Evonik vs HMRC: A Complex Financial Dispute in the High Court

Introduction

In a detailed judgment handed down on 18 December 2024, the High Court, presided over by Mr Justice Richards, addressed the complex financial dispute between Evonik UK Holdings Limited and HMRC. The case centred around the calculation of interest on unlawfully levied advance corporation tax (ACT) related to Foreign Income Dividends (FIDs).

Background

The litigation forms part of the longstanding Franked Investment Income Group Litigation Order (GLO), which has been ongoing for over two decades. Evonik's claim involved compensation for the time value of money lost due to unlawful ACT payments, a matter previously addressed in summary judgment in 2016.

Legal Context

The case revisited the principles established in prior Supreme Court decisions, including Prudential Assurance Company Ltd v HMRC [2018] UKSC 39 and Test Claimants in the FII Group Litigation v HMRC [2021] UKSC 31. These rulings impacted the understanding of interest calculations on unlawful tax payments, particularly concerning compound versus simple interest.

Evonik's Claim

Evonik sought compensation based on simple interest rates specified in the Finance Act 2019 and the Senior Courts Act 1981, depending on the timing of the ACT repayment. The claim was complicated by a prior consent order in 2021, which established a minimum value for Evonik's claim, calculated using lower interest rates.

HMRC's Position

HMRC argued that Evonik's attempt to claim higher interest rates constituted a collateral attack on the 2021 Order and conflicted with an admission made in earlier proceedings. They contended that the established value should not be exceeded unless new legal determinations within the GLO permitted it.

Court's Analysis

Mr Justice Richards examined the construction of the 2021 Order, the concept of 'Established Value,' and the implications of withdrawing admissions made in legal proceedings. The judgment highlighted the importance of interpreting consent orders within their legal and factual context.

Decision

The court concluded that Evonik's application for judgment on its FID Claim was not inconsistent with the 2021 Order. However, Evonik's request to withdraw its admission regarding the value of its claim was denied, emphasizing the need for finality and efficiency in long-running litigation.

Implications

This case underscores the complexities involved in financial litigation, particularly when dealing with historical tax issues and evolving legal standards. It also illustrates the challenges of balancing procedural fairness with the need for efficient dispute resolution.

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