Offsetting losses

Marks & Spencer sought to offset losses incurred by its EU subsidiaries against its UK profits by making group relief claims.

HMRC rejected the claims on the ground that losses from overseas subsidiaries could not be offset against UK profits.

The Special Commissioners upheld that decision. The High Court subsequently referred to the European Court of Justice for a preliminary ruling as to whether the domestic group relief provisions infringed EU law.

The ECJ said that they did not except where the non-resident company had exhausted the possibilities available to it in its own country both with regard to past and future periods (the no-possibilities test).

The case was remitted to the High Court. It dismissed the appeal concerning the French subsidiary’s losses and remitted the appeal concerning the German and Belgian losses to the Special Commissioners (now the First-Tier Tribunal). The Court of Appeal ([2008] STC 526) upheld...