Operating on an arm’s-length basis (TT May04 p22-24)

On 17 March 2004, the Budget gave one of the clearest examples yet of UK tax legislation being affected by European law. A German tax case was taken to the European Court of Justice (ECJ) on the grounds that the German thin capitalisation rules were discriminatory, in that they did not apply to domestic corporations. The ECJ found in favour of the tax payer and this created a ripple of domestic tax changes across Europe.