benefit from a potential £100 million refund. The exact amount HMRC is due to pay out has not been determined but is expected to be at least £100 million.
The decision could also benefit other life companies, as ten other insurers have brought similar complaints to HMRC.
The total cost of the decision to HMRC will not be known until the courts rule how much it must pay Prudential. However, in its annual report and accounts for 2014-2015 HMRC set aside £7.2 billion to cover costs arising from legal battles, including ongoing cases related to EU law.
Despite the decision, policyholders are still likely to face a long wait before they receive anything from HMRC. The tax body said it plans ‘to robustly defend our position through future appeals’ which means the long running could case end up in the Supreme Court.
Source: New Model Adviser