Marks & Spencer Plc v Halsey (HM Inspector of Taxes)

ORDER IT IS HEREBY ORDERED:

1. that the questions set out in the schedule to this order be referred to the European Court of Justice for a preliminary ruling pursuant to Article 234 of the EC Treaty;

2. further proceedings be stayed pending that preliminary ruling;

3. costs be reserved. SCHEDULE REFERRAL TO COURT OF JUSTICE After hearing counsel for the appellant and the respondent the court considers that, in order to determine the dispute, it is necessary to seek a preliminary ruling from the Court of Justice under Article 234 of the EC Treaty on the following questions:

1. In circumstances where: • provisions of a member state, such as the UK provisions on group relief, prevent a parent company which is resident for tax purposes in that state from reducing its taxable profits in that state by setting off losses incurred in other member states by subsidiary companies which are resident for tax purposes in those states, where such set off would be possible if the losses were incurred by subsidiary companies resident in the state of the parent company; • the member state of the parent company: subjects a company resident within its territory to corporation tax on its total profits, including the profits of branches in other member states, with arrangements for the availability of double taxation relief for those taxes incurred in another member state and under which branch losses are taken account of in those taxable profits; does not subject the undistributed profits of subsidiaries resident in other member states to corporation tax; subjects the parent company to corporation tax on any distributions to it by way of dividend by the subsidiaries resident in other member states while not subjecting the parent company to corporation tax on distributions by way of dividend by subsidiary companies resident in the state of the parent; grants double taxation relief to the parent company by way of a credit in respect of withholding tax on dividends and foreign taxes paid on the profits in respect of which dividends are paid by subsidiary companies resident in other member states; is there a restriction under Article 43 EC, in conjunction with Article 48 EC? If so, is it justified under Community law?

2. (a) What difference, if any, does it make to the answer to question 1 that, depending on the law of the member state of the subsidiary, it is or may be possible in certain circumstances to obtain relief for some or all of the losses incurred by the subsidiary against taxable profits in the state of the subsidiary? (b) If it does make a difference, what significance, if any, is to be attached to the fact that: • a subsidiary resident in another member state has now ceased trading and, although there is provision for loss relief subject to certain conditions in that state, there is no evidence that in the circumstances such relief was obtained; • a subsidiary resident in another member state has been sold to a third party and, although there is provision under the law of that state for the losses to be used under certain conditions by a third party purchaser, it is uncertain whether they were so used in the circumstances of the case; • the arrangements under which the member state of the parent company takes account of the losses of UK resident companies apply regardless of whether the losses are also relieved in another member state? (c) Would it make any difference if there were evidence that relief had been obtained for the losses in the member state in which the subsidiary was resident and, if so, would it matter that the relief was obtained subsequently by an unrelated group of companies to which the subsidiary was sold? Note A background note which has been agreed between the parties to the case and which explains the particular circumstances which have given rise to this reference is annexed hereto.