Case details

Prudential Assurance Company Ltd (Respondent) v Commissioners for Her Majesty's Revenue and Customs (Appellant)

Case ID: UKSC 2016/0102

Case summary


Permission was granted on one issue by the Court of Appeal; this is an application for permission on the remaining grounds, and a request for a preliminary reference to be made. The grounds include:

  1. whether a non-discriminatory treatment of foreign sourced dividends under EU law requires a tax credit to be set at the effective or nominal rate of tax;
  2. the appropriate methodology to quantify how much ACT was unlawful;
  3. whether lawful ACT may be set against unlawful corporation tax?
Cross-Appeal Issues
  1. If the answer (i) is in favour of HMRC, can Prudential rely on the following as a proxy for those rates: (a) the nominal rate of the jurisdiction of the dividend paying company or, (b) evidence of the underlying tax paid in the consolidated accounts of the non-resident company.
  2. What conforming construction should apply to the subject provisions to give effect to the answers in relation to the appropriate DV tax credit.
  3. Where a corporation tax liability is in part unlawful and against which ACT was utilised which incorporated unlawful ACT whether the unlawful ACT is to be regarded as utilised first against the unlawful corporation tax or is the lawful and unlawful corporation tax to be regarded as having been met pro rata by the utilisation or lawful and unlawful ACT?
  4. (iv) Where a quarterly return has been made of franked payments and ACT has been paid in respect of those payments and the company receives excess FII after the end of that quarterly return period but before the end of the accounting period, is the resulting repayment of ACT: (a) attributable to the offsetting of actual FII against franked payments so that unlawful ACT only arises from the offsetting of the s.231 credits which should have accompanied foreign dividend income against the net amount of ACT not repaid; or (b) a repayment of lawful and unlawful ACT in the proportions in which that ACT payment was made up of lawful and unlawful ACT.

Prudential is a Test Claimant in this litigation, which relates to periods running from 1990-2009 and concerns the tax treatment of UK-resident companies that received dividends from portfolio shareholdings (i.e. where the investor holds less than 10% of the voting power in the company in question) in companies in the EU and in third countries, which were allocated to their pensions and life business. The ECJ and CJEU confirmed that the UK’s tax treatment of dividends received by foreign companies breached Article 56 of the EC Treaty (now Article 63 TFEU) and was unlawful to the extent that a tax credit was not granted to the company receiving the dividends for the tax actually paid by the company making the distribution in the State in which the latter was resident. The current dispute is based on the interpretation of the requirements of EU law so as to avoid a discriminatory treatment of national and foreign sourced dividends.

Judgment appealed

[2016] EWCA Civ 376



Commissioners for Her Majesty's Revenue and Customs


Prudential Assurance Company Limited



Lord Mance, Lord Sumption, Lord Reed, Lord Carnwath, Lord Hodge

Hearing start date

20 Feb 2018

Hearing finish date

21 Feb 2018

Watch hearing
20 Feb 2018 Morning session Afternoon session
21 Feb 2018 Morning session Afternoon session