The Treasury has vastly reduced its estimates of how much it will have to repay companies as a result of European tax challenges, following last week’s interim decision in the Marks & Spencer case.
While advocate general Luis Maduro backed M&S in its group relief case, he also said that claims could not take advantage of so-called ‘double dipping’, meaning that they could only claim for tax relief on their losses once.
Officially, the Treasury has remained tight-lipped on the case, and said that only when the full decision from the European Court of Justice is known ‘will we be able to consider fully the implications for the UK tax system, and weigh up the next steps we must take’.
Privately, however, Treasury officials have viewed the advocate general’s decision as a partial victory, and adjusted the overall losses from European claims from as much as £20bn to less than £1bn.
Despite this, several companies have registered interest in joining the scores already involved in the loss-relief group litigation order (GLO) which is hanging onto the coat tails of M&S’s claim.
Simon Airey, partner with lead solicitor Dorsey & Whitney, said that the firm had experienced ‘quite a surge of interest immediately before and since’ the advocate general’s decision.
While the double-dipping aspect of the AG’s opinion could reduce the value of some claims, it is still unclear whether the full ECJ decision, expected towards the end of 2005, would support this.
A spokeswoman for M&S said it was ‘encouraged’ by the AG’s opinion.
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