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The Chartered Institute of Taxation (CIOT) is calling for the Government to agree to the EC request to implement in full the European Court of Justice judgment in Marks & Spencer plc v David Halsey on cross-border loss compensation.
In legislation meant to implement the 2005 M&S ruling - relating to the retail giant's attempt to offset losses generated overseas against profits made in this country - the UK imposes conditions on cross-border group relief that make it virtually impossible for taxpayers to benefit from the relief, said the CIOT.
The commission considers this contrary to the EC Treaty, and its request is in the form of a 'reasoned opinion' under Article 226 of the treaty.
If the UK does not reply satisfactorily to the reasoned opinion within two months, the EC may refer the matter to the European Court of Justice (ECJ).
The chairman of the CIOT's technical committee, Ian Menzies-Conacher, remarked: 'Taxpayers require certainty in order to operate their businesses successfully, and this requires that UK law should be properly aligned with our international tax obligations.
'We very much hope that the Government will amend the law as soon as possible and without the need for further ECJ involvement.'
He added: 'We consider that there are other areas, such as the taxation of controlled foreign companies and dividends, where the UK has not fully implemented the judgments of the ECJ'.
