EN

Official Journal of the European Union

C 207/3

(Case C-172/13)

2013/C 207/04

Language of the case: English

Parties

Applicant: European Commission (represented by: W. Roels, R. Lyal, agents)

Defendant: United Kingdom of Great Britain and Northern Ireland

The applicant claims that the Court should:

—declare that by imposing conditions on cross-border group relief that make it virtually impossible in practice to obtain such relief and by restricting such relief to periods after 1 April 2006, the United Kingdom has failed to comply with its obligations under Article 49 of the Treaty on the Functioning of the European Union and Article 31 of the Agreement on the European Economic Areaorder United Kingdom of Great Britain and Northern Ireland to pay the costs.

—order the United Kingdom to pay the costs.

Pleas in law and main arguments

Following the judgment in Case C-446/03 Marks & Spencer, the United Kingdom amended its legislation governing the manner in which the losses suffered by companies which are members of a group may be transferred and used by another member of the group in order to reduce its tax liability (group relief rules). The provisions governing losses of non-resident companies are now contained in Part 5 of the Corporation Tax Act 2010.

Under the United Kingdom legislation now in force, a group company may obtain a tax credit for the losses of a non-resident group member only if the latter has no possibility of relief in its State of residence. In relation to the possibility of future relief the United Kingdom legislation makes it virtually impossible to demonstrate compliance with that condition, since that possibility falls to be determined ‘as at the time immediately after the end’ of the tax year in which the loss was suffered. That condition is for all practical purposes impossible to meet. It follows that the legislation precludes any relief at all for the losses of a non-resident subsidiary, contrary to the freedom of establishment as interpreted in Case C-446/03 Marks & Spencer.

Secondly, the new rules on group relief for foreign losses apply only to losses suffered after 1 April 2006, the date of entry into force of those rules. That temporal limitation (that is to say, the exclusion of relief under the legislation for losses suffered before that date) is contrary to the freedom of establishment.