Taxman loses appeal against FCE Bank ruling

by Calum Fuller

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17 Oct 2012

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Royal Courts of Justice

FCE BANK claimed victory in the Royal Courts of Justice today, after HM Revenue & Customs lost an appeal against a ruling allowing the bank to claim group tax relief despite its holding company being US-resident.

In 1995, UK-based FCE had attempted to claim group tax relief of £538,521 against losses made by its UK-resident sister company, Ford Motor Company Ltd (FMCL), which would have seen FCE entitled to a tax repayment of about £177,000. HMRC refused, as both companies are directly owned by the US-resident parent company Ford Motor Company (FMC).

Before 2000, a non-UK group could not be used for tax purposes to benefit UK subsidiaries.

FCE Bank won the first case on the grounds that HMRC's decision to block the claim was discriminatory and based on the fact the holding company is US-based, while the upper-tier tribunal also dismissed the taxman's appeal.

Today's ruling upheld those previous judgments, noting that the US holding company was not "in any sense a relevant player as regards the surrender of losses" and that both subsidiaries are liable to UK corporation tax.

In summing up, Lord Justice Rimer observed: "In my judgment ... the only reason for the difference in treatment in the present case is the fact of FMC's US residence.

"The denial to FCE of its claimed relief was discriminatory as compared to with the treatment that FCE would have enjoyed if FMC had been a UK-resident company."

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