Hutchison Whampoa May Lose U.K. Tax-Relief Bid, EU Aide Says

Companies owned by billionaire Li Ka-shing’s Hutchison Whampoa Ltd. may lose a bid for tax relief on losses by its U.K. mobile phone unit because the parent company is situated outside the European Union, an adviser to the bloc’s top court said.

The U.K. is allowed to exclude such companies from relief because their group parent isn’t based in the EU, Niilo Jaeaeskinen, an advocate general at the EU Court of Justice in Luxembourg said in a non-binding opinion yesterday. Britain can’t deny tax relief to companies with parent companies inside the 28-nation bloc, he said.

The case follows two decisions by the EU’s top court on the legality of the U.K. corporate tax rules. A 2005 ruling in a case involving Marks & Spencer Group Plc said that EU rules allow companies to deduct foreign losses from their tax bill in some cases. In a case last year involving Royal Philips Electronics NV, the court said that the U.K. must allow the local unit of a Dutch company to deduct losses from its British tax bill.

In yesterday’s case, Hutchison Whampoa companies, which include the U.K.’s Superdrug and the British arm of the Dutch Kruidvat health-care chains, sought relief for the losses of Hutchison 3G U.K.

The U.K. Tax Tribunal last year sought the EU court’s guidance on whether the country’s rules were in line with the bloc’s law.

Relief Claims

“The opinion agrees with the U.K.’s case that although the U.K. law at that time was incompatible with EU law, the facts may mean that no group relief is due,” HM Revenue & Customs, the U.K.’s tax authority, said in an e-mailed statement. “The U.K. changed the relevant law in 2010.”

Christian Salbaing, Hutchison Whampoa Europe’s deputy chairman, said in an e-mailed statement that the opinion “confirms the basis of our consortium relief claims.”

“We look forward to the final decision of the European Court of Justice on this matter,” he said.

The case is: C-80/12, Felixstowe Dock and Railway Company Ltd, Savers Health and Beauty Ltd, Walton Container Terminal Ltd, AS Watson card Services (U.K.) Ltd, Hutchison Whampoa (Europe) Ltd, Kruidvat U.K. Ltd, Superdrug Stores plc v. The Commissioners for Her Majesty’s Revenue & Customs.

(Updates with company comment in last paragraph.)
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