UK: Marks And Spencer Cross Border Group Relief Claims: Court Of Appeal In The Main Supports Taxpayer

Last Updated: 11 May 2007
Article by Liesl Fichardt

Liesl Fichardt, George Gillham, Simon Whitehead, Dorsey & Whitney, London, who act for the taxpayer in the Marks and Spencer case

The following is a brief summary of the Court of Appeal’s judgment of 20 February 2007 in the Marks & Spencer case.

The judgment concerns the interpretation of the ECJ's judgment delivered in December 2005. The case reached the Court of Appeal as appeals brought by both the Revenue and the taxpayer from the decision of the High Court in April 2006 on the interpretation of the ECJ’s ruling.

The ECJ in its ruling indicated that there would be circumstances where the surrender of non resident losses should be permitted, namely, where the possibilities of using the loss locally had been exhausted. The judgment concerns the interpretation of this condition. Three basic issues arose.

1.  Question: At what time must claimants show that the possible use of the loss has been exhausted?

Answer: When claims are made or amended.

The Court has dismissed the Revenue’s appeal on this issue. The Revenue appealed the High Court's finding that the conditions for cross border group relief (as determined by the ECJ) need to be satisfied at the time when the Claimant company makes a claim for group relief. The Revenue contended that it must be demonstrated that the conditions were satisfied at the end of the relevant accounting period for which group relief is claimed.

This was rejected by the Court of Appeal on the basis that differential treatment is to be avoided. As in the case of a UK claimant company, a non UK resident claimant company, when it decides to surrender its losses, can do so at or up to the time when the claimant company makes it claim for group relief. The decision to claim group relief could therefore be made on the basis of facts as they are at the end of the period within which the claimant company is permitted to make its claim and not only the facts as existed during the relevant accounting period.

Thus claimants must show that the loss was beyond possible use when the claim for group relief was made. As amending group relief claims occurs by withdrawing the existing claim and making a new one, the Court of Appeal seems to have accepted that this gives claimants the further ability to show that the condition was met at the time of subsequent amendments to the group relief claims.

This is good news for all claimants. It means in effect over a 6 year period from the end of the accounting period for pay and file years in which the loss must fall beyond possible local use and an effectively indefinite period for CTSA years where HMRC has not accepted the claim.

2.  Question:  When will the possibilities of using the loss be exhausted in the local jurisdiction?

Answer:  When there is no real possibility of using the loss on an objective appraisal of the surrendering company's situation

The Court went on to accept Marks & Spencer's argument on the interpretation of the conditions formulated by the European Court of Justice so as to make a claim for cross border relief.  The Court has held that a claimant would satisfy the second condition of the test formulated by the ECJ (i.e. no possibility of future use of the loss), if on an objective appraisal of the surrendering company's situation the conclusion is reached that there is no real possibility of losses incurred in the surrender period can be taken into account in the state of residence for future periods, either by the surrendering company or by a third party.  The Court has concluded that the High Court was correct in its view that a possibility may exist even where there is little or no real likelihood that the event will happen.

3.  Question: Does the ECJ's judgment mean that the restriction on cross border surrenders should simply be disapplied in all cases or will claimants need to show that the non resident losses were beyond possible use in accordance with paragraph 55 of the ECJ's ruling?

Answer: Where time periods have closed Claimants should have a reasonable period once the criteria were known to meet them and then to make new group relief claims.

The primary argument that the rules must be disapplied in every case while formally run was not pressed and left as a fall back position.  The Court has not supported it although it is still capable of being pursued in other cases.

Instead however the Court has supported Marks and Spencer's alternative formulation of this argument that where time periods have expired Marks and Spencer should still be given a reasonable period to meet the "no possibility of use" requirement following the ECJ's ruling in December 2005.  The Court has left it for the Special Commissioners to determine how long such a period should be if it arises.

The Next Stage of the Marks and Spencer Case

The Court has declined to make a further reference to the European Court of Justice.  HMRC have sought leave to appeal to the House of Lords. If that application is refused the case will return to the Special Commissioners to determine the facts in the light of this guidance.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.