British Telecommunications PLC v The Commissioners for HM Revenue and Customs [2023] UKUT 00122 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Leech,Judge Nicholas Aleksander |
| Subject Matter | 30 May 2023 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 30 May 2023 |
Neutral Citation: [2023] UKUT 00122 (TCC) Case Number: UT/2021/62
UPPER TRIBUNAL
(Tax and Chancery Chamber) The Rolls Building
London
VAT – claim for relief for bad debts – preliminary issue referred to Upper Tribunal and
appealed to Court of Appeal – whether judgment of Court of Appeal finally resolved all issues
– whether open to appellant to raise new issue in light of subsequent decision of Court of
Appeal – res judicata – whether FTT erred in law in striking out – appeal dismissed
Heard on: 21 to 23 February 2023
Judgment date: 30 May 2023
Before
MR JUSTICE LEECH
JUDGE NICHOLAS ALEKSANDER
Between
BRITISH TELECOMMUNICATIONS PLC Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Roderick Cordara KC and Lyndsey Frawley, Counsel, instructed by
DWF Law LLP
For the Respondents: Kieron Beal KC and Eleni Mitrophanous KC, instructed by the General
Counsel and Solicitor to His Majesty’s Revenue and Customs
1
DECISION
INTRODUCTION
1. British Telecommunications plc ("BT") appeals against a decision released by the Tax
Chamber of the First-tier Tribunal ("the FTT") on 29 June 2020 ([2020] UKFTT 0278 (TC))
that its appeal be struck-out on the grounds that it had no real prospect of success or was an
abuse of process.
PROCEDURAL HISTORY
2. The histories of BT's appeal and of the availability of VAT relief for bad debts in the UK
is long and complicated. Because those histories are essential to an understanding of the issues
before us, we set them out below.
Bad debt relief
3. With effect from 1 January 1978, Article 11C(1) of the VAT Sixth Directive (which has
direct effect) provided as follows:
In the case of cancellation, refusal or total or partial non-payment, or where
the price is reduced after the supply takes place, the taxable amount shall be
reduced accordingly under conditions which shall be determined by the
Member States.
However, in the case of total or partial non-payment, Member States may
derogate from this rule.
4. UK domestic legislation made no provision for bad debt relief until 1 October 1978.
5. Section 12, Finance Act ("FA") 1978 introduced the “Old Scheme” for bad debt relief.
This was replaced (with modifications that are not material to this appeal) by s22 Value Added
Tax Act 1983 (“VAT Act 1983”) with effect from 26 October 1983. The Old Scheme was in
effect in relation to supplies made between 2 October 1978 and 26 July 1990.
6. The Old Scheme entitled (but did not require) taxable persons to make claims for bad
debt relief to HM Customs and Excise (a predecessor to HMRC - for convenience, references
in this decision to “HMRC” are to be taken as including HM Customs and Excise where
relevant).
7. It was a requirement for any claim under the Old Scheme that the conditions in s12(2)
FA 1978 (and subsequently s22(2) VAT Act 1983) were met. These required, amongst other
things, that the customer had become insolvent (“the Insolvency Condition”).
8. The regulations governing the Old Scheme required claims for bad debt relief to be made
on the VAT return for the period in which the supplier (in the case of this appeal – BT) received
the relevant document evidencing the customer’s insolvency (or proving its claim in the
customer’s insolvency). HMRC had discretion to allow claims to be made in returns for later
periods. HMRC exercised this discretion by a public notice which permitted claims to be made
under the Old Scheme in VAT returns for any later accounting period. But this discretionary
treatment was withdrawn with effect from 1 April 1991. From that date it was no longer
possible for an Old Scheme claim to be made in a VAT return for an accounting period
subsequent to the period in which the supplier received the relevant insolvency document.
9. The Old Scheme was replaced by a new scheme by FA 1990. However, paragraph 9(1),
Schedule 13, Value Added Tax Act 1994 (“VAT Act 1994”) permitted claims under the Old
Scheme to continue to be made. The Old Scheme was finally closed by s39(5) FA 1997, which
prohibited Old Scheme claims from being made after 19 March 1997.
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