Tax investigations and disputes
Tax administrations around the world continue to be under pressure to bring in more tax and to clamp down on avoidance. This has led to increasing scrutiny of tax affairs and an international rise in tax disputes and investigations.
Our team focuses on resolving these disputes and investigations. Our work ranges from advice on information requests, global investigations, tax audits and dawn raids to litigation and settlement of tax disputes, including through arbitration.
We work as one team, combining knowledge and experience from our award-winning corporate tax and dispute resolution practices across our offices and the firm's StrongerTogether partner law firms.
We provide quality advice on complex, high-value tax disputes across all taxes and sectors for both local and international clients.
Our experience covers corporate tax, transfer pricing and diverted profits tax (DPT), taxation of the digital economy, VAT and other indirect taxes, EU and contractual claims, employment taxes, state aid and public law/judicial review. We advise on civil and criminal investigations internationally.
We adapt our strategy to your specific needs. We often settle disputes without litigation, but we are also adept at taking cases to the courts at every level, including the European Courts.
Advising clients on a range of civil tax investigations
- Multiple multinational groups facing investigations into the application of the UK’s loan relationship unallowable purposes rules to their financing arrangements.
- A multinational US-headed group defend their European sales and distribution companies against allegations by the French tax authorities that the structure relied on an inappropriate transfer pricing model and lacked economic substance.
- Multiple multinational consumer products and technology companies contest the imposition of (and adhere to compliance requirements related to) extraterritorial German withholding tax on royalty payments between non-resident companies for IP registered in Germany.
- An international group on a multi-faceted dispute with the UK tax authorities, including on the correct interpretation of an advance pricing agreement.
Advising clients on a range of criminal tax investigations
- A global financial institution headquartered in Switzerland in connection with a multi-jurisdictional tax-related investigation regarding potential offshore tax offences in relation to its US cross-border business, involving undeclared life insurance products purchased by US taxpayer customers. At the end five-year project involving substantial co-ordination between our dispute resolution and tax groups, and between our US, London and German offices, our client entered into a non-prosecution agreement (NPA) with the US Department of Justice (DOJ) that confirmed the DOJ’s decision not to prosecute a Swiss entity and an Isle of Man entity within the group for any US tax-related offences in connection with their historical cross-border sales to US customers. The NPA was the first of its kind with the DOJ’s Tax Division involving either a Swiss insurer or an Isle of Man-based institution.
- Multiple clients in connection with investigations by the UK tax authority’s Fraud Investigation Service.
- A global financial institution reach a deferred prosecution style settlement with the French public prosecutor following allegations of being an accomplice to tax fraud.
Advising clients on multi-jurisdictional tax investigations and audits
- A US-listed multinational group facing a multi-year tax audit into their transfer pricing practices involving tax authorities in three different jurisdictions.
- A financial institution facing a multilateral tax audit concerned primarily with alleged transfer pricing issues.
Advising clients on litigation in tax courts and tribunals
- A large professional partnership on a dispute with the UK tax authorities and ongoing litigation in the First-tier Tribunal over the tax treatment of partners conducting the partnership’s UK business in connection with certain partnership interests. Partnership taxation is a highly complex area of law, in which a significant number of these substantive issues remain largely untested. In addition to advising on these points, our role has involved advising on the UK tax authorities’ discovery and information gathering powers, and on certain complex questions regarding the application of First-tier Tribunal procedure in partnership tax disputes involving a significant number of distinct but interrelated appeals.
- Gallaher Limited in relation to tax litigation concerning whether a tax charge should have applied to a transfer of certain IP assets to another group company resident in a non-EU member state.
- A global sports company on various aspects of a dispute with the Indian tax authorities in relation to permanent establishment issues, involving proceedings before the Bombay High Court, the Supreme Court in India and the English High Court.
- Tesco successfully conclude UK litigation concerning the VAT treatment of its flagship loyalty scheme.
- A global energy company on various aspects of a dispute with the Indonesian tax authorities in relation to branch profits tax issues, involving proceedings before the Indonesian Supreme Court.
- A Luxembourg holding company with investments in different EU and non-EU jurisdictions in relation to litigation concerning the application of the EU Parent-Subsidiary Directive to dividends received from one of its Spanish investments.
Advising clients on constitutional law-based tax disputes
- E.ON and RWE in successfully arguing before the German Federal Constitutional Court that the German parliament did not have the requisite power to introduce the German nuclear fuel tax, resulting in billions of € of tax being reimbursed to our clients and other energy companies. This was the first time that a German tax law had been declared unconstitutional and retroactively rendered null and void due to a lack of legislative competence. It was also the first time that a German tax case had been reviewed in parallel by the German Federal Constitutional Court and the CJEU. In addition to breaking new ground from a legal standpoint, the litigation was procedurally complex: it involved co-ordinating around 100 separate proceedings (relating to each individual tax assessment).
- Heathrow Airport on its application for judicial review of the UK government’s decision to abolish the UK VAT Retail Export Scheme and to withdraw airside tax free shopping in UK airports from the end of the Brexit transition period.
- Glencore on its application for judicial review of the UK tax authority’s decision to impose a significant assessment to diverted profits tax (DPT) – the first litigation in relation to DPT. As part of the proceedings, the UK tax authority was required to disclose certain documents regarding its internal process for making the DPT assessment in question, providing a rare opportunity for our client and other interested taxpayers to scrutinise the tax authority’s decision-making processes, both in relation to DPT and more generally. Although the application was ultimately unsuccessful (which is often the case in the tax context), the UK Court of Appeal’s decision laid down some important markers for the way in which the DPT legislation will be interpreted by the UK courts.
- A European government on litigation in a constitutional court in respect of the legality of certain aspects of its tax code.
Advising clients on EU law-based tax disputes, including state aid challenges
- A multinational oil and gas corporation in bringing a challenge before the EU General Court against the EU solidarity contribution imposed on oil and gas companies (the so-called ‘windfall tax’). This landmark case involves challenging the EU Council’s use of emergency powers under Article 122(1) TFEU to secure EU member states’ approval for the measure.
- Sofina successfully obtain a refund of French withholding taxes on French-source portfolio dividends, on the basis of a CJEU decision that the French rules were in breach of the free movement of capital. We acted for Sofina at all stages of the proceedings (including before the French tax courts, appellate courts and Supreme Court), following which the Conseil d’Etat reversed its previous case law and agreed to refer to the CJEU the question of whether the French law was in breach of the free movement of capital. The CJEU’s decision was a landmark one, as it significantly curtailed the ability of France (and other EU member states with similar systems for taxing outbound dividends) to withhold taxes from the gross amounts of dividends paid to EU (and, possibly, third-country) corporate shareholders in a loss-making position in their state of residence in the year when the dividends are received.
- Multiple clients in their defence against the state aid decisions in relation to tax rulings, including representing these clients at the EU Commission, the European General Court and the CJEU.
- Atlas Copco and ABInBev/Ambev in relation to court action by the EU Commission on state aid grounds in relation to Belgian ‘excess profits rulings’.
- Multiple clients in challenging the EU Commission’s state aid decision addressed to the UK regarding its CFC rules, including representing these clients at the European General Court and the CJEU.
- Gallaher Limited in relation to UK proceedings concerning the EU law compliance of the UK’s rules for tax neutral treatment of intra-group transfers of assets.
- Hasbro in relation to French proceedings concerning the VAT treatment of vouchers distributed by manufacturers or suppliers established in other EU Member States to consumers based in France via through French retailers.
Advising clients on treaty-based tax disputes
- A global financial institution in a multi-year dispute concerning its entitlement to relief from UK withholding tax under the UK/Swiss double tax treaty, including its requests for the tax authorities to engage via the mutual agreement procedure, which ultimately concluded with the client reaching settlements with both the UK and Swiss tax authorities which together ensured no double tax was suffered.
- An international infrastructure group facing a major indirect capital gains tax dispute with an African state relating to a key infrastructure project and related litigation, including on the interaction of potential arbitration and contractual claims.
- Burlington Resources (a subsidiary of ConocoPhillips) in relation to an expropriation claim against Ecuador arising out of a dispute involving a 99 per cent tax on windfall profits.
- ExxonMobil’s Nigerian subsidiary in a successful arbitration of a $2bn claim under a production sharing agreement with the Nigerian National Petroleum Corporation relating to taxation, royalty payments, cost recovery and contractual stabilisation.
- Multiple global financial institutions in relation to disputes with the French tax authorities concerning withholding tax and foreign tax credit relief in the context of delta 1 equities derivatives trading transactions.
Advising clients on contractual disputes with a tax element
- A Swiss industrial group and its two shareholders defend claims in a Vienna-seated arbitration for fraudulent inducement and various alleged breaches of representations under an SPA for the sale of a subsidiary. The dispute related (among others things) to the target company’s VAT compliance in the context of general and tax-related indemnities under the SPA, including whether the target company took all reasonably expected measures to prevent involvement in Missing Trader Intra-Community fraud in the precious metals recycling industry.
- A client defend claims from its JV partner before the German civil law courts for a higher share in the JV’s profits related to tax and accounting issues. The dispute related mainly to the correct treatment of a VAT-related contractual risk in the commercial accounts of the JV partnership, and involved careful co-ordination between our dispute resolution and tax groups to connect various legal issues ranging from contractual interpretation and corporate law to accounting for VAT and present them clearly and concisely before a court with limited familiarity with tax law.
- A Luxembourg portfolio company and its new owners in relation to a claim against the seller under a specific tax indemnity in an SPA.