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European Commission

Press release

Brussels, 27 September 2012

Taxation: Commission refers UK to the European Court of Justice over cross-border loss relief

Today, the European Commission has decided to refer the United Kingdom to the EU Court of Justice (ECJ) 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 Court ruled 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. Although the UK amended its legislation after the judgement, it continues to impose conditions on cross-border group loss relief which, in practice, make it very difficult to benefit from. The Commission considers this to infringe the principle of non-discrimination and the freedom of establishment, set down in the Treaty.

Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit, said: "Cross border loss relief is a basic need for businesses that expand beyond national borders. It is essential for entrepreneurship and for creating a positive business environment within the Single Market. I therefore urge the UK and all Member States to respect the case law on this matter."

The referral to the Court of Justice is the last step in the infringement procedure.


In 2003, the high court of Justice of England and Wales referred a preliminary question to the EU's Court of Justice in the context of a case opposing Marks & Spencer plc. to David Halsey (Her Majesty's Inspector of taxes). In 2005, the Court ruled that: "it is contrary to Articles 43 EC and 48 EC to prevent the resident parent company from [deducting from its taxable profits losses incurred in another Member State by a subsidiary established in that Member State] where the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods and where there are no possibilities for those losses to be taken into account in its State of residence for future periods either by the subsidiary itself or by a third party". This ruling is applicable to all Member States.

For press releases on infringement cases in the taxation or customs field see:

For the latest general information on infringement measures against Member States see:

For more information on EU infringement procedures, see MEMO/12/12 and MEMO/12/708 regarding September infringement package decisions.

Contacts :

Emer Traynor (+32 2 292 15 48)

Natasja Bohez Rubiano (+32 2 296 64 70)

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