Our tax sovereignty is gone

Though Special Commissioners to the Inland Revenue threw out the Marks and Spencer cross-border tax relief claim last week, it stinks of a desperation within UK government.

Because M&S will prevail if the case finds its way to the European Court of Justice.

The ECJ is clamping down on tax disparities across the European Union with more gusto than ever. While just one ruling was made by the ECJ in a direct tax case during the ’60s, there have been 40 such decisions already since 2000.

The M&S case is just one of many currently attracting the interest of multinational companies looking to claw back revenue in any way possible.

It concerns cross-border tax relief, with M&S claiming that it should be able to offset profit-making stores in the UK, against loss-making stores in Europe. Obviously, the Revenue disagrees. At least it doesn’t fancy the prospect of paying back over £30m should it be forced to side with M&S.

And Marks is only one of several cases that multinationals could take advantage of. Just before Christmas, the ECJ found in favour of Lankhorst-Hohorst in its battle with the German government, which opens the door wide open for similar claims in other member states.

Sir Nick Montagu, chairman of the Inland Revenue, told Accountancy Age that he was aware of the ‘huge issues’ the recent decision would raise.

Similar claims from UK companies could cost the chancellor anywhere between £500m and £1bn. But for British multinationals, it’s a potential goldmine.

If all the cases going through the ECJ at present were won by the taxpayers – and in the vast majority of cases they have been – the chancellor will be out of pocket by some £5bn.

The advice is clear. Seek advice on the matter and put your claims in now – you could be in for something of a windfall.

  • David Rae is technology editor at Accountancy Age.

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