UK and International Tax news
M&S Court of Appeal Decision
Monday 31st October 2011
The Court of Appeal has recently published its decision in the M&S case and upheld the UTT decision released in June 2010 [see UK Tax News item of 9 August 2010].
Whilst many of the principles of the case had already been agreed, the main aspects of the appeal from the UTT covered the technical validity of the claims and the calculation of the available losses.
In particular, HMRC had contended that the no possibilities test [NPT] should be satisfied at the end of the accounting period in which the losses crystallised but the Court of Appeal rejected this argument and agreed with the UTT which had previously decided that the NPT must be satisfied by the time the actual claim is made. HMRC had also contended that sequential or cumulative claims could not be made, given their position above on timing, but this too was rejected by the Court of Appeal.
Overall, with regard to the self-assessment years, M&S was entitled to claim group relief, valid group relief claims were made, on the basis that sequential claims were effective, claims were made within time limits, and the latest claims were made after the NPT test had become satisfied. The quantum of the claim is to be ascertained under Method E and therefore HMRC s appeal on this issue was dismissed.
With regard to the pay and file years, M&S was not entitled to claim group relief on basis that, in relation to the claims which were made in time, the NPT was not satisfied at the date of the claims, later claims made were outside the relevant time limits, and M&S should not be allowed specially to make a claim outside those time limits.
Although either side may seek leave to appeal to the Supreme Court, existing claimants should review and confirm whether the NPT was met at the time the claim was made in 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.
If you would like to discuss the implications of the decision in more detail, please contact Keith Rushen on +44 (0)20 7486 2378.Contact Us