Treasury sweats on result of historic £50m tax case
Outcome of M&S case could open door for £20bn of back tax claims, writes David Rae.
Link: M&S takes £100m Revenue fight to Europe
One of the most important tax cases in living memory will get underway next week as Marks & Spencer takes on the might of the UK government at the European Court of Justice.
On Tuesday barristers acting for M&S will argue that it is owed £30m worth of overpaid corporation tax by the Inland Revenue. Interest would likely take that figure to more than £50m, experts claim.
The Luxembourg hearing, which is expected to last for just four and a half hours, will have ‘massive’ implications for the UK Treasury.
Should M&S prevail in the case, hundreds of other claims against the Treasury are likely to be won, leading to as much as £20bn in compensation being paid out to UK plc.
The dispute centres around the UK’s loss relief rules. M&S argues that it should be able to offset losses incurred in its foreign subsidiaries against profits made in the UK.
Around 60 multinational corporations have joined a group litigation order that is almost certain to win should M&S be successful.
If that happens, the Revenue estimates a further 140 companies are waiting in the wings, and are highly likely to join the GLO.
‘It could be massive,’ said Graham Aaronson, the hugely respected tax barrister acting for M&S, ‘given that the members of the GLO in loss relief are all waiting for M&S’.
No less than eight member states of the EU will be offering evidence against M&S and Aaronson.
‘My pet theory is that the Revenue should have tried to settle these cases when the Treasury was swimming with money and European law was not as developed as it is now,’ said Aaronson. ‘A few hundred million is probably all it would have cost.’
Resources & Whitepapers
Accounting Software The power of customisation in accounting systems
The loss relief GLO figure alone is set to dwarf that.
There are five other GLOs at various stages of litigation, and other GLOs are rumoured to be in the process of being established.
A spokesman for the Revenue said it would argue that UK treatment of M&S is not against European law and said that it may be some time before a judgement is published.