Treasury seeks to amend tax loss relief rules

Treasury seeks to amend tax loss relief rules

	Published : Tue, 21 Feb 2006 09:40 By : Cedric Benson Print this Story

LONDON - Seeking to avoid similar occurrences as the now famous case of Marks & Spencer Group PLC, the Treasury has moved quickly to pre-empt a deluge of such cases and has introduced legislation aimed at amending the prevailing tax loss relief rules in the UK.

Leading retailer Marks & Spencer was able to get away from paying taxes because of the losses suffered by it elsewhere in Europe following the European Court of Justice's (ECJ) ruling last December. The Treasury fears that many businesses are all set to follow suit and this would result in massive losses for it and hence it has moved towards amending the existing laws.

A statement issued by HM Revenue & Customs said that the legislation seeks to deny tax loss relief for businesses that have arrangements that "result in losses becoming unrelievable outside the UK that were otherwise relievable, or give rise to unrelievable losses which would not have arisen but for the availability of relief in the UK, if the main purpose or one of the main purposes of those arrangements is to obtain UK relief." The statement added that the legislation would be a part of the Finance Bill this year and would come into effect from today.

But several lawyers feel the move is a little bit hasty, Reynolds Porter Chamberlain, which is acting for seven groups with claims that are similar to M&S said, “This announcement is a setback for UK businesses trying to get fair treatment from the Government." The law firm also said that the new legislation would intensify the "bad blood" between businesses and the Treasury over the issue.

Mark Persoff of Clifford Chance felt that the new legislation put the burden of showing proof on business, which was not always a good thing, "It seems to be a targeted anti-avoidance measure to prevent multinationals from arbritraging losses as a consequence of the ECJ judgment on M&S," Persoff, a senior tax lawyer at the firm said. Meanwhile, HM Revenue & Customs said that it would resume the consideration of the M&S case.