TaxCorporate TaxM&S verdict: companies can claim losses

M&S verdict: companies can claim losses

ECJ rules that companies can claim losses, but with a double-dipping condition

Companies can claim losses incurred in EU subsidiaries back against UK
profits, the ECJ has ruled in the landmark M&S case.

The judgment, out this morning, is qualified, however.

In a release, the ECJ insisted that UK group relief rules were ‘compatible
with community law,’ but added: ‘it is contrary to freedom of establishment to
preclude the possibility for the resident parent company to deduct the losses
incurred by non-resident subsidiaries from its taxable profits, if the parent
company shows that those losses were not and could not be taken into account in
the state of residence of those subsidiaries.’

The inclusion of a rule against ‘double dipping,’ where losses ‘were not and
could not’ be taken into account in other EU states, is likely to severely limit
the impact of the ruling.

Although billions of pounds would have been at stake had M&S won
outright, EU tax experts have suggested that in around eight out of 10 cases,
losses could have been or were used elsewhere.

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