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UK Treasury loses £5 billion tax case against BAT

It never rains but it pours for the UK government with news that they have today lost a £5 billion taxation case against which could have serious implications for many more companies. The issue relates to the UK governments treatment of dividend taxation on foreign subsidiaries going back to 1973. In simple terms the UK government had instigated a further tax charge on such income even though it had been taxed at source.

This legal battle has been ongoing for some time as many companies believed the UK governments stand against taxation on dividends was at odds with EU regulations. Today's case was a test case for 20 other companies which are waiting in the wings to have their say in court. The government is sure to appeal against the decision and that could drag on for many more years but the situation is critical and could cost in the region of £5 billion a year for the government.

There are a number of other taxation issues which have hit the headlines of late including the rebate received by Rank Group in relation to its Mecca bingo subsidiary. In normal times these figures would not necessarily make a massive difference to the overall UK budget but with debt set to top £1 trillion another £5 billion would be difficult to find.

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