PARLIAMENTARY WRITTEN QUESTION
Foreign Companies: Taxation (17 December 2014)

To ask Mr Chancellor of the Exchequer, what assessment he has made of the potential effect on Exchequer revenues of the decision by the Court of Justice of the European Union in European Commission v United Kingdom (Case C-112/14) of 13 November 2014; and if he will make a statement.

Asked by:
Sir Christopher Chope (Conservative)

The changes are expected to have a negligible impact on the Exchequer.

The decision handed down by the Court of Justice of the European Union in European Commission v United Kingdom (Case C-112/14) of 13 November 2014 relates to a Reasoned Opinion of the European Commission of 17 February 2011 stating that UK Anti-Avoidance legislation contained in section 13 of the Taxation of chargeable Gains Act 1992 (TCGA) did not go far enough in ensuring genuine commercial activity is excluded from charge and was therefore incompatible with EU Treaty freedoms.

The Government had already accepted the legislation was incompatible and made changes to section 13 (in section 62 of the Finance Act 2013) which applied retrospectively from April 2012, prior to the case even being referred to the Court of Justice.

The Court of Justice decision relates only to the old pre-Finance Act 2013 legislation, and the UK therefore did not contest the matter before the Court.

The UK is pleased that the conclusion in the judgement endorses the approach adopted in the revised version of section 13 TCGA; that a restriction on the free movement of capital is compatible with the Treaty where it combats tax avoidance and is targeted at wholly artificial arrangements.

Answered by:
Mr David Gauke (Independent)
5 January 2015