Commissioners for Her Majesty's Revenue and Customs v Marks and Spencer plc

This is another round in a long drawn out saga between HMRC and Marks and Spencer plc (“M&S”). It was last before the Supreme Court on 22 May 2013 when Lord Hope gave judgment on the first of five issues. Only Lord Hope gave a judgment. The other members of the Court, namely Lord Neuberger, Lord Mance, Lord Reed and Lord Carnwath simply agreed with Lord Hope. I have, as it were, replaced Lord Hope, who has now retired.

For the purposes of corporation tax, M&S claims group relief in respect of losses sustained by two of their subsidiaries, namely Marks & Spencer (Deutschland) GmbH ("MSD"), which was resident in Germany and Marks & Spencer (Belgium) NV ("MSB"), which was resident in Belgium. As Lord Hope observed at para 1 of his judgment, the claims were originally made and refused by HMRC over ten years ago and raise questions about the availability of cross-border group relief and the method of quantifying such relief as is available which, despite having been the subject of nine separate hearings since the case was first considered in December 2002, have still not yet been resolved. This is thus the tenth such hearing. As will be seen, one of the striking features of the various hearings is the number of distinguished tax lawyers who have taken part. As to the losses in respect of which relief is sought, the earliest losses relied upon extend back to 1997 in the case of MSD and back to 1998 in the case of MSB.

The five issues were summarised by Moses LJ in the Court of Appeal when (as appears below) the dispute came to the Court of Appeal for the second time. He summarised them thus at [2012] STC 231, para 4:

As Lord Hope observed in para 10, those issues have been restated in a slightly amended form in the statement of facts and issues prepared for the appeals to this Court. I will return to the facts and issues as so formulated so far as necessary below.

The reference to the ‘no possibilities test’ established by the ECJ is a reference to the decision of the ECJ in a ruling in a judgment of 13 December 2005 in Case C-446/03, Marks & Spencer plc v Halsey [2006] Ch 184, [2005] ECR I-10837. In order to be able to follow the thinking of the Court of Appeal and of this Court it is necessary to say something about the history and background which I can take largely from paras 2 to 14 of the judgment of Lord Hope.

M&S began to expand its business into other countries in 1975. By the end of the 1990s it had sales outlets in more than 34 countries, with a network of subsidiaries and franchises. But by that date it had already begun to incur losses, and in March 2001 decided to withdraw from its continental European activity. It was able to sell its French and Spanish subsidiaries to third parties, but no purchasers could be found for MSD or MSB. MSD ceased trading in August 2001 and was dissolved following liquidation on 14 December 2007. MSB ceased trading on 22 December 2001 and was dissolved following liquidation on 27 December 2007.

The first group relief claims were made between 2000 and 2003 at a time when neither subsidiary was in liquidation. They concerned MSG's losses for the years 1998 to 2001 and MSB's losses for the years 2001 and 2002. Claims in respect of the same losses by the same companies for the same years were made on three subsequent occasions in response to what (as Lord Hope put it) M&S described as factual and jurisprudential developments: on 20 March 2007, when both companies were in liquidation; on 12 December 2007, just before the companies were dissolved; and on 11 June 2008, in respect of MSB following the dissolution of that company. The claims for the years from 2000 onwards were governed by the self-assessment rules in Schedule 18 to the Finance Act 1998 and (it is now agreed) were within the statutory time limits, to which I will return below. HMRC maintain that the claims for years prior to 2000, which were governed by the corporation tax pay and file rules in Schedule 17A to the Income and Corporation Taxes Act (“ICTA”) 1988, were out of time when they were included in the claims that were made on the three occasions subsequent to the making of the first claims between 2000 and 2003.

As Lord Hope observed at para 5, M&S’s basic contention underlying all these claims was that the provisions in United Kingdom legislation which restricted group relief claims to losses of UK resident companies and, after the Finance Act 2000, losses of UK branches of non-resident companies were contrary to article 43 EC (now article 49 TFEU) on the freedom of establishment, and were thus unlawful. On I7 December 2002 the special commissioners, who were Dr John Avery-Jones and Mr Malcolm Gammie QC, held that there had been no breach of that article: Marks & Spencer plc v Halsey [2003] STC (SCD) 70. On appeal, Park J decided to refer the matter to the ECJ: [2003] EWHC 1945 (Ch). He sought a preliminary ruling on two questions, namely (1) the compatibility of the UK provisions with article 43 EC and (2) what difference the facts of M&S's case might make to the answer to the first question.

As stated above, the ECJ gave its ruling in its judgment of 13 December 2005. It ruled that the answer to the first question was that article 43 EC did not preclude provisions of a member state which prevented a resident parent company from claiming group relief for losses incurred by a subsidiary established in another member state. The restriction was justified by three grounds when taken together, namely (1) preserving the balanced allocation of the power to impose taxes between member states; (2) preventing losses being taken into account twice in different member states; and (3) preventing the risk of tax avoidance if the taxpayer were to be free to choose the member state in which to claim relief: paras 41-51. In particular, at para 51 it was said that in principle such restrictive provisions pursue legitimate objectives which are compatible with the Treaty and constitute overriding objectives in the public interest and that they are apt to ensure the attainment of those objectives. However the Court noted in effect at para 53 that, in order to be lawful, the measures must not go beyond what is necessary to attain the objectives pursued. In short the measures must be proportionate.

For present purposes the critical paragraphs are paras 55 and 56:

The matter then returned before Park J in April 2006. In Marks & Spencer plc v Halsey (No 2) [2006] STC 1235 he held that the “no possibilities” test referred to in para 55 required an analysis of the recognised possibilities legally available given the objective facts of the company's situation at the relevant time, and that the test was to be applied at the date when the group relief claim was made. He remitted the case to the special commissioners, but both parties appealed against his decision. The Court of Appeal, comprising Chadwick, Tuckey and Jacob LJJ, upheld the judge's findings: [2008] STC 526. The case then returned to the Tax Chamber of the First-tier Tribunal (“FTT”), which comprised Judge Avery-Jones and Judge Gammie (as they had by then become): Marks and Spencer plc v Revenue and Customs Comrs [2009] UKFTT 64 and 231 (TC) and proceeded from there to the Upper Tribunal (“UT”), which comprised the President, Warren J, and Judge Edward Sadler: [2010] STC 2470 and thence to a second Court of Appeal, comprising Lloyd, Moses and Etherton LJJ [2012] STC 231. It was in his judgment in that second appeal that Moses LJ, with whom Lloyd and Etherton LJJ agreed, set out the issues as quoted above. The Court of Appeal dismissed HMRC’s appeal on issues one, two and five and dismissed M&S’s appeal on issue four. It gave both parties permission to appeal to this Court.

When the matter first came before the Court, as Lord Hope observed at para 2, M&S had intended that issue one would be referred to the ECJ but, in the event, on 21 February 2013, the ECJ gave judgment in the case of A Oy (Case C-123/11). M&S submitted that any doubt that might have existed on the first issue had been dispelled by that ruling, that a reference was no longer necessary and that it could now be answered in their favour. HMRC had objected to M&S's application for a reference on the ground that the answer to the first issue was already clear, although in the event they simply invited the Court to determine this issue in their favour. So the hearing on M&S's application for a reference became a substantive hearing of the appeal on the first issue.

In retrospect it is perhaps a pity that all five issues were not all considered together on the first occasion because in this appeal, which is concerned with issues two, four and five (issue three having in effect been resolved by the determination of issue one), there has been much debate as to the inferences that can be drawn from the judgment on issue one. It is of course easy to be wise after the event but the experience of this case shows that, where there are or may be a number of inter-related issues of law, it may be better to consider them all together rather than to consider them one by one. In the event I do not think that this course has affected the result and I recognise that each case must be managed in accordance with its own circumstances but it is something to be borne in mind in the future.

Issue one was restated in the statement of facts and issues as follows:

The date of the claim was of course the date which both Park J and the first Court of Appeal had held to be the correct date, which was the answer proposed in (b) above: see as to their reasoning paras 11 and 12 of Lord Hope’s judgment respectively. Although the second Court of Appeal did not agree (see Lord Hope at para 13), it held that it was bound by the decision of the first Court of Appeal (see Lord Hope at para 14).

In para 30 Lord Hope rejected the case for HMRC that the correct answer was that proposed as alternative (a) above, namely that it is contrary to article 43 EC to preclude cross-border loss relief in the member state of the company claiming relief only where the taxpayer can show, on the basis of the circumstances existing at the end of the accounting period in which the losses in question arose, that there was no possibility of the losses in question being utilised in the member state of the surrendering company in that accounting period, in any previous accounting period or in future accounting periods. Lord Hope rejected Mr Ewart QC’s submission on behalf of HMRC that to take a later date than the end of the accounting period would give the taxpayer a choice, which would upset the balanced allocation of the power to impose taxes. Mr Milne did not dispute the need to avoid upsetting that balance but submitted that the taxpayer ought to be given an opportunity to deal with it in as realistic a manner as possible.

Lord Hope accepted that submission. He said that the approach contended for by HMRC would mean that there would be no realistic chance of satisfying the para 55 conditions at all. It would hardly ever be possible, if regard were had only to how matters stood at the end of the relevant accounting period, to exclude entirely the possibility that the losses in question might be utilised in the member state of the surrendering company unless, of course, this was prevented by its local law. The balanced allocation principle did not require to be supported by an approach which restricts the company to that extent. He said that that was clear from the way the issue was dealt with by the ECJ in A Oy at para 48.

In the course of the oral argument in this Court Mr Milne QC submitted on behalf of M&S that the relevant date was, not the date of the claim, but the later date when the facts were considered, namely the date of the hearing before the FTT. In para 31 Lord Hope rejected that submission. However Mr Milne had not abandoned his original submission, which was now put in the alternative, that the date to be taken was the date of the claim, which was of course the date chosen by Park J and the first Court of Appeal. Such a date would have the advantage of certainty. Lord Hope accordingly opted for option (b). It is important to note that Lord Hope expressly pointed out at the end of para 31 that the questions whether successive claims could be made and, if so, with what effect, must be left over for consideration under issue two. He also stressed in para 32 that the national court must be alert to the possibility that the company may simply be choosing in which member state it should be taxed. The para 55 conditions are designed to exclude that possibility. He held in para 33 that the question for inquiry is whether the company has been able to show, on the basis of the circumstances known at the date when it makes its claim, that there has been no possibility of the losses in question being utilised in the member state of the surrendering company in any accounting period prior to the date of the claim and no possibility of such utilisation in the accounting period in which the claim is made or in any future accounting periods. Finally, Lord Hope noted that that answer had the consequence that issue three need not be answered.

Issue two is formulated in the statement of facts and issues in this way:

In so far as it was suggested on behalf of the HMRC that the conclusions of Lord Hope on issue one are of some assistance in answering this question in favour of the HMRC, I would not accept the submission. As noted above, Lord Hope made it clear that he was only considering the date as at which the circumstances of a claim were to be determined. He was not considering the question whether further or alternative claims were permissible and in what circumstances. That is the question raised by issue two.

Although cumulative claims are included in issue 2 as formulated, HMRC submitted that the claims are not cumulative because each of the claims is in respect of exactly the same losses. That is so but does not affect the issue of principle, which is correctly described by HMRC as whether it is open to a claimant company to make a series of sequential claims for cross-border loss relief in respect of the same losses of the same surrendering company in respect of the same accounting period. For the purposes of discussion it is convenient to refer to the later claims as new claims, even though in one sense they may be said to be old claims. However described, HMRC submitted that the second, third and fourth group relief claims are not valid ‘claims’ at all, whether as a matter of domestic law or, more relevantly, for the purpose of the no possibilities test, as a matter of EU law. The only valid claims are the original claims, in respect of which the FTT determined that the no possibilities test was not satisfied.

It is convenient to consider first the position as a matter of domestic law, which was not considered at all for the purposes of the resolution of issue one. The relevant statutory provisions are set out in Annex A to this judgment, which is taken from the annex to the supplementary case for M&S and is not in dispute.

As noted in para 7 above, M&S made three new claims in respect of the same losses on 20 March 2007, 12 December 2007 and 11 June 2008. HMRC submit that those claims are invalid as a matter of domestic law. They rely upon para 73(2) of Schedule 18 to the Finance Act (“FA”) 1998, which provides that “a claim for group relief may not be amended, but must be withdrawn and replaced by another claim”. They say that the original claims were not withdrawn and that it follows that the new claims cannot be valid claims. Further or alternatively, they say that the new claims were not claims at all but merely repetitions of valid claims already made.

I would not accept those submissions. There is in my opinion no support for them in the provisions set out in Annex A below. As drafted, those provisions do not expressly contemplate cross-border relief. On the contrary, they refer to the surrendering company’s tax return in terms that show that the draftsman had in mind the tax return of an English company: paras 68(3), 70(3)(b), 72(1)-(3) and 75. More importantly, there is no support for the conclusion that only one claim can be made. On the contrary, the provisions contemplate that successive claims can be made. Thus para 69(2) provides that a claim is ineffective if the amount exceeds the amount available for surrender at the time the claim is made; para 70(4) provides that a claim is ineffective unless it is accompanied by a copy of the notice of consent to surrender given by the surrendering company; and para 70(3) provides that the claim is ineffective if the necessary consents are not given. Importantly, para 73(2) provides that a claim for group relief may not be amended but must be withdrawn and replaced by another claim. Those provisions are, in my opinion, inconsistent with the proposition that only one claim can be made.

So too are the time limitation provisions in the self-assessment rules. It is common ground that under para 74(1) the time limit for making or withdrawing a claim for group relief does not expire until the latest of the four periods referred to in (a) to (d) (set out in Annex A below), which might take some years where, as is not uncommon, there is an enquiry into the relevant tax return. Those provisions seem to me to be inconsistent with the notion that there can only be one claim.

The UT discussed the structure of the domestic legislation in some detail between paras 67 and 86, in the last of which they expressed their overall conclusion thus:

I agree. In short, simply as a matter of construction of the relevant provisions, without any manipulation made necessary by the fact that the draftsman did not have cross-border relief in mind, there is no support for the conclusion that only one claim can be made. Para 73(2) makes that clear. It does not provide that successive claims cannot be made. On the contrary, it expressly provides that a claim for group relief may not be amended but must be withdrawn and replaced by another claim and thus necessarily contemplates that successive claims may be made.

It is common ground that, as the UT put it at para 87, in order to give effect to M&S’s Community law rights, some adjustment or remoulding of the domestic legislation was required: Autologic plc v Inland Revenue Comrs [2006] 1 AC 118, per Lord Nicholls at paras 16-17 and 29-30. The legislation must be construed so as to ensure that those rights are effective in the sense that they are not practically impossible or excessively difficult to exercise and also so as to ensure that the statutory code provides an effective remedy.

The UT identified the problem posed by para 69(2). It concluded at para 107 that para 69(2) makes no sense if applied literally in the context of a claim for relief in respect of a foreign surrendering company. The “amount available for surrender” is not well defined in the context of the no possibilities test by reference to the definition in para 69(3). Even if the reference to the tax return can be read as the equivalent document in a member state to the UK tax return, that document will only provide information relevant to ascertaining the loss according to the law of that state and not UK tax law and will not reveal what, if any, part of the loss satisfies the no possibilities principle. In these circumstances, at para 108 the UT identified what it described as at least two approaches to the necessary disapplication or moulding of para 69(2) and, for the reasons specified in paras 109 to 111 concluded that the appropriate solution was to disregard para 69(2).

The UT expressed its conclusions thus at para 112:

That reasoning is not entirely consistent with that of the FTT, which held in its para 36 that the no possibilities test was not satisfied “so the claim did not validly claim anything” at all. It added:

As I read it, it was not part of the Upper Tribunal’s reasoning that the first claims were not valid claims at all. However, whether they were or not, the taxpayer is entitled to withdraw any unnecessary claims and advance a new claim at any time before such a claim becomes time barred. Moreover, on the facts, I would accept M&S’s submission that it made it clear from the outset that, once the courts had determined which claims were valid, it would withdraw the other claims. The correspondence amply supports the conclusion that M&S made it clear that their successive claims were made in the alternative to their original claims and that, if the original claims succeeded, they would withdraw their later claims and vice versa. HMRC did not accept that approach but in my view the FTT was entitled to proceed on the basis that, if the first claims failed, M&S had undertaken to withdraw them. See, to the same effect, the UT at paras 103 and 104.

The second Court of Appeal upheld the decision and reasoning of the Upper Tribunal. Moses LJ summarised their conclusions in paras 57 and 58 in this way:

I agree. In addition, at paras 59 to 62 the Court of Appeal expressly approved the mechanics adopted by the UT. See in particular para 60, where Moses LJ gave his reasons for agreeing that para 69(2) should be ignored as the UT proposed. Moses LJ added at para 61:

Again, I agree. I also agree with Moses LJ’s conclusion at para 62 that the decision of the first Court of Appeal dictates that the claimant M&S is permitted to make successive claims to the same loss and rely on the claim which satisfies the para 55 criteria, and then withdraw any earlier claims in respect of the same surrendered losses.

In these circumstances I would answer the question posed in issue two in the affirmative, subject to a consideration of a somewhat different point taken by HMRC that this approach offends the principle of legal certainty and jeopardises the preservation of the balanced allocation of taxing rights. However, there is nothing in the conclusion which I have reached so far that offends against the principle of legal certainty. The taxpayer is entitled to advance claims for cross border relief provided that it is in time to do so. I will return to this under issue four below in connection with time bar.

As to the importance of the preservation of the balanced allocation of taxing rights, as indicated above, it was and is correctly accepted on behalf of M&S this is an important principle, as indeed Lord Hope accepted at paras 29 and 30. The question is essentially a factual question which involves practical considerations. In reaching these conclusions Lord Hope took account both of Oy AA (Case C-231/05) [2008] STC 991 and of A Oy (Case C-123/11). He concluded at para 30 that, in carrying out the factual exercise, the taxpayer should be given the opportunity of proceeding in as realistic a manner as possible and that the balanced allocation principle does not require to be supported by an approach as narrow as that proposed by HMRC under issue one. It was in the light of those considerations that this court held that the facts should be considered as at the date of the claim. For my part I see no reason why the same approach should not be adopted as at the date of the relevant claim, which for the reasons given above may be made at any time before it becomes time barred. I would accept Mr Milne’s submission that there is no inconsistency between that approach and the principle of the balanced allocation of the power to impose taxes.

As stated above, Lord Hope made it clear at para 32 that the taxpayer may simply be choosing in which member state it should be taxed. Again Mr Milne correctly accepts the validity of that principle but submits that there was no question here of M&S making such a choice and that the FTT resolved this issue in favour of M&S. He also relies upon para 32 more widely:

I appreciate that those views were expressed in the context of issue one but they are to my mind consistent with the findings of fact made by the FTT. The FTT held at para 29 that at the time of the first group relief claims there was nothing to prevent the losses being used by continuing to trade or starting another trade or business and that it followed that the no possibilities test was not satisfied at the time of any of the first group relief claims. However, the FTT reached different conclusions in the case of the second, third and fourth group relief claims.

As to the second relief claims it said this at para 30:

I can see no realistic basis upon which those conclusions of fact can be challenged. It follows that, in the light of the answer to the question posed by issue two, the subsequent alternative claims are in principle valid against the event of the prior claims failing under the no possibilities test, subject to the answer to the question posed by issue four.

As formulated in the statement of facts and issues, issue four asks these questions:

Although issue four is formulated in that way, the conclusions set out above in connection with issue two to the effect that it is permissible to have sequential claims and that they are in principle valid so long as they are brought within the relevant time limits resolves the position with regard to self-assessment claims. As already stated, it is common ground that all the self-assessment claims are in time, so that it follows that, at any rate in my opinion, those claims can in principle be pursued.

The position of the pay and file claims is different. As the UT observed at para 156, it was said that it was not until the judgment of the ECJ in December 2005 that M&S could have anticipated that a test such as the no possibilities test would be introduced. Accordingly, M&S should not only be given time after the decision to make its claim, it should be given time to put itself into a position where it could make an effective claim. It was said that M&S should have been given time, say, to put the surrendering companies into liquidation and to have them dissolved. However, the UT rejected that argument.

They held that the principle of effectiveness is concerned with giving effect to Community rights. It is concerned with ensuring that such rights as a person has under Community law are recognised and given effect to in a member state which has not properly reflected such rights in its own domestic law. It was no part of that principle that a person should be given the opportunity to bring about a new state of affairs giving rise to the existence of new rights which he does not already have, in order to enforce them under Community law when they would be unenforceable under domestic law. In those circumstances, the principle of effectiveness could not be invoked since there was no right under Community law in respect of which a claim could be made within the time limit and, for reasons the UT had given in para 158, it is not part of the principle of effectiveness that a company must be given an opportunity to create a new situation so as to allow it to assert a right which it would not otherwise have.

That analysis seems to me to be correct. It was accepted by Moses LJ in para 63 of his judgment in the Court of Appeal, where he added that a period of six years and three months was reasonable. He then discussed the problem in some detail between paras 63 and 68. He set out the differing conclusions of the FTT and UT in paras 64 and 65 respectively and in para 66 he noted (a) that the relevant jurisprudence establishes that a Member State may impose a reasonable time limit in the interests of legal certainty: Aprile Srl v Amministrazione delle Finanze dello Stato (No 2) (Case C-228/96) [2001] 1 WLR 126, [1998] ECR 1-7141 at para 19 and Fleming (trading as Bodycraft) v Revenue and Customs Comrs [2008] 1 WLR 195 at para 79(a) and (b) that such a time-limit must not render virtually impossible or excessively difficult the exercise of rights conferred by Community law: Aprile at para 19. He concluded, in my opinion correctly, that the line of cases concerned with the reduction of a time limit which has the effect of taking a right away without adequate transitional arrangements, as for example Case C-62/00, Marks & Spencer plc v Customs and Excise Comrs “(M&S 1)” [2003] QB 866) has no relevance to these claims. As he explained, the time limit of 6 years and 3 months was in place, M&S’s claims were made within that period and were found not to have satisfied the paragraph 55 conditions.

Moses LJ recognised at para 67 that M&S could not have foreseen the contents of para 55 of the ECJ judgment but held that the critical question was whether at the expiry of the time limit for making a claim M&S had a right to claim the MSG losses. He then expressed his conclusion in para 68 thus:

I agree with that reasoning and would uphold the decision of the UT and the Court of Appeal that, unlike the self-assessment claims, the relevant pay and file claims are time barred. That appears to me to be a sufficient answer to the question relating to those claims raised by issue four.

This issue asks what is the correct method of calculating the losses available to be surrendered. Before the FTT (at both the liability and quantum hearings) the essential issue was whether the losses should be calculated (a) under the rules of a single country and, if so, whether it should be a local country (“Method A”) or the UK (“Method C”); (b) by converting to UK rules the unutilised losses as determined under local rules (“Method E”); or (c) by taking the lower each year of the amounts calculated and utilised either under local rules or after conversion to UK rules (“Method F”). The FTT held that Method E was the correct method and its decision was upheld by the UT and by the Court of Appeal. HMRC however contend that Method F is correct. The question in this appeal is thus whether the correct method is E or F.

The essential difference between the methods is this. Method E begins by applying the local rules to determine whether there is a loss in a particular period and, if so, the amount of the loss that remained unutilised. The unutilised loss calculated by reference to the local rules is then converted to UK principles. M&S says that this conversion to UK principles ensures that M&S only obtains the same relief as a UK-resident group would obtain. So, for example, if a loss calculated under local rules included a capital (rather than a trading) loss, that loss would be eliminated from the claim on conversion to UK principles because in the UK group relief is only available for trading losses. It says that the conversion process also ensures that the relief is given in the same year as that in which it would be given to a UK resident group. In some cases the process of converting the loss to UK principles has the effect of moving the loss from one period to the next. For example, the whole or part of a loss incurred in Year 1 under local rules may after conversion to UK principles be incurred in Year 0 or Year 2 under UK rules. This does not involve a permanent difference between the two sets of rules. The total amount of the loss over the period remains the same but the loss now occurs in Year 0 or 2. M&S say that this is an essential part of ensuring equal treatment. Were the group a UK-resident group the loss would occur in those years.

M&S says that Method E is to be preferred to Method F because it is the more equitable approach. HMRC, on the other hand, contend that no system of quantification can be permitted which allows a loss to be claimed in a period in which, in Germany no loss was sustained, as for example in 2002. They say that no principle of EU law requires the German losses to be relieved to a greater extent than would be the case if they were claimed in Germany.

Like the UT, the Court of Appeal preferred Method E. It did so for the reasons concisely put by Moses LJ in paras 86 to 88 of his judgment. I agree with his reasoning and could not put it better. It is in these terms:

For the same reasons, I would dismiss the HMRC’s appeal under this head. I would answer the question posed by issue five by holding that the correct method of calculating the losses available to be surrendered is Method E.

For these reasons I would dismiss the appeals of the HMRC on issues 2 and 5 and I would dismiss the appeal of M&S on issue 4. I would answer issue two in the affirmative and would hold that M&S is entitled to advance all its self-assessment claims. Under issue 4, I would hold that the relevant pay and file claims are time barred, as contended for by the HMRC. Finally, under issue five, I would hold that the correct method of calculation of the claims is Method E.

I would like to conclude by saying how much I appreciate the clarity with which all the tribunals and courts have expressed their reasoning and conclusions on the many different points that have confronted them in the light of the jurisprudence of the ECJ.

Group relief is dealt with in chapter 4 of part X of ICTA 1988 (Footnote: ¹) . The basic provisions are section 402(1) and section 403(1), which provide so far as material that: