The European Commission has referred the United Kingdom to the EU Court of Justice for its tax legislation on cross-border loss relief. The Commission considers that the UK has failed to properly implement the ECJ's previous “Marks & Spencer” ruling (Case C-446/03) on this matter.

In 2005, the ECJ had ruled in the case of Marks & Spencer v Halsey that a parent company should not be prevented from deducting the losses of its subsidiary established in another Member State, if all other possibilities have been exhausted. This ruling is applicable to all Member States.

Although the UK amended its legislation after the judgement, it continues to impose conditions on cross-border group loss relief. The Commission considers this to be an infringement of the principle of non-discrimination and the freedom of establishment, set down in the Treaty.

Ireland also amended its group loss relief laws under section 420C TCA 2007, in response to the decision handed down by the ECJ in respect of the Marks & Spencer case. Therefore, any further direction handed down by the ECJ may also impact on how Ireland provides for cross-border loss relief.