HMRC v Volkerrail Plant Ltd and others [2022] UKUT 78 (TCC) (7 March 2022) the UT allowed HMRC’s appeal and remade the FTT’s decision. It held that the UK’s rules on cross-border group relief as in force at the relevant time were not compatible with the EU principle of freedom of establishment. Unlike the FTT however the UT held that it was not necessary to disapply the UK rules in their entirety but instead it was possible to adopt a conforming construction. This meant that the losses of the UK permanent establishment in this case which had been set off against profits taxable in the Netherlands were not also available to be surrendered as group relief in the UK. It will now be for the FTT to consider exactly what that interpretation means in practice and how much relief will actually be available...
