On 23 October 2014 the Advocate General (AG) opined that the UK’s group relief rules, as amended post-Marks and Spencer, do not contravene EU law.

Following the European Court of Justice’s (ECJ’s) decision in Marks and Spencer, the UK group relief rules were amended so that relief could be given in the UK for losses of EEA subsidiaries. However, the European Commission has long argued that the UK has not properly implemented the ECJ’s decision and in April 2013 the Commission brought an action against the UK before the ECJ.

In particular, the Commission argues that the UK legislative changes have not gone far enough as:

  • the rules look at the position (as to whether non-UK losses can be used in the future in their “home” country) at the end of the tax year in which the losses are suffered, making group relief impossible to obtain in practice
  • the rules had effect only from 2006.

The AG, although accepting that the UK rules were more restrictive for non-UK subsidiaries than for UK subsidiaries, opined that such restriction is justified. She went further, opining that the UK might even be justified in disallowing non-UK losses completely.

It remains to be seen whether, and to what extent, the ECJ will follow the AG’s opinion.

To view the opinion, click here.