No tax credits

The Pirelli case concerned advance corporation tax and group income elections and originally had been part of the Group Litigation Order [2006] STC 548.

The case was remitted back to the Chancery Division where Pirelli raised a new point.

It argued that the double tax agreement credit which the non-UK companies received and which Pirelli accepted should be considered in calculating the compensation should not be characterised as a double tax credit which those companies were not entitled to at all.

If a group income election had been made the dividends paid to the non-resident companies would have been free of advance corporation tax.

The High Court judge rejected the taxpayer's argument saying that had Pirelli made a group income election the subsidiaries would not have been liable to ACT and on payment by them of mainstream corporation tax the parents...