ECJ tide turns as M&S ruling limits tax claims

Claims that corporates could claim billions of pounds back from the Exchequer
suffered a severe blow at the European Court of Justice this week, as companies
were allowed to claim group reliefs, but only in a heavily circumscribed way.

The ECJ ruled on the Marks & Spencer case, deciding that, although the
UK’s group relief system was ‘disproportionate’, companies could claim group
relief only where they had not, or could not, claim it elsewhere.

It had been assumed that the case could blow a multibillion-pound hole in the
UK’s budget plans, but the detail and tenor of the court’s verdict suggested a
move away from rulings in favour of the taxpayer, a traditional feature of ECJ
direct tax cases.

Sean Finn, tax lawyer at Lovells, said the court had rejected the ‘principle
regarding the total disregard of borders’, in adopting the double-dipping

The issue of ‘double-dipping’ was crucial to the verdict, and experts said it
would severely limit claims. The ruling said that reliefs would only apply if
‘the non-resident subsidiary had exhausted the possibilities available in its
state of residence’.

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