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The European Commission (EC) has referred the UK to the EU Court of Justice in response to the country’s tax legislation on cross-border loss relief, having previously forwarded the matter to the court in October 2009.
Despite legislative amendments introduced by FA 2006 (now at CTA 2010, Part 5), the EC believes the UK has failed to implement the court’s previous ruling in Marks & Spencer plc v Halsey (Case C-446/03) [2006] STC 237: that a parent company should not be prevented from deducting the losses of its subsidiary established in another member state, if all other possibilities have been exhausted.
Although the UK amended its rules after the judgment, the country continues to impose conditions on cross-border group loss relief that, in practice, offer little benefit and do not go far enough.
The EC considers this to be an infringement of the principle of non-discrimination and the freedom of establishment.
The referral to the Court of Justice is the last step in the infringement procedure.
