UK vs Glencore Energy CASE SUMMARY
Case Information
- Court: Court of Appeal (Civil Division)
- Case No: C1/2017/1845
- Applicant: Glencore Energy UK Limited
- Defendant: The Commissioners for Her Majesty’s Revenue and Customs (HMRC)
- Judgment Date: 2 November 2017
- Download the FULL JUDGMENT
Judgment Summary
This case examines the boundaries of judicial review in tax disputesTax Disputes arise when there is a disagreement between taxpayers and tax authorities regarding the interpretation or application of tax laws. These disputes may concern various issues such as the accuracy of a tax return, the eligibility for tax deductions or credits, the correct amount of tax liability, or transfer pricing adjustments. Tax disputes can lead to lengthy legal proceedings... involving the Diverted Profits TaxDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... (DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its...), a tax introduced by the Finance Act 2015 to prevent profit shiftingProfit Shifting is a strategic practice employed by multinational enterprises (MNEs) to reduce their global tax liability by shifting profits from high-tax jurisdictions to low- or no-tax jurisdictions. The primary method involves transferring income-generating activities, intangible assets, or other high-value components within the group to countries with favourable tax regimes. Profit Shifting is a critical concern for tax authorities and... by multinationals. Glencore Energy UK Limited (GENUK), a subsidiary of the Swiss-based Glencore International AG (GIAG), was assessed under the DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... framework after HMRC deemed the service fees paid by GENUK to GIAG under a Risk and Services Agreement (RSA) to be excessive. The arrangement allegedly diverted profits from the UK to Switzerland, reducing GENUK’s tax liabilityTax liability represents the total amount of tax owed by an individual or business to a tax authority, whether local, national, or international. This obligation arises through various forms of income, profits, or transactions subject to taxation laws and regulations. Understanding tax liability is essential for compliance and efficient financial management for corporations and individuals. It influences how businesses structure....
HMRC issued a Charging Notice for £21.3 million based on its assessment of taxable diverted profits. GENUK challenged the notice, claiming procedural errors in the evaluation process and asserting that the RSA complied with the arm’s length principleThe Arm’s Length Principle (ALP) is a cornerstone concept in international taxation and transfer pricing. It requires that transactions between related parties, such as subsidiaries or affiliates within a multinational enterprise (MNE), mirror those that would occur between independent entities under similar circumstances. This principle ensures that each entity within an MNE is compensated fairly and transparently, based on the.... The High Court rejected GENUK’s application for judicial review, stating that statutory remedies, including the review process and subsequent appeal to the First-tier Tribunal (FTT), were adequate. GENUK appealed this decision to the Court of Appeal.
The Court of Appeal upheld the High Court’s ruling. It emphasised that judicial review should not be used to bypass statutory mechanisms designed to resolve tax disputesTax Disputes arise when there is a disagreement between taxpayers and tax authorities regarding the interpretation or application of tax laws. These disputes may concern various issues such as the accuracy of a tax return, the eligibility for tax deductions or credits, the correct amount of tax liability, or transfer pricing adjustments. Tax disputes can lead to lengthy legal proceedings.... The judgment reiterated that GENUK’s objections, such as those regarding the economic substanceEconomic substance is a foundational principle in taxation and business law, ensuring that transactions and corporate structures reflect genuine economic reality beyond their legal form. The concept aims to prevent tax avoidance by evaluating whether a transaction or arrangement has a real business purpose and economic effect other than merely achieving a tax benefit. It ensures that taxpayers cannot exploit... test and calculation methods, were better addressed through the statutory review and appeal process. The court underscored Parliament’s intention for the DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... framework to include robust safeguards via these statutory remedies.
This case is significant as it clarifies the limited role of judicial review in tax matters, particularly where specific statutory remedies exist. It also highlights the complexities of assessing intercompany arrangements under the DPTDiverted Profits Tax (DPT) is a tax measure designed to counteract aggressive tax avoidance by multinational enterprises (MNEs). It aims to address arrangements where profits are artificially shifted to jurisdictions with lower tax rates or where transactions lack genuine economic substance. Introduced initially by the United Kingdom in 2015, DPT is sometimes informally called the "Google Tax" due to its... and reinforces the need for multinationals to ensure robust compliance with transfer pricingTransfer pricing is a fundamental concept in international taxation that defines the pricing methods and rules applied to transactions between related entities within a multinational enterprise (MNE). In the context of tax regulations, it governs how prices for goods, services, or intangibles (such as intellectual property) are set when these items are exchanged between different branches, subsidiaries, or affiliates of... principles.
