The European Commission has formally requested the United Kingdom to change
its Finance Act 2007 to ensure that the period during which taxes levied in
breach of EU rules can be reimbursed is proportional to the objectives pursued.
Under EU law, the reimbursement of taxes paid in violation of EU rules should
be granted according to the national rules on internal tax reimbursements and
should not be made impossible or excessively difficult. A retroactive
limitation of the rights of taxpayer in this respect contravenes this
principle. The request of the Commission takes the form of a 'reasoned
opinion', the second step of an EU infringement procedure. In the absence of a
satisfactory response within two months, the Commission may refer the United
Kingdom to the EU's Court of Justice.
The UK's Finance Act 2007 limits to six years the period during which taxes
levied in breach of EU rules can be reimbursed, thereby preventing the exercise
of rights conferred by EU law in certain cases. This could happen for example
in case a judgement of the Court of Justice of the European Union finding a tax
unlawful is rendered after these 6 years. This measure seems to exceed the
limits of national procedural autonomy stemming from Article 4(3) of the Treaty
on the Functioning of the European Union.
Since the limitation period introduced does not provide for any transitional
rules (except in certain circumstances), it is therefore almost impossible to
exercise the rights conferred by EU law in the area of direct taxation. This is
particularly true for cases that were initiated before 2007 concerning taxes
paid more than 6 years ago.
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