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The long-running saga of Marks and Spencer’s group relief claim in respect of losses incurred by its subsidiaries in various EU members states recently proceeded to the Upper Tribunal (Tax and Chancery Chamber).
The facts in brief were that HMRC refused the claim on the ground that losses from overseas subsidiaries could not be offset against UK profits. The Special Commissioners found for HMRC and, on further appeal, the High Court referred to the European Court of Justice (ECJ) for a preliminary ruling as to whether the domestic group relief provisions were contrary to EU law.
The ECJ said EU law was not infringed, except where the non-resident company had exhausted the possibilities available to it in its own country with regard to past and future periods (the no-possibilities test).
The case returned to the UK where the High Court dismissed the appeal concerning the French subsidiary’s losses and remitted the appeal concerning the German and Belgian losses to the Special Commissioners.
The Court of Appeal upheld this decision, and remitted the matter back to the First-tier Tribunal. The tribunal allowed the appeal in part, so HMRC appealed.
The Upper Tribunal (Tax and Chancery Chamber) upheld the First-tier Tribunal’s decision that for the corporation tax self-assessment periods, i.e. those for the years ending March 2000 to March 2002, group relief could be claimed. The group relief claims were validly made, within time limits, and after the no-possibilities test had been satisfied.
The court also agreed with the quantum.
