Commentary

A4.634A Interest on overpaid tax and tax paid early—interest on unlawful ACT

Administration and compliance

A4.634A Interest on overpaid tax and tax paid early—interest on unlawful ACT

A4.634A Interest on overpaid tax and tax paid early—interest on unlawful ACT

In Prudential Assurance Company Ltd1 the Supreme Court heard an appeal on four principal issues.

The first issue was whether EU law requires a tax credit in respect of overseas dividends to be set by reference to the overseas tax actually paid, or by reference to the foreign nominal tax rate ('FNR'). Agreeing with HMRC, the Court accepted that to give a credit for overseas dividends at the FNR may confer a benefit on overseas dividends, compared with domestic dividends. It noted however that the CJEU was well aware that the adoption of the FNR would not eliminate 'all inequities or incongruities' and had consciously rejected the 'ideal' alternative, of a comparison between two tax systems to ensure equivalence, as 'wholly impractical'. In light of this answer, the fourth issue did not arise.

The second (and most important) issue was whether P Ltd was entitled to compound interest in

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