The British government has been told that its rules on companies' cross border tax relief should be dropped.

The European Commission has sent the UK a formal request to properly implement the European Court of Justice (ECJ) judgment in the 2005 Marks & Spencer case on cross border loss compensation. The UK currently imposes conditions on cross border group relief which make it virtually impossible for tax payers to benefit from the relief. The Commission considers that this is contrary to the EC Treaty.

In the Marks & Spencer ruling (Case C-446/03 of 13 December 2005) the Court ruled that the UK ban on cross border loss relief was disproportionate, as it denied loss relief where a non-resident subsidiary had exhausted all possibilities for relief in its state of establishment.

Continued on Accountingweb.co.uk [1]