Losses are allowable

Several members of a group of companies with a Hong Kong parent claimed group relief in respect of losses made by a UK company through an intermediate holding company resident in Luxembourg.

HMRC rejected the claim on the basis companies were not entitled to relief under TA 1988 s 402(3B) and s 406(2). The businesses appealed saying the relevant UK provisions contravened European law.

The First-tier Tribunal referred the matter to the Court of Justice of the European Union (CJEU) which held that articles 49 and 54 of the Treaty on the Functioning of the EU:

“...must be interpreted as precluding legislation of a member state under which it is possible for a resident company that is a member of a group to have transferred to it losses sustained by another resident company which belongs to a consortium where a ‘link company’ which is a...