M&S: Companies may have to revisit group relief claims

International and UK corporates claiming for group relief on UK tax as a result of the M&S case will have to look closely at what happened to profits earned abroad.

The ECJ advocate general suggested earlier today that aspects of UK group relief, which allows companies to offset losses from UK subsidiaries but not others within the EU, were incompatible with EU law.

But, in an important qualification, Luis Maduro also said that a key question when deciding on such cross-border reliefs was whether or not the losses could be used within the country the subsidiary was based in, says Adam Craig, a director of corporate tax at Deloitte.

‘The UK and other member states do not have to pay out if the losses are able to be used in another member state,’ he told Accountancy Age. Effectively company subsidiaries would claim for losses twice.

Other countries often allow companies to delay losses or offset them elsewhere. Maduro has suggested that if losses have been used, companies cannot ‘double-dip’ in claiming the losses again at a foreign parent.

The qualification means that M&S may have to look at what happened to the losses it is claiming, as will members of a group litigation order currently at the High Court, Craig said. It will also mean member states’ losses as a result of the case could be significantly reduced.

A spokeswoman for M&S said: ‘We are encouraged by the advocate general’s opinion and we await the ECJ decision later this year.’ She added that the group would be reading the opinion in detail before commenting further.

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