Cadbury Schweppes may beat off an attempt by the UK's tax authorities to recoup GBP8.6m (US$15.8m) in taxes from an Ireland-based subsidiary.

HM Revenue & Customs wanted to charge Cadbury Schweppes Treasury International (CSTI), an in-house finance company and alleged CSTI's presence in Ireland was to dodge higher tax rates in the UK. HMRC claimed the money under a UK law on 'controlled foreign companies' allowing taxation of British-owned subsidiaries based abroad.

A European Court of Justice advocate general has advised that such tax grabs are only legal where the subsidiary is a "wholly artificial arrangement", carrying out little work, established "to circumvent national (taxation) law".

Cadbury would have to demonstrate CSTI carries out valuable work to defeat the tax demand.