Commission Rejects Uk Attempts to Comply with Marks & Spencer

Abstract:This article reports on the move of the European Commission to refer the British government to the European Court of Justice (ECJ) over the improper implementation of a ruling on cross-border relief. The infringement concerns the decision of the ECJ in a case involving Marks & Spencer. The court had expected Great Britain would grant relief for definitive losses of a subsidiary established in another member state. The commission notes the law in the country does not comply with the court's decision..

The European Commission has referred the UK to the European Court of Justice over the improper implementation of a ruling on cross-border relief.

The infringement concerns the Marks & Spencer judgement at the ECJ in 2005, which allows taxpayers to deduct the losses of a non-resident subsidiary from the tax bill of the parent company if every attempt has been made to use the losses in the jurisdiction in which the subsidiaries are established.

After this ruling, the ECJ had anticipated that the UK would grant relief for definitive losses of a subsidiary established in another member state.

Though the UK amended its legislation, the commission believes the law in Britain still does not comply with the ECJ ruling, making it difficult for taxpayers to benefit from such relief.

The commission argued that the UK's provisions are in breach of the right of establishment as provided by articles 43 and 48 of the European Treaty.

A spokesperson for HM Revenue and Customs in the UK said: "The government believes that it has properly and fully implemented the ECJ opinion of 13 December 2005 into UK tax law - it has satisfied all its treaty obligations."

International Tax Review; Nov2009, Vol. 20 Issue 9, p4

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