The UK Court of Appeal ruled in favour of General Electric in a court case against HMRC on 14th April 2021, following HMRC’s claims that General Electric had made a “fraudulent misrepresentation” in a past agreement.
The case looked back on the agreement made in 2005 between GE and HMRC, where HMRC agreed to grant a tax deduction on transactions with an Australian subsidiary. The agreement meant that GE could circulate nearly $5 billion between the US, UK, Australia and Luxembourg.
From 2011, HMRC started to gather information concerning the transaction with the Australian subsidiary. HMRC have said that the information they have found is very different to what GE had presented them with in 2005.
In 2018, HMRC asked the UK High Court to annul the agreement made with GE in 2005, stating that the six-year time limit will not apply due to the fact GE had made a ‘fraudulent misrepresentation’. HMRC sought 15 years of unpaid taxes, plus interest and fines, totalling more than $1 billion.
However, on Wednesday 14th April 2021, the decision was overturned by the Court of Appeal of England & Wales.
The Court of Appeal ruled that fraudulent misrepresentation is subject to a six-year limitation period and therefore HMRC could not pursue GE over fraud claims from 2005.
General Electric stated that the company “complies with all applicable tax laws in every country where we do business”.
HMRC is yet to confirm whether they will take the case to the Supreme Court to claim more than $1 billion.