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BP annulment action against CFC state aid decision

BP annulment action against CFC state aid decision

BP International’s annulment action against the European Commission’s state aid decision has been published in the EU Journal.

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BP International’s (BP) annulment action against the European Commission’s (EC) state aid decision on the UK’s Controlled Foreign Company (CFC) Group Finance Company Exemption (FCE) was published in the Official Journal of the European Union (EU Journal) on 16 December 2019. The action was brought by BP on 27 September 2019 and the details published in the EU Journal outline nine separate pleas in law on which the action is based. Similar to the UK Government’s earlier annulment action, BP are seeking to argue that the EC has defined the reference system too narrowly, by looking solely at the CFC rules in Part 9A of TIOPA 2010 rather than the UK corporate tax system as a whole.

BP have also argued that the EC has failed to show that the FCE has conferred an advantage in each case where it has been claimed and that it has not proven the FCE has certainly led to a reduction in the UK corporate tax liability.

Further arguments claim that: the EC has failed to properly understand how the CFC rules work and specifically has misunderstood the relationship between the Finance Company Exemption in Chapter 9 and the Non-Trading Finance Profits CFC Charge Gateway in Chapter 5; the EC has not understood that there are three separate and distinct exemptions applicable to Non-Trading Finance Profits under Chapter 9; and that the matched interest and qualifying resources exemptions are not proxies for the significant people functions (SPF) test in Chapter 5.

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