The high street retailer is appealing against a Revenue special commissioner?s decision, which ruled the company could not offset losses made in European subsidiaries against UK profits.
David Evans, a director of international tax at Ernst & Young, who worked on the case while at KPMG, said he expects the High Court to refer the case to the European Court of Justice. ‘They will do a lot better at the High Court than they did at the special commissioners,’ said Evans. Once at the ECJ, he expects M&S to win.
Evans said it was in the government’s interest for the case to be referred to Europe, because it would allow it to introduce counter legislation. ‘The sooner [the government] knows what the answer is, the sooner it can get its law compliant with EU law. The UK could have a law which said: “We’ll give you relief for the loss, but reinstate the profits when the loss-making subsidiary becomes profitable”.’
Peter Cussons, international tax partner at PwC, which is advising M&S, believes the Revenue will be soundly beaten when it appears in front of the ECJ.
‘The conclusion is disputable. Not all the relevant case law was considered and some was arguably misconstrued,’ he said at the time of the original decision.
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