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M&S criticised over transfer pricing

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24th May 2013
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Marks & Spencer has won a tax case in the UK Supreme Court as it became the most recent large company to be criticised for its tax arrangements.

The UK retailer won a court case, Commissioners for Her Majesty’s Revenue and Customs v Marks & Spencer, easing restrictions on its ability to claim tax relief from losses at its now-defunct German and Belgian subsidiaries.

The country’s highest court rejected an appeal by HMRC on how that relief is calculated, the latest development in a decade-long legal battle. M&S wants to use losses at the subsidiaries to offset taxable profits in the UK.

Multinational companies including Google, Apple, Goldman Sachs have been criticised for using legal methods so that they pay little or no corporate tax.

Meanwhile, M&S became the latest big company to face criticism over way it arranges its online sales and for the use of an Ireland subsidiary.

M&S ships goods to several countries across Europe through their new marksandspencer.eu website.

Internal M&S documents seen by the Guardian show the firm's structure involves shipping goods from the UK, while billing through Ireland.

Orders made through the site by customers from France, Germany, Ireland or other countries are shipped from M&S's UK warehouses but the transactions are all made with, and charged to, Marks & Spencer (Ireland) Limited, a subsidiary located in Ireland, which has a low CT rate of 12.5%.

M&S's UK branch is paid a wholesale price for the goods it ships by M&S Ireland, and this is subject to UK corporation tax, but the rest of the retail markup is subject to Ireland's CT rate.

However, M&S only uses this structure for sales outside of the UK. All sales in UK stores and online to UK addresses are processed through the UK and are subject to UK corporation tax.

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