Building societies win tax decision

Three building societies may take action against the Government after the European Commission of Human Rights ruled that they had a valid case over being taxed twice.

The Leeds, National & Provincial and Yorkshire building societies were caught by retrospective legislation brought in after the Government lost a test case involving the Woolwich Building society.

The case involves the way that composite rate tax (CRT) was collected to account for tax owing on building society interest. This unified rate, that used to be set to reduce the standard rate to account for non-taxpayers who were also paying tax on theirinterest, was collected yearly based on the societies' accounts until 1996.

The system then switched to quarterly collection of tax based on interest actually paid to investors. Those societies whose year end did not match the financial year were subject to transitional arrangements from April 1986.

The Leeds is claiming £57m, N & P £15m and Yorkshire £9m. Woolwich Building Society took its case to the Lords and won repayment of £91m.

The Commission will try to persuade the Government to make a "friendly settlement'' but they could end up before the European courts. A Inland Revenue spokesman said: "We have nothing to say. We are considering the decision."