BT reopens £90m UK High Court case over 1970s VAT 'overpayments'

Couldn't have come at a better time with COVID-19 economic shutdown

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BT has won a legal application to restart a decade-old court case in the hope of clawing back more than £90m in VAT the telco claims it overpaid to HMRC from 1978 onwards.

Mr Justice Fancourt lifted a legal stay on a High Court case against HMRC this morning over taxes paid on bad debt relief.

The disputed sum is equal to just over 2 per cent of BT's operating profits for fiscal year 2019 [PDF, page 109].

With the nationwide novel coronavirus shutdown certain to have a severe effect on the entire British economy, a big dollop of tax (free) cash would be very welcome at the one-time state monopoly.

Way back in 2010, BT asked HMRC to repay £91.8m in what it said was overpaid VAT. This VAT was paid by BT on so-called bad debt relief; a tax break for debts that weren't repaid by other companies that owed it the cash. BT claims that the law wrongly said at the time that debtors had to be forced into insolvency before the VAT could be clawed back.

HMRC refused to stump up so BT took the taxman to court, with HMRC lawyers summarising BT's case to Mr Justice Fancourt in written submissions: "BT claims that HMRC have wrongly retained monies from BT by way of VAT in breach of EU law and/or statutory duty and/or due to BT's mistake of law or fact, which has enriched HMRC unjustly and/or has caused BT to have lost use of the monies so paid from 1 January 1978."

Over the following decade, BT managed to start two parallel cases against HMRC: one in the First-Tier Tribunal (FTT), a specialised tax court, and a common-law claim in the High Court proper. The FTT case, a so-called "statutory appeal" wended its way right up the judicial mountain to the Court of Appeal. Normally one or the other case would have been struck out altogether, but what allowed the FTT case to go ahead was an order staying the High Court case until "30 days after final determination of any appeal from the FTT".

An evidently frustrated HMRC made a legal application in 2017 to strike out BT's FTT case, an application that is still somewhere in the labyrinthine tax tribunal system. Impatient and wanting what it sees as its cash, BT asked the High Court last August to lift the stay on its case there.

Lifting the stay this morning in a telephone hearing, Mr Justice Fancourt commented: "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." ®

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