The decision, delivered this afternoon after the case got underway on Tuesday, is a huge blow to the Revenue. It was hoping the Judge would reserve judgement, and so delay a flood of similar claims.
Simon Whitehead, solicitor in charge of the case at Dorsey & Whitney, said it was always the intention to get the case to Europe, so that the ECJ could ‘order that the UK group relief system is illegal’.
If that happens, which seems extremely likely, M&S alone will recoup about £30m in lost taxes after the Revenue did not allow it to offset losses incurred in European subsidiaries against profits made in the UK.
Because M&S could have done so with subsidiaries based in the UK, barristers representing M&S argued it was in direct contradiction to Article 43 of the EC Treaty, which stipulates that all member states should be treated on an equal footing.
The UK group relief system is beginning to creak under the strain. 45 companies have now joined a Group Litigation Order which could see the Revenue facing a bill in excess of £750m. Whitehead described today’s decision as ‘a shot in the arm’ to the GLO.
Tony Cole, head of tax at M&S, said: ‘We are delighted that it has been referred to Europe and look forward to the hearing.’
The Revenue could still appeal the decision, and is likely to let the High Court know of its intentions early next week. Should it not do so, the ECJ is likely to hear the case in the middle of next year, with a decision expected towards the end of 2004.
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