News In Focus
14 December 2005
M&S wins EU tax fight
Marks & Spencer has won its battle with the UK tax authorities to offset losses in other EU countries against its UK profits.
The European Court of Justice yesterday ruled in the retail giant's favour in a long running case that had the potential to cost EU governments billions of pounds in tax rebates.
However the ruling did not go as far as some companies would have liked. The key point in M&S's favour was that UK law did not allow the company to claim tax relief in the UK even when it had closed the loss-making foreign subsidiary. The court made it clear that companies should not be able to claim tax relief on losses both in the country in which they occurred and in the country they are based in.
The case is estimated to be worth about £30 million to M&S. The company declined to comment until it had assessed the implications of the ruling.
The UK Treasury welcomed the judgment, claiming it meant that existing rules could continue except in a limited number of cases.
Some 70 companies which had hoped to put a similar case will not be able to found on the ruling because they have ongoing operations in Europe, and will have to claim tax relief in the country where the losses occur. These include Ford, Lloyds TSB, Carphone Warehouse, Asda and Toyota.
Germany, France, Ireland, the Netherlands, Greece, Finland and Sweden all stood to lose huge sums in tax rebates had the ruling had wider effect, and had supported the UK's case.