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Brendan McGurk represented the UK Government (intervening).
A. Introduction
Unlike indirect taxation, direct taxation is not harmonised at EU level and in principle Member States are free to administer their direct tax systems as they wish. However, under EU law this freedom is not unlimited. Fifteen years ago, the judgment in Marks & Spencer Plc v Halsey (Inspector of Taxes) (C-446/03) EU:C:2005:763 held that tax rules preventing a company claiming relief for losses incurred by a non-resident subsidiary contravened Article 49 TFEU and the right to freedom of establishment where equivalent losses would have been deductible if incurred by a resident subsidiary. Although the Court had accepted that a restriction of this kind could be objectively justified in some circumstances to maintain fiscal autonomy, avoid double counting of losses and prevent tax avoidance, it found on the facts the measures there were disproportionate. Unsurprisingly, multinational companies have subsequently sought to extend the Marks & Spencer principle to other situations so as to benefit from cross-border group relief more generally; the present case represents the latest (unsuccessful) attempt to do so.
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The comments made in this case note are wholly personal and do not reflect the views of any other members of Monckton Chambers, its tenants or clients.