UK Supreme Court rules in favour of Marks & Spencer in tax dispute

In a significant victory for Marks & Spencer Group, the UK Supreme Court has eased restrictions on its ability to claim tax relief from losses at its now-defunct German and Belgian units, Bloomberg reports.

The country's highest court turned down an appeal by Her Majesty's Revenue & Customs (HMRC) yesterday on the manner of calculation of the relief, in another victory to the UK's largest clothing retailer in its decade-long legal battle. The company wants to use losses at the units to offset taxable profits in the UK.

The crux of the matter boiled down to whether the supermarket giant was right in offsetting the losses caused by the closures of its Belgian and German operations in 2001 against its profits in the UK by way of group relief.

In 2005, the European Court of Justice had stipulated that such ofsetting is was permissible,  so laong as the losses were not used in the subsidiary's resident nation, known as the 'no possibilities' test.

The main bone of contention revolved around how that relief was calculated - at the end of the accounting period where the losses applied, which is HMRC's position, or the date of the claim.

HMRC's contention was that the relief should be calculated at the end of the accounting period in which the losses were claimed, and not on the date of the claim.

On the other hand, M&S argued that it would not be possible to apply the test at the end of the accounting period, because it would not be possible to foresee what reliefs would apply.

Supreme Court judge, Lord David Hope, ruled in favour of M&S, but warned against the possibility the facility could be used to avoid tax.

Lord Hope said in a ruling, that HMRC's attempt to require M&S to prove that the European losses could not be used for future tax relief meant ''there would be no realistic chance of satisfying'' the conditions.

Google Inc, Apple Inc, Goldman Sachs Group Inc and other multinational companies had come in for sharp criticism in countries where they operated for using legal methods to avoid paying full taxes.

The retailer is ''pleased with today's ruling,'' Clare Wilkes, a spokeswoman for M&S, said in an e-mailed statement, that the retailer was pleased with the  ruling yesterday.