The Trustees of The BT Pension Scheme v The Commissioners for HM Revenue and Customs

JurisdictionUK Non-devolved
JudgeMr Justice Warren,Judge Herrington
Neutral Citation[2013] UKUT 0105 (TCC),[2013] UKUT 0105 (TCC)
CourtUpper Tribunal (Tax and Chancery Chamber)
Subject MatterTax,28 February 2013
Date28 February 2013
Published date01 December 2016
Appeal number: FTC/91/2011
[2013] UKUT 0105 (TCC)
TAX CREDIT – Foreign income dividends – Claim by Trustees of exempt
approved pension scheme – FIDS received from UK resident companies –
ICTA 1988 s.231
TAX CREDIT – Cross-border dividends – Claims for tax credits based on ECJ
decision in Manninen (Case C-319/0)2 – ICTA 1988 s.231
LIMITATIONS – Tax credit claims – Whether out of time – TMA s.43(1)
- and -
The President
The Hon. Mr Justice Warren
Judge Timothy Herrington
Sitting in public in London on 17, 18, 19, 20, 23 and 24 July 2012
Christopher Vajda QC and Conrad McDonnell, instructed by Pinsent Masons LLP
for the Appellant
Rupert Baldry QC and James Rivett, instructed by the General Counsel and
Solicitor to HM Revenue and Customs, for the Respondents
I Introduction 1
II The Facts 7
III The UK Tax System 8
IV The UK legislation 17
V Community law 19
VI Issues to be Determined 26
VII FIDS and Manninen claims: the underlying principles of
Community law 33
VIII The Tribunal’s observations on the UK Tax Code 73
IX Discussion: the FIDs claims 78
Liability 78
Remedies 144
Fiscal Supervision 176
X Discussion: the Manninen claims 179
Liability 179
Remedies 230
Fiscal Supervision 233
XI Limitation 254
General 255
UK law: Ground 1 262
Community law concerning limitation 298
General 298
Ground 2 347
Ground 3 347
Ground 4 398
Background to BTPS and Hermes
The Relevant Provisions Of The UK Tax Code
I Introduction
1. These are appeals by the trustees of the BT Pension Scheme (“the Scheme”)
and by the Commissioners for Her Majesty’s Revenue and Customs (“HMRC”) from
the decision of the Tax Chamber of the First-tier Tribunal (Sir Stephen Oliver QC and 5 Julian Ghosh QC) (“the Decision” and “the Tribunal”) released on 21 December
2011. There is a cross-appeal by the Respondents (“HMRC”). Until 2006, the
trustees of the Scheme were a group of individuals. Since 14 December 2006, there
has been a sole corporate trustee, BT Pension Scheme Trustees Limited. We will
refer to the Scheme and to the trustees without distinction (save where necessary) as 10 BTPS”. Since all of the material events relating to this appeal occurred before the
Treaty of Lisbon, we adopt the Tribunal’s approach of using pre-Lisbon terminology,
that is we refer to the European Community (“the EC”) rather than the European
Union and to Community law; and we use the pre-Lisbon numbering in the EC
Treaty. 15
2. There are three issues in the appeals. They are the same issues which were the
subject matter of the Decision and which were identified by the Tribunal in this way:
(1) whether BTPS is entitled to a payment of a tax credit under section 231
Income and Corporation Taxes Act 1988 (“ICTA”) for certain dividends
elected to be “Foreign Income Dividends” (“FIDs”) within section 246A 20 ICTA, which BTPS received from UK resident companies between 1st July
1994 and 2nd July 1997: we refer to these claims made by BTPS as the “FIDs
(2) whether BTPS is entitled to a payment of a tax credit under section 231
ICTAfor dividends paid by non-UK resident companies between 1st July 1990 25 and 2nd July 1997: we refer to these as “the Manninen claims” since these
claims arise from the case law of the European Court of Justice, concerning
the application of the EC Treaty (“the Treaty”) to cross-border dividends,
which commenced with the European Court’s judgment in Case C-319/02
Manninen [2004] ECR I-7477, (“Manninen”); and 30
(3) to the extent that the FIDs claims and the Manninen claims are good, in
principle, whether these claims have been made in time (“the limitation
3. The FIDs claims relate to dividends paid by UK tax-resident companies to
BTPS which are funded out of non-UK source income by the dividend-paying 35 companies; that non-UK source income arises both from sources located within the
EC and from sources located in states outside the EC (“third countries”), so far as the
dividend-paying companies are concerned. The Manninen claims relate to dividends
paid by companies tax-resident within both Member States and third countries.
4. The Tribunal decided both the FIDs issue and the Manninen issue in favour of 40 BTPS. Specifically, the Tribunal held that the domestic law provisions which denied
BTPS any entitlement to a payment in respect of a tax credit had to be disapplied or
given a conforming construction to give effect to BTPS’s rights under Article 56 of
the Treaty. HMRC appeal against the Tribunal’s decision on both those issues. The
Tribunal decided the limitation issue in favour of HMRC and BTPS appeal that part 45 of the Tribunal’s decision. Permission to appeal was granted to both parties by Sir
Stephen Oliver QC on 25 October 2011.

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