When and how to assess entitlement for cross border group loss relief

Tue 05 May 2020

The First Tier Tax Tribunal (FTT) has denied ExxonMobil group companies in the UK group relief for losses incurred in a Danish group subsidiary on the basis that it was not possible to determine if the losses had become unusable.  This was despite the fact that the use of the losses was time-barred in Holland.  Because the claim was made when the losses had become time barred, and the time for assessing the ‘no possibilities’ test was the date of the claim, it was not possible to assess the ‘no possibilities test’.

Consideration of cross boarded group relief may be relevant if groups are closing down loss making operations in one EU jurisdiction but have profitable operations in another EU jurisdiction.  The UK legislation on cross border group relief is found at CTA 2010 s111-128, with the no possibilities test for future periods covered at s119. 

The ExxonMobil case is a useful reminder of the difficulties of assessing the availability of cross border group relief.  Some groups may have significant losses and if the loss are available cross border, they may be a valuable resource when activities become profitable as we come out of the Covid-19 pandemic, though any restriction on the use of those losses as a result of CTA 2010 part 7ZA will need to be considered.

For further advice on cross border group relief, please get in touch with a member of the Mazars international tax team.

Further brief details of the case summary

At all relevant times ExxonMobil Denmark Holdings International ApS which was known as ExxonMobil Danmark ApS from 16 October 2006, was an ExxonMobil group company resident in Denmark.  The case considers a 2016 claim for group loss relief for unutilised losses of the Danish subsidiary in 2001 amounting to £83m.  The use of the losses had become time barred in Denmark and the Danish company was liquidated in 2013.  The FTT considered:

1. EU law was not directly engaged and the non-discrimination agreement in the UK/USA treaty did not permit the direct application of EU law;
2. The correct time for assessing the ‘no possibilities’ test for use of losses is the date of the claim;
3. The losses were prevented from being assessed as definitively unusable, as the reason they became definitive, was because they were time barred in Denmark ;
4. As the losses were time barred at the date of claim, it was not possible to say definitively that the losses could not be used at the date of claim – it was a domestic law matter.