Telent Technology Services Limited v The Commissioners for HMRC

Withdrawal of a VAT appeal engages Value Added Taxes Act 1994, section 85(4), which deems the parties to have agreed that the decision under appeal is upheld. Under section 85(1), the tribunal is deemed for all purposes to have determined the appeal accordingly.

The deemed determination extends to grounds actually advanced in the withdrawn appeal. It therefore gives rise to issue estoppel where a later appeal seeks to re-litigate the same issue. Cause of action estoppel also applies where both appeals concern entitlement to the same input tax for the same periods and on the same facts, despite challenging different HMRC decisions. Estoppel by acquiescence requires detrimental reliance.

Telent Technology Services Limited withdrew an appeal against a VAT assessment which recovered input tax claimed on investment-management services for an escrow account. It later claimed repayment of input tax for periods including periods covered by that assessment.

HMRC initially contested the substantive claim, but later conceded it except for the overlapping periods and applied to strike out that part of the appeal. The First-tier Tribunal struck it out, holding that HMRC was not estopped from making the application and that the later appeal was barred by cause of action estoppel, alternatively issue estoppel and abuse of process.

The appeal concerned the effect of withdrawal under section 85 of the Value Added Taxes Act 1994, and whether the earlier and later VAT appeals involved the same claim or issue.

1. Appeal dismissed. The First-tier Tribunal was right to strike out the part of the claim appeal relating to the overlapping VAT periods.

2. HMRC was not precluded by acquiescence or estoppel from raising the procedural objection late. The Upper Tribunal held that the lateness of such an application may found a substantive estoppel defence, rather than being merely a case-management matter. However, detrimental reliance is a necessary element of estoppel by acquiescence, as it is for estoppel by representation. The FTT had found that TTSL suffered no detriment from HMRC changing its position, and that unchallenged finding was fatal to Ground 1.

3. Under sections 85(1) and 85(4) of the Value Added Taxes Act 1994, withdrawal of the assessment appeal deemed an agreement that the assessment be upheld without variation and a tribunal determination to that effect. The statutory fiction extended beyond the recoverability of the assessed sum. Its inevitable consequences included rejection of the grounds actually advanced in the withdrawn appeal.

4. On the facts, the sole issue in the assessment appeal was whether input tax on the investment-management services was allowable. The deemed determination therefore prevented TTSL, by issue estoppel, from re-litigating entitlement to the same input tax in the overlapping periods. This construction was consistent with the anti-relitigation purpose of section 85 and its direction that the deemed consequences apply “for all purposes”.

5. Cause of action estoppel independently applied. The relevant cause of action was TTSL’s asserted entitlement to input tax credit on the escrow-account investment-adviser fees. The assessment appeal and the overlapping part of the repayment appeal concerned the same entitlement, input tax, periods and facts. The fact that one appeal challenged an assessment and the other a refusal of repayment did not create distinct causes of action.

6. The Upper Tribunal did not determine the abuse-of-process ground afresh. That issue arose only if its conclusions on issue and cause of action estoppel were wrong.

• Upper Tribunal (Tax and Chancery Chamber): Dismissed TTSL’s appeal and upheld the striking-out of the overlapping part of the repayment appeal.
• First-tier Tribunal (Tax Chamber): In a decision released on 3 May 2022, struck out the overlapping part of the appeal on cause of action estoppel, alternatively issue estoppel and abuse of process.