This week, the European Commission announced it was taking action against tax measures in eleven EU Member States for what it sees as infringement of the EU treaty. Perhaps of most immediate interest is its referral of the UK CT Group relief provisions post the Marks and Spencers case to the European Court of Justice.

Towards the end of 2005, the ECJ ruled in the Marks & Spencer case that the UK group relief provisions should permit the offset of losses from non resident sub sidiaries within the UK, where there was no prospect of those losses being used in the country where they arose.

The Commission notes that while the UK changed its legislation in the area, in a statement it says that “the UK continues to impose conditions on cross-border group loss relief which in practice make it impossible or virtually impossible for the taxpayer to benefit from such relief in accordance with the judgment in Marks & Spencer.” Its contention is that the fix in the law doesn't meet Freedom of Establishment standards.

It seems that the Commission's concerns particularly stem from the UK's legislative application of the condition that offshore losses could not otherwise be used, and how this is to be established by the claimants. The Commission is also uneasy that the revised legislation only applies to losses incurred after 1 April 2006.

As already noted, the UK is not alone in having infringement proceedings taken against it this week. Other proceedings involve:

• Austria, France, Germany and Luxembourg – reduced VAT rate on horses
• Spain and Portugal – exit taxes on companies
• Austria – car registration tax and VAT
• Austria and Finland – VAT exemptions
• Belgium – investment funds
• France – VAT on first performances. For students of the unusual, France operates a special reduced rate of VAT on tickets for first performances of cultural works, but had extended the reduced rate to first performances where drinks are being served. The Commission apparently prefers its culture served dry.
• Greece – refund of VAT which wasn't properly due
• Hungary – VAT refunds, where the refund is contingent on the related invoices actually having been settled
• Spain – special VAT scheme for travel agents