Court frees Revenue to pursue Glaxo

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Glaxo Wellcome yesterday lost a legal judgment in favour of the Inland Revenue, which is now free to pursue the company for hundreds of millions of pounds of back tax.

However, the drugs giant said the High Court ruling was only on procedural issues and was not indicative of a tax liability on the company's part.

The company has already made substantial provisions, estimated to be up to pounds 400m, against an unfavourable outcome of the case.

A spokesman said: "The judge was quite clear. He made no judgment on Glaxo's liability to corporation tax."

The case was brought by Glaxo to test certain issues surrounding transfer pricing, in particular whether the Inland Revenue was allowed to review transactions by group companies prior to 30 June 1986. Transfer pricing is a technique used to "move" profits from a country with high corporate taxation to one with lower taxes.

A spokeswoman for the Inland Revenue said: "Obviously we're pleased we won - the fact that we won would seem to suggest we've been right in the way we've applied the law for the last 40 years." She said the parties were discussing dates for appeal hearings.

The case dates from issues stretching back to before 1980 and is not expected to hit profits this year. Although Glaxo Wellcome shares fell 18p to 857p yesterday, part of that related to disappointment over Wednesday's research briefing by the company.

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