04 March 2020

ESSO & Ors vs HMRC; (FTT)

The First-tier Tribunal has rejected claims amounting to £228m brought by Exxon Mobil for cross-border group relief (“CBGR”). The Tribunal held that none of the losses said to have arisen in a Danish subsidiary were “definitive losses” for the purposes of the test set down by the CJEU in Marks & Spencer.

This was for several reasons, including:

(a) the presence of an intermediate holding company meant that the losses could not be definitive for a UK “cousin” company as per Holmen

(b) there was no infringement of EU law where a foreign subsidiary with a foreign parent sought to surrender losses to UK company held elsewhere in the group since the neither the foreign subsidiary’s nor the foreign parent’s EU rights were infringed by UK tax law.

(c) The UK/US Double Tax Treaty could not be used by a US group to indirectly access rights of freedom of establishment under EU law.

(d) Losses time barred under Danish law were not “definitive losses” as a matter of EU law.

(e) Losses which could not be used in Denmark following a business transfer were similarly not “definitive losses” since the only reason they could not be utilised was due to local Danish law.

The decision is likely to be relevant for other corporate groups that have made similar CBGR claims.

David Yates QC and Laura Ruxandu were instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents.

To see the approved decision, click here.