Q&A: State aid EU case law

The UK Controlled Foreign Company (CFC) Group Financing Exemption case recently received its final ruling after five years in the courts.

On 19 September 2024 the Court of Justice of the European Union (CJEU) annulled the European Commission (EC) ruling and set aside the General Court’s previous judgment upholding the EC’s position. HMRC is now expecting to repay £700m to affected companies.

What is the background to this case?

The UK CFC rules seek to prevent UK companies from using subsidiaries in low or no tax jurisdictions to avoid UK tax.

Before 2013 the UK CFC rules were far reaching to the extent the UK CFC charges could apply despite there being no diversion of profits from the UK. The UK CFC rules were updated in 2013 to better support UK headquartered multinationals in making commercial decisions including the ability to structure overseas operations or...