TaxCorporate TaxUK group relief hangs in the balance

UK group relief hangs in the balance

UK companies look set to lose billions of pounds' worth of tax relief if Marks & Spencer wins a group relief-tax case against the Inland Revenue, which began in the European Court of Justice this week.

Link: Click here to visit our special report on ECJ tax cases

Barristers acting for the Revenue revealed on Tuesday that one of the options for the government, should the taxman lose, would be to abolish group relief. The most up-to-date Revenue figures show UK plc benefited from almost £13bn worth of relief in 2001.

After the hearing, a Revenue spokesman said that, while abolishing group relief was not a definite reaction to an M&S loss, it would clearly have ‘to be considered’ and would ‘ultimately be a matter for ministers’.

The advocate-general for the M&S application said he would deliver his opinion on the case as soon as 7 April, potentially providing an early insight into how the ECJ is likely to rule.

M&S is claiming it should receive tax relief on UK profits for losses incurred abroad. This claim alone could cost the Treasury up to £50m in rebates, including interest. Hundreds more company groups are pinning hopes on an M&S success, which would lead to billions of pounds worth of tax repayments.

Chris Morgan, head of international tax at KPMG, said the fact that the advocate general had offered an opinion so soon ‘showed the importance of the case’. He added that any companies still to submit claims should do so as soon as possible.

A representative from Germany, which was among the eight member states represented on the day, also asked the ECJ to consider limiting how far back companies could claim.

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