The BT Pension Scheme (Trustees of) v HM Revenue and Customs

Where the availability of a remedy for an alleged restriction on free movement of capital depends on an unresolved extension of European Union jurisprudence, and the answer is not acte clair, the necessary question should be referred to the Court of Justice.

A domestic provision which infringes one person’s EU rights does not automatically confer a remedy on every person adversely affected. A claimant must establish either an infringement of that claimant’s own EU rights or that effectiveness requires a wider right of action.

A fixed six-year limit for a tax-relief claim under Taxes Management Act 1970 is compatible with equivalence and effectiveness where it applies equally to comparable domestic claims and does not make an EU claim excessively difficult.

The trustees of an exempt pension scheme claimed payable tax credits for foreign dividends and foreign income dividends (FIDs) received between 1990/1991 and 1997/1998. They contended that the exclusions from payable credits restricted the free movement of capital under article 56 of the EC Treaty.

The First-tier Tribunal, in [2011] UKFTT 392 (TC), and the Upper Tribunal, in [2013] UKUT 0105 (TCC), held that the relevant regimes infringed EU rights in principle, but that all claims save the FIDs claim for 1997/1998 were time-barred. An earlier Court of Appeal ruling had held that a claim for a payable credit was a claim for relief subject to section 43 of the Taxes Management Act 1970.

The central questions were whether the timely FIDs claim raised an unresolved Article 56 issue, and whether EU law required the six-year time limit to be disapplied for the remaining claims.

1. The appeals on limitation were dismissed. The six-year period in section 43(1) of the Taxes Management Act 1970 applied to claims for payable credits made under section 42. It was a reasonable, certain and pre-existing procedural limit. It did not breach equivalence, because an EU-based claimant was treated in the same way as a taxpayer making a comparable domestic claim. It did not breach effectiveness, because a separate letter could validly make the required claim and the standard tax-return form created no material procedural obstacle.

2. The development or uncertainty of EU law did not prevent time running. The Revenue had not caused the Trustees’ delay merely by reproducing the domestic legislation in tax forms and guidance. The special caution required of trustees when considering speculative litigation did not justify a separate EU-law limitation regime.

3. The High Court proceedings were claims for common-law compensation or restitution, not claims for a tax credit under section 42. They could not therefore constitute a timely statutory claim for the 1996/1997 FIDs credit. The tax tribunals also lacked jurisdiction in the statutory appeals to decide whether HMRC had fairly applied extra-statutory concession B41; that was a public-law challenge.

4. A reference to the ECJ was required for the surviving FIDs claim for 1997/1998. The Court could not regard as acte clair either whether a shareholder’s investment in a United Kingdom parent with foreign subsidiaries was itself a cross-border movement of capital, or whether effectiveness gave shareholders a right to seek relief for an infringement of the parent company’s Article 56 rights. Those questions, and potentially the nature of any remedy, were to be referred under article 267.

• Court of Appeal (Civil Division): In [2015] EWCA Civ 713, dismissed the Trustees’ limitation appeals and directed a reference to the ECJ on the surviving FIDs claim.

• Court of Appeal (Civil Division): An earlier preliminary ruling, [2014] EWCA Civ 23, held that a claim for payable tax credits was a claim for relief subject to section 43 of the Taxes Management Act 1970.

• Upper Tribunal (Tax and Chancery Chamber): In [2013] UKUT 0105 (TCC), dismissed appeals and cross-appeals from the First-tier Tribunal. It held the EU claims well founded in principle but time-barred save for the final FIDs year.

• First-tier Tribunal (Tax Chamber): In [2011] UKFTT 392 (TC), with one exception, dismissed the Trustees’ appeals from HMRC’s refusals of the tax-credit claims.