The Court of Justice has given a judgment in the case Commission v UK on cross border group relief.
In 2006, following the judgment of the Court of Justice in the Marks & Spencer case, the UK amended its legislation so as to allow cross-border group relief, subject to certain conditions. Under those provisions, now set out in the Corporation Tax Act 2010 (CTA 2010), a non-resident company must have exhausted all possibility of having the losses taken into account in the accounting period in which the losses were incurred or in previous accounting periods, and there must be no possibility of the losses being taken into account in future accounting periods. The CTA 2010 requires that the determination as to whether losses may be taken into account in future accounting periods must be made ‘as at the time immediately after the end' of the accounting period in which the losses were sustained. The Commission argues that the CTA 2010 rules make it virtually impossible for a resident parent company to obtain cross-border group relief, since in practice it allows the resident parent company to take such losses into account in only two situations: (i) where the legislation of the Member State of residence of the subsidiary concerned makes no provision for losses to be carried forward and (ii) where the subsidiary is put into liquidation before the end of the accounting period in which the loss was sustained. The Commission also argues that losses sustained before 1 April 2006 are excluded from cross-border group relief, inasmuch as the CTA 2010 provisions concerning that relief apply only to losses sustained after 1 April 2006, the date on which the new legislation entered into force. Considering, therefore, that those rules infringed the principle of freedom of establishment, the Commission brought an action before the Court of Justice. In today's judgment, the Court dismisses the action in its entirety.