Felicity Lawrence, the Guardian's Special Correspondent, reports that the UK government could be liable for compensation payments worth a total of £55 billion if unsuccessful in its defence against a series of group litigations brought by transnational corporations.
The point of contention is whether HMRC discriminated unlawfully against the corporations by processing transactions from foreign businesses differently to transactions from UK-registered companies. The litigations are said to exploit a discrepancy between UK tax law and that of the European community which gives corporations the right not to be discriminated against by nationality. The first case of this kind was successfully brought by British American Tobacco in 2016, earning the conglomerate a £1 billion payout.
Given that £55 billion would amount to almost half of the NHS annual budget, it begs the question, how would the UK afford such a payment? And what would happen if HMRC simply refused to cough up?
In outline, big businesses have joined together in a series of group litigations to challenge past UK government decisions to levy tax on them. The tax regimes were approved by parliament at the time, but the cases involve exploiting the gap between UK tax law and European community law going back to the beginning of our membership in 1973. These group lawsuits hinge on the different way the Revenue treated transactions made by UK-registered companies and ones made by their related foreign companies. Lawyers for the claimants have successfully argued, decades after the event, that this difference discriminated by nationality and therefore unlawfully breached corporates’ rights enshrined in European treaties – the right to freedom of establishment (ie the right to set up shop in any member state without discrimination) and the right to the free movement of capital.