EC takes UK to court over loss relief ruling

The European Commission is taking legal action against the UK government, accusing them of preventing cross-border loss relief being implemented properly, according to the Financial Times.

They claimed yesterday that the UK was making it ‘impossible or virtually impossible’ for companies with taxable profits to take advantage of the ruling, first clarified in a landmark tax victory for Marks & Spencer in the European Court of Justice.

Cross-border loss relief allows a company to offset tax losses made by subsidiaries based in other EU countries against that company’s taxable profits. Advisers have predicted that if the UK government was to change the law it would cost them tens, or even hundreds, of millions of pounds in revenue.

In 2006, the government amended the rules as a result of the Marks & Spencer case but changes could only be applied ‘in some very limited circumstances’. The commission, however, labeled the changes as ‘unnecessarily restrictive’.