Richard has picked up on my previous post about Margaret Hodge’s examination of HMRC leadership at the Public Accounts Committee and, reliable and well informed as ever, has shed more light on matters. The information he provides serves to show up Hodge’s ignorance as even deeper than we originally believed.
Richard explains how the Inland Revenue has already run a test case of the type Hodge was demanding in such ill tempered, playing to the gallery fashion. This was the Thin Cap Group Litigation, with a ruling on 13 March 2007 from the European Court of Justice.
In that case, based on the tax arrangements being used, the European Court of Justice (ECJ) found that EU law “precluded legislation of a Member State” which restricted “the ability of a resident company to deduct, for tax purposes, interest on loan finance granted by a direct or indirect parent company which is resident in another Member State or by a company which is resident in another Member State and is controlled by such a parent company”. You can read Richard’s post in full and in glorious technicolour over on EU Referendum. It’s an education in itself.
In summary, Richard explains that to charge tax therefore – in the way Hodge is cajoling HMRC to do – would be contrary to EU law, but with a limited proviso – that this does not apply if it can be proved that the loan is a “purely artificial arrangement, entered into for tax reasons alone”. Proving that particular point is nigh on impossible as companies can provide a multitude of reasons for establishing their European HQ in a particular location.
Hodge is chasing her own tail, to no purpose, at the expense of a public that is being misinformed and deceived by her ill informed and pathetic political grandstanding. If Hodge wants the law pertaining to this area of taxation to change, she needs to push for the UK to withdraw from the EU. That won’t happen this side of never. So her continual hectoring is a waste of everybody’s time.
Now, a question. Why is it the media – with its powerful reputation for accuracy – is incapable of researching this story and explaining this? Why is it that to understand the facts we have to resort to reading what a hard working blogger has published on his particular piece of electronic pub gossip? Answers on a postcard to Brian Leveson, courtesy of:
1, Passed Over for Lord Chief Justice