The time limit for the UK to appeal the EU’s State aid decision in relation to the UK’s CFC regime is fast approaching, and we still do not know whether the UK itself will appeal. This is a political decision that needs to be made by the UK Government, rather than HMRC, and the Government currently has many other distractions.
This is not the only pressing issue for the UK in relation to the State aid decision.
HMRC needs to decide whether it needs new legislation to effect recovery of the alleged State aid, or (perhaps more likely) whether it can simply rely on its existing tax assessment machinery (as it did with the Aggregates Levy State aid decision). The latter may require a bit of finessing in relation to time limits, but is probably the preferred option.
HMRC will already be working on compiling the list of the 200 or so taxpayers thought to have benefited from the regime, and the amount of tax at stake, which it is meant to provide to the EU this month. Working out the amount of tax at stake for each taxpayer is very fact dependent and this is therefore not a straightforward calculation.
The amount of tax will also be relevant for any interim assessments that HMRC sends to taxpayers to kick off the recovery process.
HMRC is unlikely to have either the information or the resources in the time available to calculate this accurately – such as the significant people function factual position for each group and any tax reliefs available. But this is an important issue for the taxpayers, who, even if they appeal these assessments, will be expected to finance and pay what could be very material amounts of tax in the meantime. It is unlikely that postponement of the tax will be an option, with the Commission breathing down HMRC’s neck to make a rapid interim recovery. Taxpayers will want to be on the front foot in providing information to HMRC before these interim assessments are issued.
There is plenty for affected taxpayers to think about in addition to the question as to whether to make an annulment application.