UK and International Tax news

M&S Supreme Court Decision

Wednesday 29th May 2013

Following the Court of Appeal decision in October 2011, a further appeal was heard by the Supreme Court in April 2013 and its decision in favour of M&S has just been published.

The appeal came before the Court on an application by M&S for a reference to the CJEC. On 14 October 2011 the Court of Appeal gave judgment on five issues which had been identified, finding in favour of M&S on four of these issues and in favour of HMRC on the other one.  It gave the parties permission to appeal on all issues. M&S had intended to seek a reference on the first issue [the no possibilities test – NPT], but on 21 February 2013 the CJEU gave judgment in Case C-123/11 Proceedings brought by A Oy. M&S submitted that any doubt that might have existed on the first issue had been dispelled by that ruling, that a reference was no longer necessary and that it can now be answered in their favour. HMRC had objected to M&S’s application for a preliminary ruling on the ground that the answer to the first issue was already clear. M&S thus invited the Court to determine this issue in their favour, so the hearing on M&S’s application for a reference became a substantive hearing of the appeal on the first issue.

Lord Hope (with whom Lords Neuberger, Mance, Reed and Carnwath all agreed) held that “the question for inquiry is whether the claimant company has been able to show, on the basis of the circumstances known at the date when it makes its claim, that there has been no possibility of the losses in question being utilised in the Member State of the surrendering company in any accounting period prior to the date of the claim and no possibility of such utilisation in the accounting period in which the claim is made or in any future accounting periods”.

Existing claimants should therefore review and confirm whether the NPT was met at the time the claim was made and, if not, new claims should be considered with loss calculations amended where necessary to be consistent with the Court of Appeal decision.

For new claimants, claims for overseas losses which meet the NPT should be made provided they are within the normal two year time limit or if the tax return is still open due to enquiry.

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