Group relief for UK PE losses of EEA resident companies
UK companies look to be in line for group relief for losses sustained by any UK permanent establishments of EEA resident group members.
Philips Electronics (UK) Ltd (PE(UK)), a UK resident subsidiary of Philips, the Dutch electronics group claimed consortium relief in respect of the group’s share of trading losses sustained by a UK permanent establishment of a Dutch resident company (“LG.PD”). LG.PD was owned as to 50% plus one share by the Philips group; 50% less one share by a South Korean multinational.
The UK legislation did not permit such consortium relief claims to be made (nor does UK legislation permit group relief claims in respect of losses sustained by the UK PE of a non-UK subsidiary). HMRC thus rejected the consortium relief claims. In 2009 the First Tier Tribunal held that denial of the relief breached EU freedoms. HMRC appealed and the Upper Tribunal asked the CJEU for a ruling. The Advocate General appointed to provide an Opinion for the Court of Justice of the European Union (CJEU) recommends that the Court should uphold the claims for consortium relief.
Assuming the CJEU follows her opinion, claims for consortium (and group) relief may be successful in respect of losses sustained by UK PEs of companies resident in any other member state of the EU. Protective claims should be made in respect of losses sustained by the UK PE of any EEA resident member of a group or consortium. This should be done at the earliest opportunity in view of the time limits for group and consortium relief claims.
If the CJEU agrees with the AG’s opinion, the Philips Electronics case has potentially wider implications for sister company claims lodged following the Marks & Spencer case as HMRC’s arguments for resisting these claims are undermined.
We would be pleased to discuss possible implications of this case for your group of companies. For more information please contact Richard Service .