The BT Pension Scheme (Trustees of) v HM Revenue and Customs [2015] EWCA Civ 713

“14. Where a UK-resident company made a qualifying distribution it was liable to pay ACT on the distribution: section 14(1). The sum of the amount of the distribution and the ACT was called a franked payment: section 238(1). Before 6 April 1993, the rate of ACT was linked to the basic rate of income tax. For example, from 1988 to 5 April 1993, when the basic rate of income tax was 25%, the ACT rate was 25/75 (or 1/3) of the amount of the distribution. Between 6 April 1993 and 5 April 1994 the ACT rate was set at 22.5/77.5 (or 9/31). From 6 April 1994 until 5 April 1999 the ACT rate was linked to the lower rate of income tax: section 14(3). At that time the lower rate of income tax was 20%. The ACT rate was therefore 20/80 (or 1/4). Tax treatment of dividends received by individuals and exempt entities 15. Income tax was charged under various "Schedules" for different types of income. This is a peculiar feature of the UK tax system. Under Schedule F (section 20) individual shareholders were liable to income tax on dividends and other distributions received. A UK-resident individual in receipt of a qualifying distribution from a UK-resident company was entitled to a tax credit equal to such proportion of the amount or value of the distribution as corresponded to the rate of ACT: section 231(1). Income tax was chargeable on the total of the distribution and the tax credit: section 20(1). The tax credit extinguished all or part of the taxpayer's liability. Lower-rate taxpayers and non-taxpayers (e.g. taxpayers whose income did not exceed the personal allowances) could recover some or all of the tax credit in cash. Entities not subject to UK tax on investment income, e.g. pension funds, could before 2 July 1997 claim payment in full of the tax credit on dividends received. Tax treatment of dividends received by companies 16. A UK-resident company was subject not to income tax but to corporation tax: section 6(2). However, corporation tax was not chargeable on dividends and other distributions received from another UK-resident company, nor were such payments taken into account in computing the corporation tax liability of the company making the distributions. This follows from section 208, which provides as follows: "Except as otherwise provided by the Corporation Tax Acts, corporation tax shall not be chargeable on dividends and other distributions of a company resident in the United Kingdom, nor shall any such dividends or distributions be taken into account in computing income for corporation tax." 17. A UK-resident company was, by contrast, subject to corporation tax on dividends received from non-resident companies. Such tax was charged under Case V of Schedule D, set out in section 18, being "Tax in respect of income arising from possessions out of the United Kingdom not being income consisting of emoluments of any office or employment." The company was, however, granted relief for foreign taxes paid. Such relief was given either unilaterally under domestic rules (section 790) or under double taxation conventions entered into with other countries (section 788). The unilateral arrangements provided for the crediting against a company's UK corporation tax liability of withholding taxes paid on foreign dividends. Where the UK-resident company either directly or indirectly controlled, or was a subsidiary of a company which directly or indirectly controlled, not less than 10% of the voting power of the company paying the dividend, the relief extended to the underlying foreign corporation tax on the profits out of which the dividends were paid, including underlying tax incurred by lower-tier companies (section 801). The foreign tax was creditable only up to the amount of the UK corporation tax liability on the particular income. Similar arrangements generally applied under the UK's double taxation treaties with other countries: see, for example, the treaties with France, Spain and the Netherlands. 18. The standard clause in such treaties, reflecting section 790(4), is usually to be found in the "Elimination of Double Taxation" article. So, for example, Article 22(b) of the UK/Netherlands Double Taxation Treaty reads: "Where such income is a dividend paid by a company which is a resident of the Netherlands to a company which is a resident of the United Kingdom and which controls directly or indirectly not less than one-tenth of the voting power in the former company, the credit shall take into account (in addition to any Netherlands tax payable in respect of the dividend) the Netherlands tax payable by that former company in respect of its profits." Franked investment income 19. A UK-resident company receiving a qualifying distribution from another UK-resident company was entitled to a tax credit: section 231(1). The total of the distribution and the tax credit was called franked investment income ("FII"): section 238(1). A UK-resident company receiving a distribution from a non-resident company was not entitled to a tax credit, and the income did not qualify as FII. Where a UK-resident company received FII, it was liable to pay ACT in relation to its own dividends only to the extent that those dividends and the ACT referable to them (i.e. its franked payments) exceeded the FII: section 241. Special arrangements applied under section 247 to dividends paid between UK-resident members of groups of companies. Provided that they satisfied certain minimum holding requirements – broadly speaking, the requirement was that more than 50% of the shares of the company paying the dividend had to be held by the parent – the UK-resident subsidiary and its UK-resident parent could make an election (called a group income election) under which dividends could be paid to the parent by the subsidiary without its having to account for ACT. Where a group income election was in force, the payment of dividends under it did not entitle the parent company to a tax credit, and the dividends were not included within its FII. The effect of a group income election was to postpone the payment of ACT until a distribution was made by the parent company. Set-off and surrender of ACT 20. A company was entitled to set ACT paid in respect of a qualifying distribution during an accounting period against its mainstream corporation tax ("MCT") liability for that and future periods. There was, however, a limit on the amount which could be set off based on the income tax rate (see paragraph 14 above). Since the UK operated a partial imputation system, so that the UK corporation tax rate exceeded the ACT set-off rate, the company always faced a marginal corporation tax liability on its profits. Moreover, where a company received credit for foreign tax, this reduced the amount of the corporation tax liability available for set-off of ACT: section 797(4). Unrelieved ACT, known as "surplus ACT", could be carried back or forward for set-off against MCT of other periods: section 239. 21. A company was also permitted to surrender to its subsidiaries the benefit of ACT payments it had made: section 240. The subsidiaries to whom the surplus ACT could be surrendered were restricted to subsidiaries resident in the UK: section 240(10). The subsidiaries were then able to set the surrendered ACT against their own UK MCT liability. 22. A company with surplus FII (that is, FII which exceeded franked payments) could, if it had losses, set the amount of those losses against the surplus FII under section 242 and obtain a payment in cash of the tax credit comprised in that amount of surplus FII. This provision was abolished with effect from 2 July 1997. The FID regime 23. Experience with the arrangements described above showed that companies receiving significant foreign dividend income generated surplus ACT. This was because: (i) foreign dividends did not attract a tax credit and therefore did not create FII which could be used to reduce the companies' ACT liability on distributions made by them; and (ii) any credit given for foreign tax reduced the MCT liability against which the ACT could be set off. Arrangements were introduced with effect from 1 July 1994 under which a UK-resident company could elect that a cash dividend which it paid to its shareholders was a FID: sections 246A to 246Y. The election had to be made by the date the dividend was paid and could not be revoked after that date. ACT was payable on the FID but, if the company could match the FID with foreign profits, a claim for repayment could be made for ACT arising in respect of the FID. 24. The reclaimed ACT became repayable at the same time as the MCT became payable, i.e. nine months after the end of the accounting period, and was set first against any MCT liability for the period and any excess was then repaid. As ACT was paid 14 days after the end of the quarter in which the dividend was paid, and MCT was payable nine months after the end of the accounting period, this meant that ACT would remain outstanding under the FID system for between 8½ and 17½ months depending when the dividend was paid in that accounting period. 25. A FID did not constitute FII, although a corporate shareholder could use a FID received by it to frank a FID paid, so that ACT was payable only on the excess of FIDs paid over FIDs received. Because a FID did not constitute FII the shareholder receiving the FID was not entitled to a tax credit under section 231(1); but an individual receiving a FID was nevertheless treated as receiving income which had borne tax at the lower rate for the year of assessment. However, no repayment was made to individual shareholders of income tax treated as having been paid, nor could a tax exempt shareholder such as a UK pension fund reclaim a tax credit similar to that which would have been payable on a non-FID qualifying distribution. Abolition of the ACT regime 26. For distributions made on or after 6 April 1999, the ACT system was abolished. Companies no longer had to pay or account for ACT on shareholder dividends and other qualifying distributions. The FID rules were also abolished. 27. For companies with brought-forward surplus ACT, a "shadow ACT" system was introduced. The shadow ACT regulations allowed companies access to their surplus ACT in an amount broadly similar to the relief allowable under the old rules. This meant that surplus ACT could only be utilised after the shadow ACT was notionally used and exhausted. 28. UK-resident individuals now receive dividends with a tax credit equal to one ninth of the dividend. The tax credit extinguishes lower and basic rate income tax liability on the dividend.”

“Chapter 4 Capital and payments Article 56 (ex Article 73(b)) 1. Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. 2. … Article 58 (ex Article 73(d)) 1. The provisions of Article 56 shall be without prejudice to the right of Member States: (a) To apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested; (b) … 2. … 3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 56.”

“Chapter 2 Right of establishment Article 43 (ex Article 52) Within the framework of the provision set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the conditions laid down for its nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.”

“A. Transactions in securities on the capital market 1. Acquisition by non-residents of domestic securities dealt in on a stock exchange. 2. Acquisition by residents of foreign securities dealt in on a stock exchange. 3. Acquisition by non-residents of domestic securities not dealt in on a stock exchange. 4. Acquisition by residents of foreign securities not dealt in on a stock exchange.”

“207. However, contrary to what the claimants in the main proceedings contend, neither the reliefs waived by a taxpayer in order to offset in full a tax levied unlawfully, such as ACT, against an amount due in respect of an another tax, nor the loss and damage suffered by resident companies which elected to be taxed under the FID regime because they saw themselves as having to increase of their amount of their dividend so as to compensate for the lack of a tax credit in the hands of their shareholders, can form the basis of an action under Community law for the reimbursement of the tax unlawfully levied or of sums paid to the Member State concerned or withheld by it directly against that tax. Such waivers of relief or increases in the amount of dividends are the results of decisions taken by those companies and do not constitute, on their part, an inevitable consequence of the refusal by the United Kingdom to grant those shareholders the same treatment as that afforded to shareholders receiving a distribution which has its origin in nationally-sourced dividend. 208. That being the case, it is for the national court to determine whether the waivers of relief or the increases in the amount of dividends constitute, on the part of the companies concerned, financial losses suffered by reason of a breach of Community law for which the Member State in question is responsible.”

“This analysis is fortified by the nature of the FIDs regime itself. The effect of the regime is to provide a quite separate tax treatment for UK-sourced dividends as opposed to dividends which are wholly derived from non-UK sourced dividends. A FID only carries the ACT benefit for the FID-paying company to the extent that it can be funded out of non-UK sourced profits and gives the UK shareholder a direct economic link to the underlying dividends received by the UK company making the distribution.”

“20. It must further be noted that, in order to be truly effective, the right of workers to be engaged and employed without discrimination necessarily entails as a corollary the employment’s entitlement to engage them in accordance with the rules governing freedom of movement of workers. 21. Those rules could easily be rendered nugatory if Member States could circumvent the prohibitions which they contain merely by imposing upon employers requirements to be met by any worker whom they wish to employ which, if imposed directly on the worker, would constitute restrictions on the exercise of the right to freedom of movement to which that worker is entitled under Article 48 of the Treaty.”

“It is, in the present case, of no relevance in that regard that it is not the taxpayer, a company established in the United Kingdom, whose freedom of establishment has been unjustifiably restricted, but rather the non-resident company with a permanent establishment in the United Kingdom. In order to be effective, freedom of establishment must also entail, in a situation such as that in the main proceedings, the possibility that the taxpayer may have the benefit of group relief set against its profit.”

“36. Where a person fully taxable in Finland invests capital in a company established in Sweden, there is thus no way of escaping double taxation of the profits distributed by the company in which the investment is made. In the face of a tax rule which takes account of the corporation tax owed by a company in order to prevent double taxation of the profits distributed, shareholders who are fully taxable in Finland find themselves in a comparable situation, whether they receive dividends from a company established in that member state or from a company established in Sweden.”

“54. In those circumstances, the calculation of a tax credit granted to a shareholder fully taxable in Finland, who has received dividends from a company established in Sweden, must take account of the tax actually paid by the company in established in that other member state, as such tax arises from the general rules on calculating the basis of assessment and from the rate of corporation tax in that latter member state …. 55 … the answer to the questions referred must be that articles 56 and 58 EC preclude legislation whereby the entitlement of a person fully taxable in one member state to a tax credit in relation to dividends paid to him by limited companies is excluded where those companies are not established in that state.”

“35. Consequently, by not charging [FIEs] tax on dividends from Germany or Portugal, the Kingdom of the Netherlands treats those dividends in the same way as dividends from Netherlands companies, in respect of which those enterprises are not taxed either. In addition, by refraining from taxing dividends from other Member States, the Kingdom of the Netherlands avoids the imposition of a series of charges to tax arising from the exercise of its own fiscal power, just as it does in respect of dividends paid by Netherlands companies. 36. Therefore, contrary to the assertions of [the FIE] and the Commission, Netherlands legislation, such as that at issue in the main proceedings, does not treat dividends from Germany or Portugal differently from dividends distributed by Netherlands companies. 37. While, in those circumstances, dividends from Germany or Portugal are subject to a greater tax burden than are dividends distributed by Netherlands companies, that disadvantage is not attributable to the Netherlands legislation at issue in the main proceedings, but is the product of the parallel exercise of fiscal sovereignty by the Member States in which the distributing companies are established and the Member State in which the recipient company is established, whereby the former chose to impose a series of charges to tax on distributed dividends and the latter opted to refrain from any taxation of dividends with respect to [FIEs] (see, to that effect, Case C-513/04 Kerckhaert and Morres [2006] ECR I-10967, paragraph 20). 38. The Commission contends, however, that in its capacity as the Member State of residence of the company in respect of dividends, it is for the Kingdom of the Netherlands to offset the foreign tax burden on those dividends in the same way as it offsets the domestic tax burden to which those dividends are subject. 39. That argument cannot be accepted. Admittedly, it follows from the case-law that, where a Member State has a system for preventing or mitigating a series of charges to tax or economic double taxation for dividends paid to residents by resident companies, it must treat dividends paid to residents by non-resident companies in the same way (Test Claimants in Class IV of the ACT Group Litigation, paragraph 55 and the case-law cited). 40. Under such systems, the situation of shareholders resident in a Member State and receiving dividends from a company established in that State is comparable to that of shareholders who are resident in that State and receive dividends from a company established in another Member State, inasmuch as both the dividends deriving from a national source and those deriving from a foreign source may be subject to a series of charges to tax (see Test Claimants in Class IV of the ACT Group Litigation, paragraph 56). 41. However, the status of the Member State of residence of the company in receipt of dividends cannot include the obligation for that Member State to offset a fiscal disadvantage arising where a series of charges to tax is imposed entirely by the Member State in which the company distributing those dividends is established, since the dividends received are neither taxed nor treated differently by the first Member State as regards investment enterprises established in that State. 42. It follows that, in a situation where the greater tax burden imposed on dividends distributed by companies established in Germany or Portugal to a [FIE] established in the Netherlands than that which is imposed on dividends distributed to that same enterprise by companies also established in the Netherlands does not arise as a result of a difference in treatment attributable to the tax regime in the Netherlands, but stems from the decision of the Federal Republic of Germany and the Portuguese Republic to make a deduction at source from those dividends, and from the decision of the Kingdom of Netherlands not to tax those dividends, the fact that the latter Member State has not granted a concession in respect of the deduction at source for which the first two States have opted does not constitute a restriction on the movement of capital.”

“Subject to any provision of the Taxes Acts prescribing a longer or shorter period, no claim for relief under the Taxes Acts shall be allowed unless it is made within six years from the end of the chargeable period to which it relates.”

“19. As I see it, these claimants fall into two broad classes. One class comprises cases where, if the claimant company's contentions on Community law are well-founded, it is still open to the company to obtain in full the group relief to which, on that footing, the company is entitled. The other class comprises cases where this course is not open to the claimant company. The difference between these two classes corresponds to the distinction between (a) giving effect to the group relief provisions as read and applied in accordance with Community law and (b) awarding damages for breach of a Community law right. 20. In my view in the former of these two classes the category (1) claims in the High Court are misconceived. Where a claimant company can obtain through the statutory procedures the very tax relief of whose non-availability it is complaining, I see no justification for the company by-passing the statutory route and, instead, going to the High Court and claiming damages or a restitutionary remedy based on the proposition that the company has been wrongly refused the tax relief to which it is entitled under Community law. ….. 30. Of course, to be compliant with Community law the remedial route prescribed by the legal system of a member state must be such that the rules "are not less favourable than those governing similar domestic actions (principle of equivalence)" and, additionally, the rules must not render "practically impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness)": see the Hoechst case, para 85. The statutory route prescribed for group relief claims was not designed for claims in respect of non-resident companies. So, as United Kingdom law presently stands, at the initial step a taxpayers' group relief claim will inevitably be refused by the revenue. Further, as already noted, some statutory requirements will need adaptation to accommodate claims in respect of non-resident companies. But neither of these features should present any major problem. Neither of them renders the statutory route "practically impossible or excessively difficult". Adaptation of the formal requirements will be needed whichever route is followed, and the appropriate adaptation is a matter on which the special commissioners' practical expertise will be invaluable.”

“[40] Time bars of this character are commonplace. I see no reason to suppose the statutory time bars applicable to group relief claims are in themselves inconsistent with Community law: cf Steenhorst-Neerings v Bestuur van de Bedrijfsvereniging voor Detailhandel, Ambachten en Huisvrouwen (Case C-338/91) [1993] ECR I-5475 and Johnson v Chief Adjudication Officer (No 2) (Case C-410/92) [1995] ICR 375, [1994] ECR I-5483. This means that, in respect of this class of cases, it is now too late for the taxpayers to obtain group relief by following the statutory route. A similar view has, rightly, been expressed by the Court of Appeal in respect of an employment tribunal's jurisdiction to entertain claims for unfair dismissal involving directly applicable Community rights outside the statutory time limits: see Biggs v Somerset County Council [1996] ICR 364. [41] In such cases the taxpayers' remedy necessarily lies elsewhere. In such cases the taxpayer's remedy is of a different character. The taxpayer's remedy lies in pursuing proceedings claiming restitutionary and other relief in respect of the United Kingdom's failure to give proper effect to Community law. The appeal commissioners have no jurisdiction to hear such claims. Such claims are outside the commissioners' statutory jurisdiction, and the commissioners have no inherent jurisdiction. Claims in this class should therefore proceed in the High Court. Difficult questions, both of domestic law and Community law, may arise about the time limits applicable to High Court claims of this character. Some of these questions were explored recently by the Court of Appeal in Deutsche Morgan Grenfell Group plc v IRC [2005] EWCA Civ 78, [2005] STC 329. Those are not matters arising on these appeals. [42] I add one caveat. The Revenue and the appeal commissioners have power to extend time limits for late amendments and late appeals. Before proceeding with their High Court claims claimant companies in this class of cases should therefore take the simple step of inviting the Revenue or the appeal commissioners to extend the time limits appropriately. If this invitation is accepted, the claimants should proceed along the statutory route. If the invitation is declined, or if the Revenue and the appeal commissioners have no power to grant the necessary extensions, the way will be clear for the High Court proceedings to continue.”

“In the first place, we consider that the claim made by BTPS for the tax credits to which we have held . . . it is entitled, are 'claims' within s 43. We accept Mr Baldry's submissions concerning the structure of s 231 and consider that a taxpayer is entitled to the set-off or payment referred to s 231(3) if, but only if, he makes a claim. The formal claim will, ordinarily, be made in a tax return. But even if Mr McDonnell is right in saying that set-off is automatic and does not need to be claimed, he cannot, we think, be right in saying that a request or demand by a taxpayer for payment under s 231(3) is not a claim. That of itself lends strong support to the view that even a set-off has to be claimed, otherwise a distinction – unwarranted, it seems to us – would have to be drawn between set-off and payment in terms of time limits.”

“So far as the second argument is concerned, the problem here, as I see it, is that the annual returns did not in fact claim tax credits in respect of foreign dividends. That is not surprising, because until the CJEU's ruling, no one thought that they could be claimed. But I do not see how a failure (or omission) to claim something can amount to a claim to the very thing that has been omitted.”

“The Court has thus acknowledged, in the interests of legal certainty which protects both the taxpayer and the authority concerned, that the setting of reasonable time limitation period for bring proceedings is compatible with Community law. Such periods cannot be regarded as rendering virtually impossible or excessively difficult the exercise of rights conferred by Community law, even if the expiry of those periods necessarily entails the dismissal, in whole or in part, of the action brought” reference being made to Case 33/76 Rewe v Landwirtschaftskammer Saarland [1976] ECR 1989 40 paragraph 5 and Case C-45/76 Comet v Produktschap voor Siergewassen [1976] ECR 2043, paragraphs 17 and 18.”

“202. However, the fact remains that, according to established case law, the right to a refund of charges levied in a member state in breach of rules of Community law is the consequence and complement of the rights conferred on individuals by Community provisions as interpreted by the Court of Justice: see, inter alia, Amministrazione delle Finanze dello Stato v SpA San Giorgio (Case 199/82) [1983] ECR 3595, para 12 and Metallgesellschaft [2001] Ch 620, para 84. The member state is therefore required in principle to repay charges levied in breach of Community law: Société Comateb v Directeur Général des Douanes et Droits Indirects (Joined Cases C-192 to C-218/95) [1997] STC 1006, para 20 and the Metallgesellschaft case, para 84. 203. In the absence of Community rules on the refund of national charges levied though not due, it is for the domestic legal system of each member state to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from Community law, provided, first, that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and, secondly, that they do not render virtually impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness): see, inter alia, Rewe-Zentralfinanz eG v Landwirtschaftskammer für das Saarland (Case 33/76) [1976] ECR 1989 , para 5 and Comet BV v Produktschaap voor Siergewassen (Case 45/76) [1976] ECR 2043 , paras 13 and 16; and, more recently, Edilizia Industriale Siderurgica Srl (Edis) v Ministero delle Finanze (Case C-231/96) [1998] ECR I-4951 , paras 19 and 34; Dilexport Srl v Amministrazione delle Finanze dello Stato (Case C-343/96) [2000] All ER (EC) 600, para 25 and Metallgesellschaft v Inland Revenue Commissioners [2001] Ch 620, para 85.”

“19. As regards the latter principle, the court has held that it is compatible with Community law to lay down reasonable time limits for bringing proceedings in the interests of legal certainty which protects both the taxpayer and the administration concerned: Rewe-Zentralfinanz e.G. v. Landwirtschaftskammer für das Saarland (Case 33/76) [1976] E.C.R. 1989, 1997–1998, para. 5; Comet B.V. v. Produktschaap voor Siergewassen (Case 45/76) [1976] E.C.R. 2043, 2053, paras. 17 and 18, and Denkavit Italiana [1980] E.C.R. 1205, 1225, para. 23; see also Palmisani v. Istituto Nazionale della Previdenza Sociale (Case C-261/95) [1997] E.C.R. I-4025, 4046, para. 28, and Haahr Petroleum Ltd. v. Åbenrå Havn (Case C-90/94) [1997] E.C.R. I-4085, 4158, para. 48. Such time limits are not liable to render virtually impossible or excessively difficult the exercise of rights conferred by Community law. In that regard, a time limit of three years under national law, reckoned from the date of the contested payment, appears reasonable: see Edilizia [1998] E.C.R. I-4951, 4990, para. 35 and SPAC [1998] E.C.R. I-4997, 5019, para. 19. 20. Observance of the principle of equivalence implies, for its part, that the procedural rule at issue applies without distinction to actions alleging infringements of Community law and to those alleging infringements of national law, with respect to the same kind of charges or dues. That principle cannot, however, be interpreted as obliging a member state to extend its most favourable rules governing recovery under national law to all actions for repayment of charges or dues levied in breach of Community law: see Edilizia, p. 4991, para. 36 and SPAC, p. 5020, para. 20.”

“31. As for verifying whether the principle of equivalence has been complied with in the case at issue in the main proceedings, it should be noted that compliance with that principle requires that the national rule in question apply without distinction to actions based on infringement of EU law and those based on infringement of national law having a similar purpose and cause of action. However, the principle of equivalence cannot be interpreted as requiring a member state to extend its most favourable rules to all actions brought in a certain area of law. In order to ensure compliance with that principle, it is for the national court, which alone has direct knowledge of the procedural rules governing restitution actions against the state, to determine whether the procedural rules intended to ensure that the rights derived by individuals from EU law are safeguarded under domestic law comply with that principle and to consider both the purpose and the essential characteristics of allegedly similar domestic actions. For that purpose, the national court must consider whether the actions concerned are similar as regards their purpose, cause of action and essential characteristics (see, to that effect, Pontin v T-Comalux SA (Case C-63/08) [2009] ECR I-10467, para 45 and case law cited).”

“20. Only in specific circumstances, in particular where a Member State has failed to take the implementing measures required or has adopted measures which are not in conformity with a directive, has the Court recognized the right of persons affected thereby to rely, in judicial proceedings, on a directive as against a defaulting Member State. This minimum guarantee, arising from the binding nature of the obligation imposed on the Member States by the effect of directives, cannot justify a Member State absolving itself from taking in due time implementing measures appropriate to the purpose of each directive (see judgment in Case 102/79 Commission v Belgium [1980] ECR 1473). 21. So long as a directive has not been properly transposed into national law, individuals are unable to ascertain the full extent of their rights. That state of uncertainty for individuals subsists even after the Court has delivered a judgment finding that the Member State in question has not fulfilled its obligations under the directive and even if the Court has held that a particular provision or provisions of the directive are sufficiently precise and unconditional to be relied upon before a national court. 22. Only the proper transposition of the directive will bring that state of uncertainty to an end and it is only upon that transposition that the legal certainty which must exist if individuals are to be required to assert their rights is created. 23. It follows that, until such time as a directive has been properly transposed, a defaulting Member State may not rely on an individual's delay in initiating proceedings against it in order to protect rights conferred upon him by the provisions of the directive and that a period laid down by national law within which proceedings must be initiated cannot begin to run before that time. 24. The answer to the question referred to the Court must therefore be that Community law precludes the competent authorities of a Member State from relying, in proceedings brought against them by an individual before the national courts in order to protect rights directly conferred upon him by Article 4(1) of Directive 79/7, on national procedural rules relating to time-limits for bringing proceedings so long as that Member State has not properly transposed that directive into its domestic legal system.”

“21. It follows that EU law does not preclude a national authority from relying on the expiry of a reasonable limitation period unless, by its conduct, it was responsible for the delay in the application, thereby depriving the applicant in the main proceedings of the opportunity to enforce his rights under an EU directive before the national courts. 22. It should also be made clear that, in accordance with settled case law, the fact that the court may have ruled that the breach of EU law has occurred generally does not affect the starting point of the limitation period. 23. This is a fortiori the case where, as in the main proceedings, the breach of EU law was not in doubt. In such a situation, a ruling by the Court that there has been such a breach is not necessary to enable the beneficiaries to ascertain the full extent of their rights. The fact that the period starts to run before the Court has given its ruling does not therefore render it virtually impossible or excessively difficult to safeguard the rights derived from EU law.”

“32. In the case before the referring court, it should be noted, first of all, that - as the European Commission pointed out at the hearing - it would have been impossible or, at the very least, excessively difficult for BAPV to obtain, by means of an action brought within the two-year time-limit, a refund of the VAT paid in the years from 1984 to 1994, particularly in view of the position adopted by the tax authority - and confirmed, according to the information provided by the referring court, by the case-law of the national courts - which dismissed the possibility that the services supplied by BAPV fell within the exemption provided for under Article 10(5) of DPR No 633/72. 33. Also, by attributing retroactive effect to the Circular of 26 February 1999, the interpretation provided by the referring court and by the court decision referred to in paragraph 16 above has the result of moving the starting point of actions for recovery back to the date on which the VAT was paid, which - given that the service provider had no more than two years in which to bring an action against the tax authority for the recovery of sums paid but not due - totally deprived the provider of any possibility of recovering the tax paid but not due. 34. Lastly, it is common ground that the consortia brought an action for the recovery of sums paid but not due after the expiry of the two-year specific limitation period during which it was open to BAPV, with effect - according to the case-law interpretation mentioned above - from the date on which the VAT was paid, to claim a refund from the tax authority of the VAT paid but not due. 35. The consortia brought an action for recovery of sums paid but not due following publication of the Circular of 26 February 1999 by which the tax authority changed its interpretation of the nature of the transactions at issue in the main proceedings, thereafter regarding them as exempt from VAT. 36. Consequently, it should be noted that, in a situation such as that at issue before the referring court, it is BAPV itself which bears the cost of paying the VAT which was not due, without any possibility of effectively claiming a refund from the tax authority because the two-year time-limit has expired, even though such a situation is not its fault, but a result of the fact that, prompted by the Circular of 26 February 1999, the recipients of the services brought an action against BAPV, after the expiry of the above time-limit, for the recovery of sums paid but not due. ….. 42. It is apparent from the above considerations that the principle of effectiveness does not preclude national rules governing the recovery of sums paid but not due, under which the time-limits for a civil law action for recovery of sums paid but not due, brought by the recipient of services against the supplier, a taxable person for the purposes of VAT, are more generous than the specific time-limits for a fiscal law action for a tax refund, brought by the supplier against the tax authority, provided that it is possible for that taxable person effectively to claim reimbursement of the VAT from the tax authority. That condition is not satisfied where the application of such rules has the effect of totally depriving the taxable person of the right to obtain from the tax authority a refund of the VAT paid but not due, which the taxable person has himself had to pay back to the recipient of his services.”

“354. Moreover, paragraphs 40 to 42 of the judgment indicate the factors which weighed heavily with the Court in reaching its decision. Thus (paragraph 40) the circular effectively reopened the question whether transactions consisting of the collection of those contributions were subject to VAT, (paragraph 41) the national authority must take account of the particular situations of economic operators and, where appropriate, provide for adjustments to the way in which this new legal assessments of those transactions are applied. This is just the sort of situation envisaged in paragraph 21 of Iaia (see paragraph 306 above) where the Member State is responsible for the delay in the taxpayer’s application for a refund. We do not think that what the Court said in paragraphs 31 and 32 can be taken as lending support to the proposition that whenever a tax-collecting authority collects tax on the basis of its understanding of the law (including Community law) which is later shown to be wrong by a judicial assessment (and not by a change of view on the part of the authority) it necessarily follows that the principles of legal certainty or effectiveness are not met.”

“Claims to repayment of tax Under the Taxes Management Act [TMA 1970], unless a longer or shorter period is prescribed, no statutory claim for relief is allowed unless it is made within six years from the end of the tax year to which it relates. However, repayments of tax will be made in respect of claims made outside the statutory time limit where an overpayment of tax has arisen because of an error by the Revenue or another Government department, and where there is no dispute or doubt as to the facts.”

“401. Our reasons for saying that the Tribunal has no jurisdiction to give effect to the Extra-Statutory Concessions stems from the recent decision of the Upper Tribunal in HMRC v Hok Ltd [2012] UK Upper Tribunal 363 (TCC) (“Hok”) a decision of Warren J and Judge Bishopp. Mr Vajda has relied on the decision of Sales J in Oxfam v. HMRC [2009] EWHC 3078 (Ch), [2010] STC 686 (“Oxfam”), paragraphs 61 to 79 to demonstrate that the Tribunal does have jurisdiction. However, that decision turned on a construction of 83(1)(c) of the Value Added Tax Act 1994 which Sales J held gave jurisdiction to the VAT Tribunal to deal with legitimate expectation in the context of an appeal as to the amount of input tax. It lends no support at all to the view that the Tribunal has a general jurisdiction to deal with public law matters, whether in the context of direct tax or indirect tax, in particular to require, in the exercise of some sort of supervisory jurisdiction, HMRC to give effect to a concession. The suggestion that there is a jurisdiction in the context of direct tax is refuted by the decision in Hok.”

“There is to be a tribunal, known as the First-tier Tribunal, for the purpose of exercising the functions conferred on it under or by virtue of this Act or any other Act.”

“(7) If on an appeal notified to the tribunal, the tribunal decides that a claim which was the subject of a decision contained in a closure notice under paragraph 7(3) above should have been allowed or disallowed to an extent different from that specified in the notice, the claim shall be allowed or disallowed accordingly to the extent that appears appropriate, but otherwise the decision in the notice shall stand good.”

“(1) Subsection (2) applies if the Upper Tribunal, in deciding an appeal under section 11, finds that the making of the decision concerned involved the making of an error on a point of law. (2) The Upper Tribunal– (a) may (but need not) set aside the decision of the First-tier Tribunal, and (b) if it does, must either– (i) remit the case to the First-tier Tribunal with directions for its reconsideration, or (ii) re-make the decision. (3) In acting under subsection (2)(b)(i), the Upper Tribunal may also– (a) direct that the members of the First-tier Tribunal who are chosen to reconsider the case are not to be the same as those who made the decision that has been set aside; (b) give procedural directions in connection with the reconsideration of the case by the First-tier Tribunal. (4) In acting under subsection (2)(b)(ii), the Upper Tribunal– (a) may make any decision which the First-tier Tribunal could make if the First-tier Tribunal were re-making the decision, and (b) may make such findings of fact as it considers appropriate.” (a) may (but need not) set aside the decision of the First-tier Tribunal, and (b) if it does, must either– (i) remit the case to the First-tier Tribunal with directions for its reconsideration, or (ii) re-make the decision. (a) direct that the members of the First-tier Tribunal who are chosen to reconsider the case are not to be the same as those who made the decision that has been set aside; (b) give procedural directions in connection with the reconsideration of the case by the First-tier Tribunal. (a) may make any decision which the First-tier Tribunal could make if the First-tier Tribunal were re-making the decision, and (b) may make such findings of fact as it considers appropriate.”

“(1) … an appeal shall lie to the tribunal with respect to any of the following matters— …” (c) the amount of any input tax which may be credited to a person …”

“[63] On the ordinary meaning of the language of that provision, it appears that it covers all the issues between Oxfam and HMRC regarding the question whether HMRC should have allowed Oxfam credit for a higher amount of input tax under the approved method formula, including both the contract issue and the legitimate expectation issue. The words, 'with respect to', in s 83(1) appear clearly to be wide enough to cover any legal question capable of being determinative of the issue of the amount of input tax which should be credited to a taxpayer. The tribunal's jurisdiction is defined by reference to the subject matter specified in the section, not by reference to the particular legal regime or type of law to be applied in resolving issues arising in respect of that subject matter. ….. [67] Usually, of course, an appeal under one of the sub-paragraphs of s 83(1) will be on the merits of decision taken by HMRC, and questions of private law or public law (such as whether HMRC took into account irrelevant considerations or failed to take account of relevant considerations) will simply not be relevant to the tribunal's task on the appeal. But in my view it does not follow from this that the tribunal will never have jurisdiction to consider issues of general private law and general public law where that is necessary for it to determine the outcome of an appeal against a decision of HMRC whose subject matter falls within one of the sub-paragraphs of s 83(1). [68] I do not think that it is a valid objection to this straightforward interpretation of s 83(1)(c) according to its natural meaning that it has the effect that sometimes the tribunal will have to apply public law concepts in order to determine cases before it. It happens regularly elsewhere in the legal system that courts or tribunals with jurisdiction defined in statute by general words have jurisdiction to decide issues of public law which may be relevant to determination of questions falling within their statutorily defined jurisdiction. No special language is required to achieve that effect. Where they are themselves independent and impartial courts or tribunals (as the tribunal is) there is no presumption that public law issues are reserved to the High Court in the exercise of its judicial review jurisdiction. So, for example, a county court may have to consider whether possession proceedings issued by a local authority have been issued in breach of its public law obligations (Wandsworth London BC v Winder [1994] 3 All ER 976, [1985] AC 461); magistrates' courts and the Crown Court may have to decide issues of public law in so far as they arise in relation to criminal proceedings (eg to determine if a byelaw is a valid and proper foundation for a criminal charge: Boddington v British Transport Police [1998] 2 All ER 203, [1999] 2 AC 143 or to determine the validity of a formal instrument which is in some way a necessary foundation for the criminal charge: DPP v Head [1958] 1 All ER 679, [1959] AC 83); and employment tribunals may have to decide issues of public law in employment proceedings (eg to determine whether a contract of employment with a public authority is vitiated as having been made ultra vires). [69] I cannot see any good reason for adopting a different approach to the interpretation of the jurisdiction of the tribunal in s 83 of VATA. The tribunal is used to dealing with complex issues of tax law. There is no reason to think that it would not be competent to deal with issues of public law, in so far as they might be relevant to determine the outcome of any appeal. That view is reinforced by the fact that the tribunal may have to deal with complex public law arguments in relation to Convention rights when construing legislation under s 3 of the Human Rights Act 1998, and is recognised by Parliament as being competent to do so. [70] Moreover, there is a clear public benefit in construing s 83 by reference to its ordinary and natural meaning which strongly supports that construction. It is desirable for the tribunal to hear all matters relevant to determination of a question under s 83 (here, the amount of input tax to be credited to a taxpayer) because (a) it is a specialist tribunal which is particularly well positioned to make judgments about the fair treatment of taxpayers by HMRC and (b) it avoids the cost, delay and potential injustice and confusion associated with proliferation of proceedings and ensures that all issues relevant to determine the one thing the HMRC and taxpayer are interested in (in this case, the amount of input tax to be recovered) are resolved on one occasion in one place. It seems plausible to suppose that Parliament would have had these public benefits in mind when legislating in the wide terms of s 83. [71] Therefore, apart from any authority on this question, I would hold that s 83(1)(c) bears its ordinary and natural meaning, so that resolution of the issue of legitimate expectation which arose between Oxfam and HMRC fell within the tribunal's jurisdiction.”