KPMG Expert Speaks Out On Marks And Spencer Tax Case

by Jason Gorringe, Tax-News.com, London

10 January 2003

Roopa Aitken, head of KPMG's specialist EU law group, this week spoke out regarding the implications of the Inland Revenue's recent decision to prevent international retailer, Marks and Spencer from offsetting losses in its continental subsidiaries against UK profits.

In an interview with legal information publisher, Butterworths, Ms Aitken, who is acting in the case for M&S, explained that the Inland Revenue ruling, if not overturned by the European Court of Justice in Luxembourg, could have grave implications for any UK plc with EU subsidiaries.

A Revenue panel of two special commissioners recently dismissed the retailer's claim that UK law had hindered its ability to invest overseas, arguing that: 'The denial of UK relief for losses on activities the profits of which are not subject to UK tax can be justified as being for the maintainance of the coherence of the UK tax system.'

However, according to Ms Aitken, Marks and Spencer is disputing the assertion that overseas subsidiaries are not subject to tax in the United Kingdom, arguing that dividends paid by an overseas branch to its UK parent are taxed. 'It is an issue of timing,' she told Butterworths.

The KPMG legal expert believes that the Revenue panel has based its decision on the tax position of the subsidiary, whereas in the past, the ECJ has been more concerned with the tax treatment of the parent company.

The case is expected to go before the Court of Appeal in the next six months. However, opinion is divided among observers as to whether the UK appeals court will support the Inland Revenue verdict, or simply duck the issue and refer it straight to the European Court of Justice.

Recommended