Lloyd's Maritime and Commercial Law Quarterly


FII Group v. Revenue and Customs

The current Franked Investment Income (“FII”) group litigation raises a number of interesting and hitherto untested issues regarding the availability of and limits to unjust enrichment claims brought against the Revenue. In particular, the litigation raises the novel question whether the defence of change of position applies to claims for restitution of tax paid to the Revenue under legislation which contravenes European Union law. The financial consequences of the answer are momentous, likely running into billions of pounds. The legal ramifications are also highly significant. The decision of Henderson J usefully highlights some unsettled questions on the nature and scope of the change of position defence, particularly in its application to claims brought against public authorities, even if it ultimately fails to answer them satisfactorily.
In Test Claimants in the FII Group Litigation v. Revenue and Customs Commissioner 1 the claimants in the group litigation argued that there had been unjustified discrimination in the taxation treatment of dividends received by United Kingdom companies with resident and non-resident subsidiaries. This was said to infringe what are now Art 43 (freedom of establishment) and Art 56 (free movement of capital) of the EC Treaty, causing the claimants financial loss, which in some cases dated back to the accession of the UK to the EU in 1973. Henderson J concluded that many of the claimants’ complaints



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