BT Plc v The Commissioners for HMRC

A statutory scheme for VAT bad-debt relief is exclusive where, construed in its legislative context, it covers the same ground as a proposed common-law claim and makes relief subject to substantive conditions, detailed procedural requirements and a specialist appeal route. The unlawfulness of a condition under EU law does not permit the court to ascertain Parliament’s intention by disregarding that condition.

Unjust enrichment requires a normatively defective transfer of value. A taxpayer’s mere failure to make a relief claim, or to exercise a set-off, does not transfer value to HMRC where the right was not given up. If the analysis instead establishes an overpayment of VAT, recovery is confined to the statutory regime in section 80 of the Value Added Tax Act 1994.

BT claimed VAT bad-debt relief for unpaid retail-customer debts arising between 1 January 1978 and 31 March 1989. For most of that period, relief was available under the statutory Old Scheme in section 12 of the Finance Act 1978, subject to an insolvency condition. No domestic scheme operated during the first nine months of 1978.

BT’s statutory claim had failed. Its separate Chancery Division claim sought restitution. Miles J struck out the claim for the main period but allowed the claim for the first nine months of 1978 to proceed: [2021] EWHC 1095 (Ch). BT appealed the first ruling. HMRC cross-appealed the second.

The central questions were whether the Old Scheme was the exclusive remedy, whether BT’s failure to claim relief could amount to unjust enrichment, and whether the nine-month claim was time-barred.

1. Appeal dismissed and cross-appeal allowed. HMRC’s application for strike out or reverse summary judgment succeeded in full. The Old Scheme was intended to be the exclusive means of obtaining bad-debt relief for the main period.

2. The question of exclusivity was one of statutory construction. Section 12 of the Finance Act 1978 implemented the relief required by Article 11C(1) of the Sixth Directive and covered the same ground as BT’s restitutionary claim. Parliament made relief conditional upon, among other things, insolvency, prescribed claims and evidential requirements, provisions for determining the outstanding consideration and repayment, and an appeal to the VAT tribunal. Those qualifications would be deprived of practical effect if a taxpayer could bypass them through a common-law claim. The scheme was therefore incompatible with a coexisting remedy.

3. The prior decisions concerning the statutory appeal had determined that the Old Scheme, moulded by disapplying the unlawful insolvency condition, had provided an effective means to enforce the directly effective EU right before its repeal. EU law did not require the court to treat the scheme as non-exclusive after BT had failed to use it.

4. BT’s restitution claim had no real prospect of success. VAT properly due when accounted for remained properly due where BT did not make a bad-debt claim. Its omission to seek a refund or exercise a set-off was not a transfer of value to HMRC. It was analogous to allowing a valid claim to expire, rather than conferring or foregoing a benefit. If BT’s alternative analysis established an overpayment, recovery would necessarily fall within section 80 of the Value Added Tax Act 1994, whose subsection (7) excluded other remedies; BT’s statutory section 80 claim had already been finally determined.

5. It was therefore unnecessary to decide limitation for the nine-month period. The court nevertheless observed that the test in [2020] UKSC 47 requires a factual inquiry into when the mistake was, or could with reasonable diligence have been, discovered. The absence of witness evidence would have prevented summary determination of that issue.

• Court of Appeal (Civil Division): BT’s appeal was dismissed and HMRC’s cross-appeal was allowed. The restitution claim was struck out in full.
• High Court, Chancery Division: Miles J struck out the claim for the main period but refused summary disposal of the claim for the first nine months of 1978: [2021] EWHC 1095 (Ch).
• Separate statutory appeal: BT’s statutory appeal was struck out by the First-tier Tribunal. The Upper Tribunal dismissed BT’s appeal: [2023] UKUT 122 (TCC). Permission to appeal was refused.