Marks & Spencer Group Plc won a key ruling in a tax dispute over £100 million ($195 million) in European losses, in a case that may bolster hundreds of similar claims against British tax authorities.
The company appealed a UK court's interpretation of a 2005 ruling by the European Court of Justice, the EU's top tribunal, clarifying when foreign losses can be offset against domestic profits. Marks & Spencer, Britain's largest clothing retailer, claimed the EU decision should entitle it to relief for losses incurred by its Belgian and German units as long as it couldn't take deductions in those countries. The Court of Appeal in London today backed most of the retailer's case, saying companies should be able to offset European losses against profits when there is no „real” or „actual” possibility of using the losses locally. Marks & Spencer may also be entitled to a transition period, letting it make additional claims for relief within a reasonable time frame, the appeals court said. „Today's decision is good news for M&S and other taxpayers who have made similar claims for loss relief,” said Jonathan Bridges, head of international corporate tax at KPMG in London. „The Court of Appeal has given a wider interpretation of the ECJ's ruling than that given in the High Court, which was extremely restrictive.”
The case, which is now due to be sent back to specialist tax commissioners for final resolution, may affect more than 300 similar claims filed against Britain's tax authority. Around 70 other companies, including BT Group Plc and Asda Group Plc, are also pursuing rebates for foreign losses in one class action-style claim against the government. Bridges said the decision may also trigger fresh challenges to legislation adopted by the UK government last February in a bid to limit loss relief. Several companies have already filed lawsuits over the legislation, known as the Finance Act. „It is now very clear that the rules introduced in last year's Finance Act concerning tax relief for EU losses are in breach” of the 2005 European ruling, Bridges said.
HM Revenue & Customs, Britain's tax authority, said it would seek permission to appeal the decision to the House of Lords, given the amount of money at stake. Marks & Spencer is seeking rebates on £46.4 million ($90 million) of losses incurred by its German unit and £5.6 million of Belgian losses between 1998 and 2001. Both businesses have since ceased operations and are being liquidated. The London-based retailer has dropped a related claim for around £47 million in losses incurred by its French stores, which were sold to Galeries Lafayette SA in 2001. Marks & Spencer spokeswoman Clare Wilkes said the retailer hoped the decision would provide a basis to move toward a final resolution of the dispute. No date will be set for the hearing before the special commissioners pending a possible appeal of the case to the House of Lords. (Bloomberg)