The European Commission has sent the UK a formal request to properly implement the ECJ judgment in Marks & Spencer on cross border loss compensation. According to the Commission, while the legislation has been amended, the UK still imposes conditions on cross border group relief which in practice make it impossible or virtually impossible for the taxpayer to benefit from tax relief pursuant to the judgment in Marks & Spencer.

The Commission highlights the following points:

• “An unnecessarily restrictive interpretation of the condition that there should be no possibility of use of the loss in the state of the subsidiary (paragraph 7 of Schedule 18A of the Income and Corporation Taxes Act (ICTA) 1988);
• the date for determining whether the condition that there should be no possibility of use of the loss in the state of the subsidiary is met is set immediately after the end of the accounting period in which the loss arises (Part 1, paragraph 7(4), of Schedule 18A ICTA 1988);
• the time limit to claim for group relief for losses made by subsidiaries established in other Member States is set at twelve months (extended in case of enquiries by the Revenue) after the filing date for the company tax return of the claimant company (Schedule 18, paragraph 74, of the Finance Act 1998);
• the legislation states that it applies only to losses incurred after 1 April 2006 (Part 3 of Schedule 1 of the Finance Act 2006).”

In Ireland, FA07 s48 amended loss legislation to implement Marks and Spencer into Irish tax law. While the Irish implementation is restrictive, it is not as restrictive as the UK implementation.