Dorsey wins landmark M&S tax case

Dorsey & Whitney has won a major European Court of Justice (ECJ) case for Marks & Spencer (M&S) finding that UK tax legislation does not comply with European law.

The ECJ handed down judgment this morning (13 December) in the landmark case, agreeing with the April 2005 opinion of Advocate General Poiares Maduro.

M&S brought legal action against the Inland Revenue after it was refused tax relief from losses incurred by subsidiaries based outside the UK. The Revenue argued that its group relief scheme does not apply for foreign subsidiaries.

But the ECJ ruled that while the scheme is essentially compatible with European law, it does not observe the principle of proportionality and so precludes a company from being able to claim relief it is due.

The verdict could cost the Revenue millions of pounds in tax repayments as M&S and other companies seek rebates.

Dorsey partner Simon Whitehead instructed Graham Aaronson QC of Pump Court Tax Chambers for M&S. Richard Plender QC of 20 Essex Street was instructed by the Inland Revenue.