UK v Commission: the General Court’s critical error

In UK and ITV plc v European Commission the General Court read the UK’s CFC legislation as laying down a general rule that the mere existence of relevant UK significant people functions (SPFs) made lending by non-resident subsidiaries an abusive diversion of profits (even in the case of funds not originating from the UK). Any exemptions from that general rule therefore selectively privileged some cases of abusive diversion over others. Given however that group finance departments tend to be involved in lending by foreign group members the General Court’s reading if correct would have the startling effect that most lending by CFCs would be abuse. That was not the objective. The existence of SFPs is merely a gateway i.e. an initial test which critically is further refined by a series of other rules designed to limit the charge to cases...