Share with your friends

Court of Appeal Decision: Coal Staff Superannuation Scheme Trustees Limited v HMRC

Court of Appeal Decision

Court of Appeal ruled in favour of the test claimant regarding recoverability of withholding tax on manufactured overseas dividends.


Also on

On 3 October 2019, the Court of Appeal (CoA) published its decision in Coal Staff Superannuation Scheme Trustees Limited (the Trustee) v HMRC, a test case seeking to recover withholding tax on manufactured overseas dividends (MODs), following an appeal from the Upper Tribunal (UT) by HMRC. The CoA upheld the UT decision that HMRC’s MOD withholding tax rules prior to 1 January 2014 were a ‘restriction’ on the free movement of capital. Further, the justifications for this restriction were also dismissed.

A number of the key highlights from the decision are as follows:

  • The CoA agreed with the UT decision and concluded the UK MOD regime amounted to a ‘restriction’ on the free movement of capital. The CoA noted that the MOD regime limited the returns available to investors from stock lending of overseas shares and therefore discouraged such investors from buying or retaining overseas shares. An investment in UK shares gave rise to no such issues;
  • Potential justifications for restricting the free movement of capital, relating to the concepts of the balanced allocation of taxing rights and the prevention of tax avoidance, and fiscal cohesion of the UK tax system, were also rejected by the CoA which is line with the previous UT decision issued last year; and
  • In terms of remedy, the CoA held that the remedy adopted by the UT was appropriate. Both the UT and CoA were not convinced that a complete disapplication of the relevant provision was required, and that instead a conforming construction could be applied (specifically where the recipient of a MOD has no liability to income tax under s186 FA 2004).

The decision is clearly positive news for the test claimant and other registered pension schemes and it remains to be seen whether HMRC seek leave to appeal this decision to the Supreme Court. The decision also generally supports the position for other claimant types which are not registered pension schemes, including life insurance companies and investment funds. However, these other claimant types might require further clarification given the conforming interpretation proposed by the UT and upheld by the CoA.

Note that following legislative changes, with effect from 1 January 2014, there is no longer any UK withholding tax on MOD payments. Therefore claims relate to periods prior to this date and there is no opportunity to file reclaims in relation to MODs received after 1 January 2014.

For further information please contact:

© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

For more detail about the structure of the KPMG global organisation please visit

Connect with us


Want to do business with KPMG?


loading image Request for proposal

Save, Curate and Share

Save what resonates, curate a library of information, and share content with your network of contacts.

Sign up today