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High Court judgment in FII: compensating for unlawful tax

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In The Test Claimants in the FII Group Litigation v HMRC [2014] EWHC 4302 (Ch) the High Court has largely found in favour of the taxpayers regarding the manner in which claims should be calculated arising from the payment of ACT and tax on DV income where claimants were in receipt of foreign dividend income. The method adopted is to incorporate within the ACT return a credit for foreign tax. This does the least violence to the system. Credit against liabilities for tax on DV income should be given for the higher of the actual tax paid on the underlying profits or the foreign nominal rate. However claimants receiving dividends from group companies could be expected to make proportionate inquiries into the actual and nominal tax rates applicable in the state in which the profits were earned. The nominal rate credit is to be calculated by following...

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