A company (PAC) brought a test case against HM Revenue and Customs (HMRC) on various issues originating from two features of the UK tax system between 1990 and 1 July 2009. The first feature was that throughout that period, dividend income received from overseas investments was in principle taxable, subject to certain reliefs. Second, until 6 April 1999, advance corporation tax (ACT) was levied on dividends distributed to UK companies’ shareholders.

One of the principal issues in this case was whether PAC was entitled to compound interest (as opposed to simple interest) in respect of tax levied in breach of EU law, on the basis that HMRC was unjustly enriched by the opportunity to use the money in question.