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Danish tax authority loses High Court ‘cum-ex’ case

The Danish tax authority’s attempt to pursue more than 100 financial institutions for £1.5bn in tax payments through London’s High Court has collapsed, after a judge ruled that the action could not be brought in the English courts.

Jonathan Rose successfully represented Martin Smith and obtained a favourable costs order for his client.

The Danish tax authority’s attempt to pursue more than 100 financial institutions for £1.5bn in tax payments through London’s High Court has collapsed, after a judge ruled that the action could not be brought in the English courts. The Danish Customs and Tax Authority (SKAT) brought a lawsuit seeking the recovery of £1.5bn it alleges represent the proceeds of unlawful and fraudulent reclaiming of tax between 2012 and 2015 in the “cum-ex” dividend scandal. It is suing around 100 defendants, mainly financial institutions, which are contesting SKAT’s claims. The suit is so complex that it has been split into three separate linked trials in what had been expected to be on one of the most expensive court cases in recent High Court history. On Tuesday, however, the High Court ruled against SKAT in the first trial, which had to decide whether the Danish state could enforce its own tax laws in an English court. Giving his ruling, Mr Justice Andrew Baker found that the Danish authority was not entitled to do so and he dismissed all of SKAT’s claims. The ruling is just one step being pursued by the Danish body in its sprawling investigation into the “cum-ex” dividend tax fraud as it seeks to identify those it says are responsible for allegedly defrauding the country of DKr12.7bn. Last month it charged three US nationals and three British citizens with defrauding Denmark by $175m. Denmark, Germany, Italy and France are among the European countries hardest hit by the “cum-ex” scandal, in which governments were duped into refunding billions of euros of dividend taxes that had never been paid.  SKAT said in a statement that it had taken steps to appeal against the verdict. In its civil lawsuit SKAT had alleged that hedge fund manager Sanjay Shah, who founded Solo Capital Partners, had exploited the country’s tax system to fraudulently claim large sums of money. Shah, who now lives in Dubai, has also been charged by Danish prosecutors but he and his companies have always strenuously denied any wrongdoing. Chris Waters, managing partner at law firm Meaby & Co, which represents Shah and his companies, said: “The Sanjay Shah defendants have suffered three years of unnecessary litigation in the UK. Mr Shah continues to maintain that at all times he and his companies have acted lawfully and in accordance with the Danish tax rules in force at the relevant time.”

Financial Times 12 May 2021

 

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