The loss relief Group Litigation Order accused the Revenue of falling foul of European law by not allowing tax relief on losses incurred by European subsidiaries, as revealed by Accountancy Age last year.

The setback, while not fatal to the GLO, will delay the litigation by months, and could lead to some companies dropping out altogether.

'The Revenue is hoping that lots of companies will be out of time,' said Christopher Morgan, head of the EU tax group at KPMG. 'It gives them the possibility to close the door on a lot of claims. The Revenue will still be drinking champagne.'

Adam Craig, head of the EU tax group at Deloitte, said the High Court's decision will lead to claimants having to spend more time and money on the litigation. 'Some claims will now fall out of the GLO process - subject, of course, to the right of appeal,' he said.

The GLO followed on the heels of a £30m Marks & Spencer claim, which will be heard by the European Court of Justice later this year. The difference comes in the GLO's route to litigation, which bypassed Inland Revenue special commissioners, and went straight to the High Court instead. It was on this point that Mr Justice Park ruled against concluding it was not his court's 'jurisdiction'.

'The decision means EU claims should be made if at all possible in the tax return in the first instance, or in an amended tax return,' said Morgan.

He said the decision would lead to an additional referral to the ECJ.

The Revenue refused to comment. Email David_Rae@vnu.co.uk.