UK and ITV v Commission. UK Group Financing Exemption scheme not in line with EU State aid rules (T-363/19,T-456/19)

The General Court upheld the European Commission’s finding that an exemption to the UK’s CFC regime for non-trading finance profits out of qualifying loans resulted in State aid. As CFC rules had the objective of including income diverted from the UK back in the tax base, the Court took these rules as its reference point and concluded that the exemption was not justified, as qualifying and non-qualifying loans effectively referred to legally and factually comparable situations. The General Court also pointed out that the Commission did not need to show actual movements by international groups or compare different tax systems within the EU in order to establish that an effect on trade may exist. It also held that the CFC rules as designed did not constitute an obstacle to the freedom of establishment. As a result, the Commission’s recovery decision was upheld and the actions were dismissed.