Tax headache looms for Brown over offsets

The European Court of Justice (ECJ) will decide whether the retailer can offset £30m tax losses in France and Germany against profits made here.

Should it be permitted to do so, the floodgates would open for other British companies to follow suit.

The mobile phone retailer Carphone Warehouse, First Choice holidays and BT are among an estimated 200 firms that have already lodged claims against the Exchequer.

Hartley Foster, the head of tax litigation at the law firm DLA Piper, said: "Any multinational that has losses arising in any of its European operations is a potential claimant." Vodafone alone may be in line for as much as £7bn.

Tax experts expect the ECJ to find in favour of M&S, but said the Chancellor's ultimate liability hinged on how far the Court wanted to harmonise European tax laws.

"There is not much Europe-wide co-operation on how to change tax systems across the Continent, but M&S could change that," Mr Foster added.

At the moment, UK companies can only use losses racked up by a subsidiary to reduce the amount of tax it has to pay if that subsidiary is based at home.

In April, Miguel Poiares Maduro, an advocate-general at the ECJ, said that a British law barring M&S from offsetting tax losses made by continental subsidiaries against its UK tax bill violated European law.

Tax experts said they were "75 per cent" confident that the ECJ would back M&S. The retailer declined to comment. Chris Morgan, the head of KPMG's EU tax group, said: "Any rules that apply differently to a cross-border investment are contrary to the idea of a single market."

A Europe-wide tax shake-up could see member states introduce a system to provide for cross-border tax loss relief.

Mr Morgan warned that governments would need to be careful that any new laws did not allow companies to use losses amassed in one country twice. "Governments will need to negotiate to make sure their rules are compatible," he said. "We need reciprocal rules, otherwise the UK Exchequer will be subsidising investment outside the UK."

Less expensive variants of the ECJ's decision for Mr Brown could see the court declare the UK's corporate tax structure illegal but give the country a period of grace to change its tax relief system, making retrospective claims impossible.

The court could also rule that only companies that have already lodged claims should benefit from the ruling. Pilkington, InterContinental Hotels, Portakabin, Chubb and Asda are among those with outstanding claims.

M&S lodged its claim through its regular tax return process five years ago. The British courts referred the case to the European courts in 2003. The retailer has since sold its operations in continental Europe.

News
Russia Today’s new UK channel began broadcasting yesterday. Discussions so far have included why Britons see Russia as ‘the bad guy’
tv

New UK station Russia Today gives a very bizarre view of Britain

Voices
Left: An illustration of the original Jim Crowe, played by TD Rice Right: A Couple dressed as Ray and Janay Rice
voices

By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen

News
John Moore inspired this Coca Cola Christmas advert
people

News
people

Top Gear presenter is no stranger to foot-in-mouth controversy

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Jamie Oliver’s version of Jollof rice led thousands of people to post angry comments on his website
food + drink
Arts and Entertainment
Vividly drawn: Timothy Spall in Mike Leigh’s ‘Mr Turner’
film

Review: Mike Leigh's biopic is a rambling, rich character study

Arts and Entertainment
glastonbury
Arts and Entertainment
Shelley Duvall stars in Stanley Kubrick's The Shining
film
Arts and Entertainment
Shock of the news: Jake Gyllenhaal in ‘Nightcrawler’
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The benefits of Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Finance Assistant - Part time - 9 month FTC

£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

Marketing Manager

£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

Day In a Page

The drugs revolution starts now as MPs agree its high time for change

The drugs revolution starts now as MPs agree its high time for change

Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

Gotcha! The camera is turned on tabloid editors

Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

Fall of the Berlin Wall

It was thanks to Gorbachev that this symbol of division fell
Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

What makes ouija boards and demon dolls scary?

Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

Rose Rouse's safari in modern Britain

Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

'My world of no smell and odd tastes'

A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

Matt Parker is proud of his square roots

The "stand-up mathematician" is using comedy nights to preach maths to big audiences
Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

Paul Scholes column

Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

Frank Warren column

Call me an old git, but I just can't see that there's a place for women’s boxing
Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

Adrian Heath's American dream...

Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
Simon Hart: Manchester City will rise again but they need to change their attitude

Manchester City will rise again but they need to change their attitude

Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

A Syrian general speaks

A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities
‘A bit of a shock...’ Cambridge economist with Glasgow roots becomes Zambia’s acting President

‘A bit of a shock...’ Economist with Glasgow roots becomes Zambia’s acting President

Guy Scott's predecessor, Michael Sata, died in a London hospital this week after a lengthy illness
Fall of the Berlin Wall: History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War

Fall of the Berlin Wall

History catches up with Erich Honecker - the East German leader who praised the Iron Curtain and claimed it prevented a Third World War
How to turn your mobile phone into easy money

Turn your mobile phone into easy money

There are 90 million unused mobiles in the UK, which would be worth £7bn if we cashed them in, says David Crookes