LAWFUEL – The Law News Network – Marks & Spencer (M&S) has won an im…

LAWFUEL – The Law News Network – Marks & Spencer (M&S) has won an important victory as the European Court of Justice (ECJ) this morning handed down a judgment in their tax appeal.

M&S had claimed that UK tax rules, which prohibited M&S in the UK obtaining UK tax relief for losses incurred by their French and Belgian subsidiaries, were contrary to the fundamental freedoms enshrined in EU Law.

The ECJ has now upheld M&S’s appeal but attached significant qualifications. Effectively the ECJ said that Member States could impose restrictions which ensured that the tax losses in dispute could not be used twice – once in the foreign jurisdiction and again in the UK. The decision will have far-reaching consequences both as to the past and for the future.

As to the past:

Many multi-national groups have filed UK claims for cross-border loss relief, pending the outcome of the M&S appeal. No one knows the amount at stake for sure but it’s likely to be several billions Pounds of tax at stake. The qualifications imposed by the ECJ do not help the UK as to the past because UK tax did not contain the restrictions permitted by the Court.
Many other EU member states have similar rules to those in the UK. Those states now face multi-billion pound claims for tax refunds.

As to the future:

The UK is likely to change its law to incorporate the restrictions on tax relief for losses permitted by the ECJ.
Other member states face the same decision.
The ECJ decision strengthens the hand of those calling for greater agreement between member states on the harmonisation of the corporate tax system – something which the UK Government has fiercely resisted.
Appeals by other multinationals on fundamental aspects of the UK’s corporate tax system are pending before the ECJ. This decision shows that the ECJ will adopt a bold approach.

Guy Brannan, Head of Tax, at Linklaters:

“This is a very important but carefully balanced decision. It gives the tax authorities a nasty bill for the past but gives them an escape route for the future. Perhaps more

importantly, as regards other tax appeals pending before the ECJ, it shows that the Court continues to be bold in upholding tax payers’ rights under the EU Treaty.”


Notes to Editors

Linklaters is a law firm that specialises in advising the world’s leading companies, financial institutions and governments on their most challenging transactions and assignments. With offices in major business and financial centres, we deliver an outstanding service to our clients anywhere in the world.

Guy Brannan is the head Linklaters’ global tax practice. His main areas of practice include M&A, contentious tax issues, investigations, litigation and negotiation, EU tax law and international tax planning. Other tax partners to speak on this issue include: Andrew Beverley, Mark Kingstone and Mike Hardwick.

Linklaters was named European Tax Litigation Firm of 2005 (International Tax Review).

Please refer to for important information on the regulatory position of the firm.
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