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M&S wins cross-border tax relief case

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24th Feb 2014
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Marks & Spencer has won another court case against HMRC - part of a long legal dispute over the right to claim tax relief from losses at the retailer's now-defunct German and Belgian subsidiaries.

The dispute, which started more than 10 years ago, is about whether M&S can use losses at the subsidiaries to offset taxable profits in the UK.

The latest hearing, in the Supreme Court, was about the interpretation of a statement in 2005 by the Court of Justice of the European Union (CJEU).

The court said that the UK parent should be able to claim relief for the losses made by its EU subsidiaries, but only if the subsidiaries had exhausted the possibilities available for using those losses in their own countries in past, present and future accounting periods.

This test (known as the 'no possibilities' test) may not sound contentious. But as Rebecca Reading, partner at Baker Tilly says in a note on the ruling, M&S and HMRC have been in dispute over this point for the last eight years - specifically, the issue of when future possibilities might become exhausted.

HMRC argued that a 'no possibilities' test had to be applied on the day after the end of the accounting period in which the losses arose. 

M&S argued that the test should be met at the date the claim for loss relief was made. The Supreme Court agreed unanimously with M&S. 

The ruling may encourage other companies to make similar claims, according to Reading.

HMRC said in a statement: "The judgement confirms we are not obliged to accept out of time claims, but we acknowledge that subsequent alternative cross-border group relief claims can be made within the statutory time limits."

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