News

BT reopens former £90m UK Court repayments case

UK courts NEW.jpg

BT Group has reopened a 10-year-old case regarding VAT refunds it says it is owed from HMRC.

At the end of March, the UK telco incumbent managed to lift a stay on the case in the the UK High Court that initially claimed that HMRC owed them £91.8 million plus interest in overpaid tax.

The saga began in 2009 when the telco wrote HMRC claiming that has incurred bad debt from companies that owed it money – in other words expenses a result of these companies being unable to pay.

For the period January 1978 and March 1989, the company then claimed Bad Debt Relief (BDR) which totalled £62.5m.

BT’s argument however is that the UK law at the time, Finance Act 1997, said that debtors had to have gone into insolvency before it could reclaim any VAT – preventing it from making a claim.

BT however, cited EU law, European regulations in the 6th Directive, which stipulated that it was entitled to receive BDR in 2009.

At the time BT lost its case with the Upper Tribunal on the grounds of national law.

In 2014, the case was brought before Court of Appeals [here], with the legal body agreeing that BT’s argument that UK legislation during that period infringed EU law. However, BT lost on the grounds that a ‘a prudent and circumspect operator’ would have made its claims before the new laws came into force.

According to Accountancy Daily, the judge said:

“I do not understand how such unawareness can be a relevant consideration. EU law has been flowing up our estuaries since 1972 and BT had every opportunity to obtain the most expert advice as to its rights.

I therefore fail to understand how BT can now say that the eventual demise by the Finance Act 1997 of a bad debt scheme that had included provisions that infringed its directly enforceable EU rights was a change in the law that also infringed its directly enforceable EU rights. It did not.”

“BT had literally had almost decades in which to enforce its rights but did nothing towards doing so. The suggestion that the four-month warning of the impending change in the law was too short a warning for BT, or those in a like position, is one with which I also disagree.

BT could in fact have sought to enforce its directly enforceable EU rights during that period, although in the event it still did nothing towards doing so for a further 12 years. It is in my view counterintuitive that BT should now be entitled to bring such a stale claim.”

As The Register reports, since then BT has launched other cases against HMRC one in the First-Tier Tribunal (FTT), a specialised tax court, and the other a common-law claim in the High Court.

In 2017 however, HMRC launched a legal application to throw out out BT's FTT case, a application that has not gone through, while BT wrote the High Court last August to lift the stay on that case.

As of this week, Justice Fancourt agreed to lift the stay of its High Court case, officially reopening this dispute.

"The appeal is currently stayed. And will not be progressed in any event until a decision has been given on HMRC's strike-out application," said Fancourt.