Marks and Spencer v David Halsey (Inspector of Taxes): ECJ 13 Dec 2005

ECJ Articles 43 EC and 48 EC – Corporation tax – Groups of companies – Tax relief – Profits of parent companies – Deduction of losses incurred by a resident subsidiary- Allowed – Deduction of losses incurred in another Member State by a non-resident subsidiary – Not included.
Article 43 EC did not preclude provisions of a Member State which prevented a resident parent company from claiming group relief for losses incurred by a subsidiary established in another Member State. The restriction was justified by three grounds when taken together: preserving the balanced allocation of the power to impose taxes between Member States; preventing losses being taken into account twice in different Member States; and preventing the risk of tax avoidance if the taxpayer were to be free to choose the Member State in which to claim relief.
As to the proportionality of the restriction, however, the ECJ went on to say this:
‘In that regard, the Court considers that the restrictive measure at issue in the main proceedings goes beyond what is necessary to attain the essential part of the objectives pursued where:
– the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods, if necessary by transferring those losses to a third party or by offsetting the losses against the profits made by the subsidiary in previous periods, and
– there is no possibility for the foreign subsidiary’s losses to be taken into account in its state of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party.
Where, in one Member State, the resident parent company demonstrates to the tax authorities that those conditions are fulfilled, it is contrary to article 43 EC and 48 EC to preclude the possibility for the parent company to deduct from its taxable profits in that Member State the losses incurred by its non-resident subsidiary.’

V Skouris, P
C-446/03, [2005] EUECJ C-446/03, Times 15-Dec-2005, [2006] CEC 299, [2006] BTC 318, 8 ITL Rep 358, [2006] Ch 184, [2005] ECR I-10837, [2006] 1 CMLR 18, [2006] STI 41, [2006] All ER (EC) 255, [2006] 2 WLR 250, [2006] STC 237
Income and Corporation Taxes Act 1988 402, Article 43 EC
Reference fromMarks and Spencer Plc v Halsey (Inspector of Taxes) 2003
Marks and Spencer Plc appealed against the refusal of group relief, on the ground that the statutory limitations on the territorial scope of group relief were incompatible with, and overridden by, Community law. The Special Commissioners dismissed . .
See AlsoMarks and Spencer Plc v Halsey (HM Inspector of Taxes) ChD 2-May-2003
Order requiring reference to ECJ. . .

Cited by:
At ECJHalsey (HM Inspector of Taxes) v Marks and Spencer Plc CA 20-Feb-2007
The inspector appealed against a decision granting group relief to the taxpayer a UK resident company for losses by a group company in another European state.
Held: The appeal was denied. To refuse group relief in these circumstances would be . .
At ECJMarks and Spencer plc v Halsey (Inspector of Taxes) ChD 10-Apr-2006
The court considered the implementation of the ECJ decision between the parties.
Held: The matter was to be remitted to the Special Commissioners. The ‘no possibilities’ test referred to in the ECJ’s judgment required an analysis of the . .
At ECJHM Revenue and Customs v Marks and Spencer Plc CA 14-Oct-2011
The taxpayers claimed relief for losses incurred within their European subsidiaries. The claim having been referred to the ECJ, Moses LJ summarised the issues outstanding: ‘(i) Is the test that the ECJ established to identify those circumstances in . .
At ECJRevenue and Customs v Marks and Spencer Plc SC 22-May-2013
The company wished to assign losses in its European subsidiaries against its profits. Since the losses were first claimed, the subsidiaries had gone into insolvent liquidation.
Held: Lord Hope said: ‘I would answer the first issue by rejecting . .
At ECJMarks and Spencer Plc v Halsey (HM Inspector of Taxes) ChD 10-Apr-2006
Preliminary judgment. . .
At ECJRevenue and Customs v Marks and Spencer Plc SC 19-Feb-2014
For the purposes of corporation tax, MandS claimed group relief in respect of losses sustained by two of their subsidiaries, resident in Germany and in Belgium. Lord Hope observed that the claims were originally made and refused by HMRC over ten . .

Lists of cited by and citing cases may be incomplete.

European, Corporation Tax

Leading Case

Updated: 10 November 2021; Ref: scu.235939