Linpac – Tribunal confirms that EU group relief claims did not replace earlier domestic claims to relief

In Linpac Group Holdings Ltd v HMRC [2020] UKFTT 60 (TC), the First-tier Tribunal (FTT) allowed an appeal against an HMRC decision that the taxpayer's claim for group relief had been withdrawn by a subsequent claim.

Background

LINPAC Group Holdings Ltd (Holdings), a global plastics supplier, was a UK resident company which formed part of an international group which comprised UK companies and EU subsidiaries.

Holdings submitted domestic claims for corporation tax group relief under Chapter IV, Part X, Income and Corporation Taxes Act 1988 (ICTA 1988) (now Part 5, Corporation Tax Act 2010), in respect of losses surrendered by another of the UK group companies (the UK claims). 

Holdings subsequently made further group relief claims in respect of losses made by UK and EU group companies (the EU claims). The EU claims were made in respect of the same profits as the UK claims. The EU claims were based on the decision of the European Court of Justice in Marks & Spencer plc v Halsey (Inspector of Taxes) [2006] (C-466/03) (M&S).

When made, the efficacy of the EU claims was unclear, and Holdings subsequently accepted the EU claims were not valid. Holdings, therefore, sought to rely on the UK claims but, despite having indicated that it was prepared to accept their reinstatement, HMRC maintained that the UK claims were no longer open because the making of the EU claims involved the withdrawal of the UK claims (because it is not possible to have two group relief claims extant at the same time) and it was too late to resubmit them.

Holdings appealed.

FTT decision

The appeal was allowed.

The FTT was of the view that the circumstances of the case were different to those in M&S. In M&S, only overseas losses were in issue and the successive claims were in respect of the same losses. Following the M&S decision it was not necessary for a later claim to be preceded by the withdrawal of an earlier claim. Rather, a later claim can be valid despite the non-withdrawal of an earlier claim, and earlier and later group relief claims can co-exist.

The FTT concluded that although Holdings had not expressly kept the UK claims open or replaced them, there was no implicit withdrawal. This was particularly so in light of the fact that it was unclear at the time when the EU claims were made whether they would be valid. Overall, the FTT found that the EU claims had been made in the alternative to the UK claims and that Holdings had withdrawn the EU claims, leaving the UK claims extant.

Comment

This decision provides useful guidance on the effect of making both domestic and cross-border group relief claims in respect of the same profits. It is clear that EU group relief claims do not replace earlier domestic claims to relief, and that such claims can co-exist, leaving the domestic claims valid.

A requirement to withdraw the valid domestic claims before making the still speculative cross-border claims would have made it excessively difficult, if not practically impossible, to advance the cross-border claims. The result would have been that the putative EU right to cross-border group relief would have been impossible in practice to exercise.

This decision will be of interest to corporate groups where there is an international dimension to their group relief claims.