Marks & Spencer Plc v Revenue and Customs Commissioners [SC]

JurisdictionEngland & Wales
JudgeLord Reed,Lord Mance,Lord Neuberger,Lord Carnwath,Lord Hope
Judgment Date22 May 2013
Neutral Citation[2013] UKSC 30
Date22 May 2013
CourtSupreme Court

[2013] UKSC 30


Easter Term

On appeal from: [2011] EWCA Civ 1156


Lord Neuberger, President

Lord Hope, Deputy President

Lord Mance

Lord Reed

Lord Carnwath

Commissioners for Her Majesty's Revenue and Customs
Marks and Spencer plc
Commissioners for Her Majesty's Revenue and Customs
Marks and Spencer Plc


David Milne QC

Nicola Shaw QC

(Instructed by Hage Aaronson Ltd)


David Ewart QC

Sarah Ford

(Instructed by HMRC Solicitors Office)


David Ewart QC

Sarah Ford

(Instructed by HMRC Solicitors Office)


David Milne QC

Nicola Shaw QC

(Instructed by Hage Aaronson Ltd)

Heard on 15 April 2013

Lord Hope (with whom Lord Neuberger, Lord Mance, Lord Reed and Lord Carnwath agree)


This litigation concerns claims by Marks and Spencer plc ("M&S") for group relief in respect of losses sustained by two of their subsidiaries: Marks and Spencer (Deutschland) GmbH ("MSD"), which was resident in Germany; and Marks and Spencer (Belgium) NV ("MSB"), which was resident in Belgium. The claims were originally made and refused by the Revenue ("HMRC") more than ten years ago. They raise questions about the availability of cross-border group relief and the method of quantifying such relief as is available which, despite having been the subject of nine separate hearings since the case was first considered in December 2002, have still not yet been resolved.


The appeals come before the Court at this stage on an application by M&S for a reference to the Court of Justice of the European Communities. On 14 October 2011 the Court of Appeal gave judgment on five issues which had been identified as arising in the case: Marks and Spencer plc v Revenue and Customs Commissioners [2011] EWCA Civ 1156, [2012] STC 231. The Court of Appeal found in favour of M&S on four of these issues and in favour of HMRC on the other one. It gave the parties permission to appeal on all issues. M&S had intended to seek a reference on the first issue, but on 21 February 2013 the CJEU gave judgment in Case C-123/11 Proceedings brought by A Oy. M&S submit that any doubt that might have existed on the first issue has been dispelled by that ruling, that a reference is no longer necessary and that it can now be answered in their favour. HMRC had objected to M&S's application for a preliminary ruling on the ground that the answer to the first issue was already clear. As matters now stand, however, they simply invite this Court to determine this issue in their favour. So the hearing on M&S's application for a reference became a substantive hearing of the appeal on the first issue.


M&S began to expand its business into other countries in 1975. By the end of the 1990s it had sales outlets in more than 34 countries, with a network of subsidiaries and franchises. But by that date it had already begun to incur losses, and in March 2001 it decided to withdraw from its continental European activity. It was able to sell its French and Spanish subsidiaries to third parties, but no purchasers could be found for MSD and MSB. MSD ceased trading in August 2001 and was dissolved following liquidation on 14 December 2007. MSB ceased trading on 22 December 2001 and was dissolved following liquidation on 27 December 2007.


The first group relief claims were made between 2000 and 2003 at a time when neither subsidiary was in liquidation. They concerned MSD's losses for the years 1998 to 2001 and MSB's losses for the years 2001 and 2002. Claims for the same losses by the same companies for the same years were made on three subsequent occasions in response to what M&S describe as factual and jurisprudential developments: on 20 March 2007, when both companies were in liquidation; on 12 December 2007, just before the companies were dissolved; and on 11 June 2008, on behalf of MSB following the dissolution of that company. The claims for the years from 2000 onwards were governed by the self-assessment rules in Schedule 18 to the Finance Act 1998 and were within the statutory time limits. HMRC maintain that the claims for years prior to 2000, which were governed by the corporation tax pay and file rules in Schedule 17A to the Taxes Act 1988, were out of time when they were included in the claims that were made on the three occasions subsequent to the making of the first claims between 2000 and 2003.


The basic contention underlying all these claims was that the provisions in United Kingdom legislation which restricted group relief claims to losses of UK resident companies and, after the Finance Act 2000, losses of UK branches of nonresident companies were contrary to article 43 EC (now article 49 TFEU) on the freedom of establishment, and were thus unlawful. On 17 December 2002 the Special Commissioners held that there had been no breach of that article: Marks and Spencer plc v Halsey (Inspector of Taxes) [2003] STC (SCD) 70. Park J on appeal decided to refer the matter to the ECJ: [2003] EWHC 1945 (Ch). He sought a preliminary ruling on two questions. The first was the compatibility of the UK provisions with article 43 EC. The second was what difference the facts of M&S's case might make to the answer to the first question.


The ECJ gave its ruling in its judgment of 13 December 2005: Case C-446/03 Marks & Spencer plc v David Halsey (Her Majesty's Inspector of Taxes) [2005] ECR I-10837. It ruled that the answer to the first question was that article 43 EC did not preclude provisions of a Member State which prevented a resident parent company from claiming group relief for losses incurred by a subsidiary established in another Member State. The restriction was justified by three grounds when taken together: preserving the balanced allocation of the power to impose taxes between Member States; preventing losses being taken into account twice in different Member States; and preventing the risk of tax avoidance if the taxpayer were to be free to choose the Member State in which to claim relief: paras 42–51.


As to the proportionality of the restriction, however, the ECJ went on to say this:

"55 In that regard, the Court considers that the restrictive measure at issue in the main proceedings goes beyond what is necessary to attain the essential part of the objectives pursued where:

—the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses taken into account for the accounting period concerned by the claim for relief and also for previous accounting periods, if necessary by transferring those losses to a third party or by offsetting the losses against the profits made by the subsidiary in previous periods, and

—there is no possibility for the foreign subsidiary's losses to be taken into account in its state of residence for future periods either by the subsidiary itself or by a third party, in particular where the subsidiary has been sold to that third party.

56 Where, in one Member State, the resident parent company demonstrates to the tax authorities that those conditions are fulfilled, it is contrary to article 43 EC and 48 EC to preclude the possibility for the parent company to deduct from its taxable profits in that Member State the losses incurred by its non-resident subsidiary."


The debate then returned to the United Kingdom. Park J gave effect to the ruling of the ECJ on 10 April 2006: Marks and Spencer plc v Halsey (Inspector of Taxes) [2006] EWHC 811 (Ch), [2006] STC 1235. He held that the "no possibilities" test referred to in para 55 of the ECJ's judgment required an analysis of the recognised possibilities legally available given the objective facts of the company's situation at the relevant time, and that the test was to be applied at the date when the group relief claim was made. He remitted the case to the Special Commissioners, but both parties appealed against his decision. The Court of Appeal upheld the judge's findings: [2007] EWCA Civ 117, [2008] STC 526. The case then returned to the Tax Chamber of the First Tier Tribunal: Marks and Spencer plc v Revenue and Customs Commissioners [2009] UKFTT 64 (TC); [2009] UKFTT 231 (TC); [2009] SFTD 757, and proceeded from there to the Upper Tribunal [2010] UKUT 213 (TCC), [2010] STC 2470 and then to a second Court of Appeal, whose decisions are now under appeal to this court.


The issues that arose in the second Court of Appeal were summarised by Moses LJ in [2012] STC 231, para 4 as follows:

"(i) Is the test that the ECJ established to identify those circumstances in which it would be unlawful to preclude cross-border relief for losses, the 'no possibilities' test, to be applied (as the Revenue contend) at the end of the accounting period in which the losses crystallised rather than (as M&S contends) the date of claim? This question involves deciding whether the Court of Appeal in the first appeal reached a binding decision on that issue and whether it remains binding on this court in light of subsequent decisions of the ECJ.

(ii) Can sequential/cumulative claims be made (as M&S contends) by the same company for the same losses of the same surrendering company in respect of the same accounting period? The Revenue assert that that is not a question decided by the Court of Appeal and is precluded both by UK fiscal rules and by the underlying jurisprudence of the ECJ.

(iii) If a surrendering company has some losses which it has or can utilise and others which it cannot, does the no possibilities test (as the Revenue contend) preclude transfer of that proportion of the losses which it has no possibility of using?

(iv) Does the principle of effectiveness require M&S to be allowed to make fresh 'pay and file' claims now that the ECJ has identified the circumstances in which losses may be transferred cross-border,...

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4 cases
  • Marks & Spencer Plc v Revenue and Customs Commissioners (No 2)
    • United Kingdom
    • Supreme Court
    • 19 February 2014
    ...was the "no possibilities" test. Five issues were identified in the circumstances of this case. In its previous judgment in May 2013 ([2013] BTC 162), the Supreme Court had determined "Issue One", namely that it is the circumstances known at the date of claim which are to be considered for ......
  • Esso Exploration and Production UK Ltd and Others v Commissioners for Revenue and Customs
    • United Kingdom
    • First Tier Tribunal (Tax Chamber)
    • 4 March 2020
    ...of an early reference. The Tribunal is bound by the decisions of the Supreme Court in M&S 20131010R & C Commrs v Marks & Spencer plc [2013] BTC 162 and M&S 2014 and the Supreme Court was aware that the loss-making subsidiaries were held through a Netherlands intermediate holding company. Th......
  • Thurcroft Power Ltd v Volta Energy Group Ltd
    • United Kingdom
    • Queen's Bench Division (Commercial Court)
    • 18 February 2022
    ...for a claim in unjust enrichment are as summarised by Lord Clarke (with whom Lords Kerr and Wilson agreed) in Benedetti v. Sawiris [2013] UKSC 30, [2014] AC 938 (“ Benedetti”), at [10], as follows: “It is now well established that a Court must first ask itself four questions when faced wit......
  • Bing Holdings Inc. and Another v Michael Hue-Williams (Defendant/Part 20 Claimant) John Chandris (Third Party) Christina Chandris (Fourth Party)
    • United Kingdom
    • Queen's Bench Division
    • 5 December 2017
    ...of a reasonable sum and a true quantum meruit claim in unjust enrichment. The distinction was drawn by Lord Clarke in Benedetti v Sawiris [2013] UKSC 30 in the following terms 9. It is common ground that the correct approach to the amount to be paid by way of a quantum meruit where there is......
1 firm's commentaries
  • Weekly Tax Update - Februrary 9th, 2015
    • United Kingdom
    • Mondaq UK
    • 12 February 2015
    ...should be assessed immediately after the end of the accounting period. The decision contrasts with the UK Supreme Court's 2013 decision ([2013] UKSC 30, ) in the case of losses incurred by the M&S group in periods up to December 2001, which concluded the no possibilities test should be ......
1 books & journal articles
  • Case Notes
    • United Kingdom
    • Sage Maastricht Journal of European and Comparative Law No. 22-3, June 2015
    • 1 June 2015
    ...Commissione rs for HMRC v. Marks & Spencer plc and Commiss ioners for HMRC v. Marks & Spe ncer, Judgments of 22May 2013 [2013] UKSC 30, [2013] STC 1262 and of 19February 2 014 [2014] UKSC 11, [2014] STC 819.14 See alrea dy A. Cordewener, ‘Cross-Border Loss Rel ief and the “E et Utile” of......

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