Brussels launched legal action on Friday to force Britain to recover €100 million in tax exemptions for multinational firms operating in Gibraltar.

European Commission vice-president Margrethe Vestager said the UK had failed to claw back the sum despite the EU deeming the tax breaks “illegal state aid”.

The sum, equivalent to $119 million, is small relative to many EU state subsidy cases, but the case is the latest in a string of spats between the EU and post-Brexit Britain.

“The aid granted by Gibraltar in the form of corporate tax exemption for passive interest and royalties gave an unfair advantage to some multinational companies,” Vestager said. “More than two years after the Commission adopted this decision, the aid has still not been recovered in full and sufficient progress has not been made in restoring competition,” she said. “That is why we have decided to refer the United Kingdom to the Court of Justice for failing to implement this decision.”

The aid granted by Gibraltar in the form of corporate tax exemption for passive interest and royalties gave an unfair advantage to some multinational companies- European Commission vice-president Margrethe Vestager

The United Kingdom left the European Union last year, but the case dates back to a period before Brexit over which Brussels says the European Court of Justice still has jurisdiction.

Gibraltar is a British overseas territory with a border with southern Spain and European member states have long had concerns over its competitive tax regime.

In December 2018, the European Commission decided that some corporate tax exemptions granted to multinationals in Gibraltar between 2011 and 2013 broke EU rules against state subsidy.

They ordered the UK to recover sums granted to four companies, but this has only been fully completed for two, with the remaining pair challenging the order.