M&S back in court to hammer out group relief ruling

Hundreds of millions pounds were at stake yesterday as lawyers for Marks
& Spencer returned to the High Court to thrash out the details of last
year’s European Court of Justice ruling on group tax relief.

The outcome will determine whether M&S’s ECJ victory will have material
financial benefits to hundreds of other companies.

According to the FT
, court papers show that tax authorities estimate that 300 other companies
are waiting on the outcome of the proceedings. This is in addition to 70
multinationals who are involved in a group litigation claim, which followed the
M&S test case.

The ECJ ruled last
year that M&S should be allowed to offset losses in France, Germany and
Belgium of £100m against its UK tax bill. The ruling did, however, have some
significant qualifications.

The ECJ said that it would be up to member states to impose restrictions that
ensured that tax losses were not used once in the UK and then again in the
foreign jurisdiction.

The ruling was no more specific, and as a result a fresh wrangle has emerged
between HM Revenue & Customs and
M&S
. The high street retailer believes it only needs to show reasonable
evidence that it will not be able to use overseas losses locally in the future.

The Revenue, however, maintains that M&S must show that at the moment the
losses were incurred, there was no question, under local law, of them being used
in those overseas jurisdictions.

A High Court ruling this year said that the issue depended on whether at the
time that the group relief claim was made, the taxpayer could demonstrate that
there was no that there was no possibility that of the overseas losses been used
locally, either in the past or the future.

Both M&S and HMRC are now in the process of appealing this ruling to the
to the Court of Appeal.

Further reading:

M&S to fight on after French tax defeat

Taxman shuts M&S loophole

M&S considers using new tax-efficient trusts