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CFC State Aid: UK’s appeal and EC decision published in Official Journal

CFC State Aid: UK’s appeal and EC decision

The UK has raised 4 pleas in an action before the CJEU for the EC decision to be annulled and the EC decision has been formally published.


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The UK’s appeal against the European Commission (EC) claim that the UK Controlled Foreign Company (CFC) regime constitutes EU State Aid has now been published in the Official Journal of the EU. Separately on 20 August 2019 the full EC decision was formally published in the Official Journal.

The pleas raised by the UK in the action before the Court of Justice of the European Union (CJEU), for the EC’s decision to be annulled, are largely consistent with the summary of technical arguments that Government put forward, made available by Government earlier in the summer. We discussed these in our article published on 21 June 2019. Should you wish to access the full EC decision published in the Official Journal please click here.

In summary, the four pleas raised following the EC decision are the following:

  1. The UK alleges manifest error of assessment on the part of the EC in selecting the UK’s CFC rules as the reference framework for an examination of comparability. The UK argues that the proper reference system is the UK’s corporate tax framework as a whole; 
  2. The exemptions from the broad CFC rules used in Chapter 9 of TIOPA 2010 are intended to operate as a filter, excluding profits derived from CFCs for which the level of risk that such profits have arisen from avoidance is low. They are not derogations from the rules;
  3. The UK alleges a manifest error of assessment regarding selectivity. One of the arguments raised under this plea is that the EC was wrong to find that the UK should have relied only on a ‘significant people functions’ test; and 
  4. The UK argues that the EC erred in concluding that the relevant exemptions granted a ‘benefit’ to any company so as to affect intra-EU trade.

The ball is now in the CJEU’s court to consider whether the EC erred in its judgment and whether the decision should be annulled.

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