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Cadbury Schweppes: the future of CFC legislation

Category Technical Articles
AuthorTechnical Department
Article by Bill Dodwell, tax partner and head of tax policy group, and Carolyn Serrau, senior manager, tax policy group, Deloitte. This article appeared in the July 2006 issue of Tax Adviser. It is not expected that the European Court of Justice will hand down its judgment in respect of Cadbury Schweppes plc, Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue much before 2007, but a great deal of attention has been given to the case following Advocate General Leger's Opinion, presented on 2 May 2006. This is hardly surprising, bearing in mind that this is the first case before the ECJ in respect of a member state's CFC regime and the large amounts of money at stake across Europe. The UK Treasury and other member states with CFC regimes (Germany springs to mind in particular) will be concerned that, should the ruling favour the taxpayer, it will not be possible for their CFC rules to remain in their present form. This is not to mention all the claims that HMRC may need to deal with in respect of tax UK companies have previously paid on their CFC's profits.

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