British Telecoms v Revenue & Customs (VAT - whether this appeal should be struck out on the basis that it has no reasonable prospect) [2020] UKFTT 0278 (TC)

“ Transfer of Complex cases to the Upper Tribunal 28.—(1) If a case has been allocated as a Complex case the Tribunal may, with the consent of the parties, refer a case or a preliminary issue to the President of the Tax Chamber of the First-tier Tribunal with a request that the case or issue be considered for transfer to the Upper Tribunal. (2) If a case or issue has been referred by the Tribunal under paragraph (1), the President of the Tax Chamber may, with the concurrence of the President of the Tax and Chancery Chamber of the Upper Tribunal, direct that the case or issue be transferred to and determined by the Upper Tribunal.” 7. The formulation of the BT issues, as agreed between the parties, and which President of this tribunal, with the concurrence of the President of the UT, directed were to be transferred to the UT and determined by the UT, was as follows: “a. Issue 1: On the assumption that BT could otherwise have relied on an EU law right to bad debt relief, in respect of bad debts allegedly arising in the prescribed accounting periods running from 1 January 1978 to 31 March 1989, by virtue of Article 11C(1) of the Sixth VAT Directive, was the exercise of that right in 2009 barred in accordance with the general principles of EU law and/or subject to section 39(5) of the Finance Act 1997? b. Issue 2: If the answer to Question 1 is in the negative in relation to the general principles of EU law, but affirmative in relation to section 39(5), does section 39(5) fall to be disapplied, or construed, under EU law, in such a way as not to affect the exercise of BT’s right under EU law? c. Issue 3: Do section 80 of the Value Added Tax Act 1994 and section 121 of the Finance Act 2008 apply to BT’s claim irrespective of the answer to Question 1.” 8. The direction for the transfer of the BT issues was made pursuant to a joint application made by the parties: (1) Initially, in an application of 13 April 2011, the parties applied for the whole case to be transferred to the UT. (2) On 26 April 2011, the President of the tribunal informed the parties that he and the President of the UT were willing to agree to the transfer provided that the UT was not required to determine issues of fact or quantum. (3) It appears from the correspondence that the parties sought to address the concern on the fact finding by agreeing a statement of facts which they proposed to provide to the UT. However, in a letter of 9 September 2011 from BT to the UT, BT noted that the parties had confirmed in June 2011 that it was not possible to confirm definitively that all conceivable questions of fact would be agreed in advance between the parties and that some issues of fact may yet require some determination by the UT (or perhaps remission back to the tribunal). (4) When the parties failed to reach agreement on a statement of facts, it was decided to seek the transfer of preliminary issues to the UT only. On 30 September 2011 the UT confirmed that the Presidents of the tribunal and the UT were willing to agree to the transfer of a preliminary issue under rule 28 to be heard immediately following the appeal of GMAC provided the parties produced an agreed preliminary issue which was acceptable to the President of the UT. It was also stated that the transfer would not be made if the UT were to be expected to find the facts. (5) The correspondence between the parties shows that a number of changes were made to the initial drafts of the BT issues, in particular : (a) in the initial draft prepared by BT, what became BT issue 3 was worded differently to ask whether s 121 was applicable which would make BT’s claim “in time”; and (b) in earlier versions, in what became BT issue 2, there was additional wording at the end which said “in circumstances where the relevant national provisions implementing [article 11C(1)] in relation to supplies made before July 1990 were repealed after due notice had been given to taxable persons and their legitimate expectations were respected?”

“It is, of course, a matter for [HMRC] how they then put their submission and whether or not they wish to raise “legitimate expectation”

“…..the proceedings before the Court of Appeal are already at the hearing stage and that consequential delay for hearing any remaining issues before this tribunal in waiting for their decision is unlikely to be significant. I also take into account the possibility that the Court of Appeal’s decision may render the issue irrelevant and even if it does not, that the Court of Appeal’s decision is likely to be of considerable assistance to this tribunal in forming a view as to what, if any, issues remain to be determined and, therefore, what directions are appropriate. If there are factual matters that need to be resolved for the purposes of the appeals before the higher courts, it is possible for those courts to identify these and refer them back for determination.”

“is not meant to dispense with the need for a trial where there are issues which should be investigated at the trial…..the proper disposal of an issue under Part 24 does not involve the judge conducting a mini trial, that is not the object of the provisions; it is to enable cases, where there is no real prospect of success either way, to be disposed of summarily”. (3) It was made very plain in Three Rivers District Council v. Governor and Company of The Bank of England [2001] UKHL 16 that if prolonged and serious argument is needed then a strike out is not appropriate. (4) In Hughes v Richards [2004] EWCA Civ 266 , Gibson LJ said that in a case where “the pleadings show significant disputes of fact between the parties going to the existence and scope of the alleged duty of care…..the court must be certain that the claim is bound to fail” and he cited comments of Lord Browne Wilkinson in Barrett v Enfield London Borough Council [2001] 2 AC 550 at page 557 that: “In an area of the law which was uncertain and developing…..it is not normally appropriate to strike out…..it is of great importance that such development should be on the basis of actual facts found at trial not on hypothetical facts assumed (possibly wrongly) to be true for the purposes of the strike out…” 15. However, I agree with HMRC’s point that the comments taken from the caselaw set out above present only a partial picture of the correct approach for the tribunal to take in deciding whether an appeal should be struck out on the basis that it has no reasonable prospect of success. I note the following: (1) In the Fairford case BT referred to, at [41], after the comments set out above, the UT also said: “The Tribunal must consider whether there is a realistic, as opposed to a fanciful (in the sense of it being entirely without substance) prospect of succeeding on the issue at a full hearing, see Swain v Hillman [2001] 2 All ER 91 and Three Rivers (see above) Lord Hope at [95]. A “realistic” prospect of success is one that carries some degree of conviction and not one that is merely arguable, see ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 . The tribunal must avoid conducting a ‘mini-trial’. As Lord Hope observed in Three Rivers , the strike out procedure is to deal with cases that are not fit for a full hearing at all.” (2) The decision in Hughes v Richards concerns different circumstances to those in this case; the proceedings were at an early stage and no findings had yet been made at all. (3) In Swain v Hillman Lord Woolf said, at [7], that the words “no real prospect of being successful or succeeding”: “do not need any amplification, they speak for themselves. The word “real” distinguishes fanciful prospects of success or, as Mr Bidder submits, they direct the court to the need to see whether there is a “realistic” as opposed to a “fanciful” prospect of success. (4) Lord Woolf also said, at [13], that the judge was not correct in looking at the matter on the basis that he had to be certain that the case could not succeed and was bound to fail before he could appropriately accede to the defendant's application. (5) The full passage at [95] of the Three Rivers case referred to by BT and in the citations above is set out below together with the preceding passage at [94]: “…..I think that the question is whether the claim has no real prospect of succeeding at trial and that it has to be answered having regard to the overriding objective of dealing with the case justly. But the point which is of crucial importance lies in the answer to the further question that then needs to be asked, which is - what is to be the scope of that inquiry? I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”

“In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States. However, in the case of total or partial non-payment, Member States may derogate from this rule.” 24. The UT explained, at [25], that the UK domestic legislation which was intended to implement article 11C(1) contained two sets of provisions: (a) those which apply to give relief where there is total or partial non-payment, termed “bad debt relief”, and (b) those which apply in the other circumstances set out in article 11C(1), under regulation 38 of the Regulations 1995 (and earlier regulations introduced in 1989). These regulations provided that where there was a decrease in the consideration for a supply which included an amount of VAT then the taxpayer should adjust his VAT account by making a negative entry for the relevant amount of VAT (see [26]). 25. For supplies made between 2 October 1978 and 19 March 1997 (and for supplies made prior to 2 October 1978 giving rise to a bad debt after that date) “bad debt relief” in domestic legislation was available under the Old Scheme or, what the UT termed, the New Scheme: (1) Claims could be made under the Old Scheme in relation to supplies made between 2 October 1978 and 26 July 1990. (2) Claims could be made under the New Scheme for supplies made between 1 April 1989 and 19 March 1997. (3) There was thus an overlap period, between 1 April 1989 and 26 July 1990 when a claim could be made under either (but not both) schemes. (See [31]) 26. Details of the Old Scheme and New Scheme were set out at [32] to [38]. The Old Scheme contained the Property Condition and the Insolvency Condition (in one of two differing forms). The New Scheme contained the Property Condition only (and there were other differences which are not material). (1) The Old Scheme was first enacted by s 12 of the Finance Act 1978 (“FA 1978”), and then re-enacted in s 22. Section 22 provided: “(1) Where - (a) a person has supplied goods or services for consideration in money and has accounted for and paid tax on that supply; and (b) the person liable to pay any outstanding amount of the consideration has become insolvent, then, subject to subsection (2) and to regulations under subsection (3) below, the first mentioned person shall be entitled, on making a claim to the Commissioners, to a refund of the amount of tax chargeable by reference to the outstanding amount. (2) A person shall not be entitled to a refund under this section unless - (a) he has proved in the insolvency and the amount for which he has proved is the outstanding amount of the consideration less the amount of his claim; (b) the value of the supply does not exceed its open market value; and (c) in the case of a supply of goods, the property in the goods has passed to the person to whom they were supplied...” (2) There were rules in s 22(4) as to when an individual or company was to be regarded as insolvent for this purpose. The requirement that the taxpayer “has proved in the insolvency…” was removed by the Finance Act 1985 which applied to persons becoming insolvent after 31 March 1986 (although the definition of insolvency was then tightened). (3) The New Scheme was brought in by s 11 of the Finance Act 1990 (“ FA 1990 ”) for supplies made on or after 1 April 1989. This provided that (a) the Old Scheme did not apply to any supply made after 26 July 1990 (the date FA 1990 was passed) (under sub-s(9)) and (b) a claim under the New Scheme could not be made if a claim had been made under the Old Scheme (under sub-s(8)). A taxpayer had therefore to elect between the two schemes in relation to supplies made in the overlap period. (4) The New Scheme was re-enacted in s 36 VATA 1994. Para 9(1) of schedule 13 VATA 1994 provided that: “(1) claims for refunds of VAT relating to supplies made before 27 July 1990 may continue to be made in accordance with section 22 of the 1983 Act notwithstanding the repeal of that section by the Finance Act 1990”. 27. In 1997, s 39(5) was introduced as follows, as set out at [152] : “(5) No claim for a refund may be made in accordance with section 22 of the Value Added Tax Act 1983 (old scheme for bad debt relief) at any time after the date on which this Act is passed [19 March 1997].” 28. FA 1997 also formally repealed the provisions in para 9(1) of schedule 13 VATA 1994 under which claims for supplies before 27 July 1990 could continue to be made under the Old Scheme (see [153]). 29. GMAC submitted that its EU right was to be dealt with under s 80 (rather than under the “bad debt relief” provisions) which provided as follows (see [156]): “(1) Where a person – (a) has accounted to the Commissioners for VAT for a prescribed accounting period (whenever ended), and (b) in doing so, has brought into account as output tax an amount that was not output tax due, the Commissioners shall be liable to credit the person with that amount. (2) the Commissioners shall only be liable to repay an amount under this section on a claim being made for the purpose. ... (4) the Commissioners shall not be liable on a claim under this section [to credit or repay an amount] if the claim is made more than three years after the relevant date.” 30. The earlier version of s 80(4) (and its predecessor in s 24 of the Finance Act 1989) had provided for a six-year time limit for claims to be made under s 80. The Government announced its intention to introduce the three year time limit, with immediate effect, on 18 July 1996 and it became law on 4 December 1996, with retrospective effect to 18 July 1996, under a resolution made by Parliament pursuant to the Provisional Collection of Taxes Act 1968. Legislation in terms of the resolution was in due course enacted as part of the Finance Act 1997 , and came into force on 19 March 1997 with similar retrospective effect to 18 July 1996. 31. In the wake of the decision of House of Lords in Fleming (t/a) Bodycraft v HMRC [2008] UKHL 2 (“ Fleming ”) , which resolved a challenge to a similar shortening of a time limit applicable for VAT purposes, s 121 FA 2008, in effect, amended the three year time-limit in s 80(4) as follows (see [155]): “(1) The requirement in section 80(4) VATA 1994 that a claim under that section be made within 3 years of the relevant date does not apply to a claim in respect of an amount brought into account, or paid, for a prescribed accounting period ending before 4 December 1996 if the claim is made before 1 April 2009 .”

“Where a person has for a prescribed accounting period (whenever ended) paid to the Commissioners an amount by way of VAT that was not VAT due to them, otherwise than as a result of - (a) an amount that was not output tax due being brought into account as output tax, or (b) an amount of input tax allowable under section 26 not being brought into account, the Commissioners shall be liable to repay to that person the amount so paid.”

“For example, consider a 5-year hp agreement entered into with GMAC on 31 March 1989 so that a bad debt, should one materialise, could only fall within the Old Scheme (ignoring for the purpose of this example the Property Condition). Suppose that the contract was terminated in the final year (say on 14 January 1994). In order to claim bad debt relief, GMAC would have had to prove in the insolvency of the customer. GMAC may have had perfectly sound commercial reasons for not pursuing, itself, insolvency proceedings. But even if it had done so, it may well not have been able to have obtained a bankruptcy order or a winding up order and to have proved in the bankruptcy or insolvency by 18 March 1997, let alone to have submitted a claim for relief.” 36. The UT commented as follows as regards the various changes to the “bad debt relief” regime set out above: (1) As regards the introduction of the New Scheme in 1990, at [149]: “The continued application of section 22 to supplies made before 26 July 1990 cannot, we think, be seen as intended to be simply a temporary arrangement so far as concerns those supplies. We do not consider that the provisions of FA 1990 can be seen as a signal that the provisions of the Old Scheme would be likely, in the future, to be repealed rather than to be allowed to run their course.” (2) As regards the saving provision in para 9(1) of schedule 13 VATA 1994, at [151]: “It is correct, no doubt, to describe this as a transitional provision in the sense that it provides for the Old Scheme to apply in relation to old supplies and would, in the course of time, become exhausted. But that is not to say that it was transitional in the sense of being merely temporary in the expectation that it would in due course be abrogated. As with FA 1990, we do not consider that the provisions of the VATA 1994 can be seen as a signal that the provisions of the Old Scheme would be likely, in the future, to be repealed rather than to be allowed to run their course.” (3) On the effect of the introduction of s 39(5), at [154]: “Thus up to 19 March 1997 the taxpayer could make a claim under the Old Scheme in respect of a supply made before 27 July 1990 if the debt on that supply went bad (and the relevant conditions of the regulations were satisfied), and thereafter he could not. If the supply was made before 1 April 1989 (in which case a claim could not be made under the New Scheme), he therefore ceased to be able to claim bad debt relief at all under domestic legislation.” 37. At [157] to [159] the UT set out that HMRC relied on the following publications as giving notice of the abolition of the Old Scheme (a) VAT Notes No 2, 1990 published in September 1990 (after the passing of the Finance Act 1990 and after the end of the overlap period on 26 July 1990), (b) a Budget News Release of 26 November 1996 (“ the Budget News Release ”), and (c) a Budget Notice 48/96 (“ the Budget Notice ”). They noted that the Budget News Release and the Budget Notice were followed by the Finance Bill which was published on 3 December 1996 and said: “The Bill, as amended, was enacted as FA 1997. Clause 39 of the Bill dealt with bad debt relief. Clause 39(5), dealing with termination of the Old Scheme, was reflected in section 39(5) of FA 1997. Anyone reading the Budget News Release and the Budget Notice would have known that details would be found in the Finance Bill and anyone reading and understanding the Bill would have known that the Old Scheme was to come to an end once the Bill passed into law.” 38. The UT first addressed whether, on the footing that the Property and Insolvency conditions are incompatible with EU law, (a) as HMRC argued, GMAC’s EU right should be given effect through the mechanism of s 22 but with some appropriate “moulding” to reflect the invalidity of those Conditions (see [163]) or (b) as GMAC argued, “GMAC's claims should not be considered to lie under section 22 at all, but are to be treated as separate direct claims to rights under the Directive…..based on the premise that section 22 cannot be read so as to cover the current claim” (see [160]). 39. At [164], the UT noted that where domestic legislation is inconsistent with EU law, in the sense that the legislation provides for something which EU law does not allow, the well-established jurisprudence demonstrates that the relevant legislation is to be read as being without prejudice to any EU right (see for instance Autologic plc v Inland Revenue Commissioners [2006] 1 AC 118 citing R v Secretary of State for Transport, Ex p Factortame Ltd [1990] 2 AC 85 ,140, and Imperial Chemical Industries plc v Colmer (No 2) [1999] 1 WLR 2035 , 2041). 40. They said, at [165], that the fact that the Property Condition and the Insolvency Condition in s 22 “were impermissible restrictions on the right to [bad debt] relief……does not detract from the fact that section 22 was the mechanism by which bad debt relief was to be delivered ”

“…..section 22 can, and should, be read as providing the mechanism for giving effect to GMAC’s directly enforceable claims. Where there is a partial or total non-payment within the meaning of Article 11C(1), section 22 is to be read as providing relief in relation to that non-payment by disapplying the Property Condition and the Insolvency Condition.” (Emphasis added.)

“Accordingly, the requirement to make a claim in the way specified in the regulations will have to be disapplied and adapted (to use the word used by Lord Nicholls in Autologic at [17]) in some way to give effect to GMAC’s directly enforceable rights. In that context, it might be said that the provisions of the regulations concerning VAT returns do apply to a directly enforceable claim at least to this extent, namely that the claim must be made by including the correct amount of the refund in the box identified. But that does not lead one anywhere in terms of time limits since what those provisions do not do is to identify which return is the appropriate return in the case of a directly enforceable claim. It would go far beyond any permissible adaptation of the statutory provisions to treat them as identifying some other VAT period as the relevant period and could lead to anomalies.” 42. They added, at [173], that subject to the impact of Allen which they considered later, they did not consider that “there is to be implied, as a matter of domestic law, any limitation period for the making of a claim” so “although GMAC’s claims can, and…. should, be treated as made under section 22, neither that section nor the regulations made under it result in the imposition of a time limit within which the claims must be made”

“He would, no doubt, be correct in saying that there was no time limit, before 1 April 2009, for the making of a claim if the claim was properly made as one for “output tax not due”

“results in a refund of VAT so that…..GMAC is wrong in asserting that, as it did not make a claim for bad debt relief when it arose, it has overpaid VAT….. if no claim for bad debt relief is made, no refund can be granted and there is therefore no overpayment”. 46. They continued, at [181], that s 80 is concerned with cases where a taxpayer has brought into account as output tax an amount that was not output tax due but: “When GMAC made its supplies and accounted for the full amount of output tax, it accounted for an amount of output tax which was then due : it is only the subsequent failure of the customer to pay which has resulted in any possible claim for bad debt relief. It does not seem to us that later circumstances giving rise to a bad debt for the purposes of Article 11C(1) and which results in a reduction in the chargeable amount renders the amount which was actually paid retrospectively incorrect in the sense that it can be said that the amount actually paid was “not output tax due” within section 80. It was, when paid, output tax which was due; and remained such until a bad debt arose.” (Emphasis added.)

“the onus is on the taxpayer to make a claim; in the absence of a claim, HMRC would have no way of knowing that a bad debt had arisen. It follows, unless and until a claim is indicated, that it cannot be said that any relief is to be afforded and that it cannot be said that any amount has been brought into account as output tax that was not output tax due. Accordingly, section 80 does not, in our judgment, in terms apply to GMAC’s claims.” 49. At [185], the UT said that that is not to say that s 80 could not be moulded or adapted in order to give effect to GMAC’s EU right to include within the words “not output tax due” an amount by which output tax is reduced following the giving of “bad debt relief” pursuant to article 11C(1). However, they did not consider adaptation of s 80 to be as appropriate a way of giving effect, under domestic law, to GMAC’s EU right as the adaptation of s 22. 50. The UT thought it clear, at [187], that given their decision on s 22, subject to the second issue, s 39(5) “precludes GMAC’s claim being made through the mechanism of section 22”

“Where there is such a domestic time-limit, it will apply, subject to the principle of effectiveness…..to directly enforceable rights under EU law even if those rights have not been established by a decision of the Court and are disputed by the Member State concerned. This was the position in Case C-188/95 Fantask A/S and Others v Industriministeriet (Erhvervsministeriet) [1997] ECR I-6783 ….” 51. At [189], they said that once it is accepted that GMAC’s rights are to be effected under s 22 and the relevant regulations, appropriately adapted, the ending of the possibility of claims under s 22 should apply as much to EU rights as it does to purely domestic rights. 52. At [190] they noted that under domestic law it was clear when the claim under the Old Scheme would first arise, namely when the Insolvency Condition was fulfilled. In the case of an EU right: “it is less clear when the claim would first arise. It would, we suppose, be when the facts first fell within Article 11C(1) absent any derogation by the Member State concerned but it is not at all clear to us when that would be. It is, of course, a factual question in any particular case, but what would be sufficient in order for a taxpayer to establish a directly enforceable claim is not, at least to us, obvious. A few things are, however, clear. The first is that many of GMAC’s bad debts giving rise to a directly enforceable claim…..arose many years before the passing of the FA 1997…. in relation to supplies made before 1 April 1989, many, if not most, directly enforceable claims….would have arisen well before 18 March 1997….at least in theory and probably in reality, there will, in respect of such supplies, have been some bad debts which arose for the first time shortly before or even after 18 March 1997…... ” 53. At [191], the UT explained that: (1) HMRC submitted that s 39(5) was not about time limits at all; it was simply the final stage of a change from the Old Scheme to the New Scheme. HMRC viewed the provisions of s 11 FA 1990 and schedule 13 VATA 1994 as “transitional provisions continuing the Old Scheme for a temporary period with the final termination of the Old Scheme - something which everyone knew would be coming at some time - being effected by s 39(5)”. (2) GMAC submitted that s 39(5), “viewed purposively, is simply a provision which imposes a time limit on the making a claim in respect of a subsisting right” which “is really no different from”

“ It was never the case (except in relation to supplies made during the overlap period from 1 April 1989 to 26 July 1990) that the New Scheme was substituted for the Old Scheme. In relation to supplies made before 1 April 1989, it was the Old Scheme alone which applied; the New Scheme could never apply. The termination of the Old Scheme therefore had the result that it ceased to be possible to obtain bad debt relief in relation to supplies made before that date; there was no question of some alternative scheme of relief being available. So far as those supplies are concerned, the position was this: immediately before the coming into effect of section 39(5), GMAC had claims (under section 22 and the regulations as appropriately adapted) for bad debt relief……..After that date, GMAC had no claims at all if section 39(5) is to be given its apparent temporal effect.” 55. At [193], the UT explained that the Fleming case related to claims for input tax repayment under regulation 29 of the Regulations 1995 which required a claim to be made in the period in which the VAT became chargeable “save as the Commissioners may otherwise allow or direct”

“….to be compliant with EU law (i) the new time limit had to be fixed in advance so as to give legal certainty (ii) where the new time limit was retrospective, there had to be an adequate transitional provision so that those with accrued rights had a reasonable time within which to make their claims before the new time limit applied, it being for Parliament, or HMRC by means of an announcement disseminated to taxpayers to introduce prospectively an adequate transitional period (iii) that where a new time limit was introduced without any, or any reasonable, transitional period, it would be a breach of EU law to enforce the new time limit in relation to accrued rights at least for a reasonable period (iv) that the adequacy of the transitional period was to be determined by reference to the principles of effectiveness and legitimate expectations, so that the period was not so short as to render it practically impossible or excessively difficult for a person with an accrued right to make his claim and (v) where the national court decided that the transitional period was inadequate, it had to fashion the remedy necessary to avoid an infringement of EU law which would normally be to disapply either permanently or temporarily the operation of the retrospective application of the new time limit. As to (iii), the reasonable period must itself be certain. This appears most clearly from the speech of Lord Neuberger at [88] and [90], although it is implicit in the speeches of Lords Hope and Scott and of Lord Carswell too.” 58. At [196] and [197], the UT set out that HMRC submitted that the present case is different from Fleming on the basis that: (1) It is not one of “a retrospective imposition of a time-limit when before there was none…..because it concerns the discontinuance of a legal regime applicable during a particular period of time, on the expiry of a transitional period, rather than a change in the limitation period applicable to claims made under that regime”

“there would be a breach of legitimate expectations if a Member State suddenly and unexpectedly withdrew a particular regime in relation to a particular subject matter; in particular if the UK had suddenly and unexpectedly withdrawn the Old Scheme (particularly if, in doing so, it did not replace the Old Scheme so far as concerns old supplies)”. (3) At [201], in both Gemeente Leusden and Plantanol , the regime which resulted from the changes in each case were permissible end results in accordance with EU law. In contrast, the absence of any “bad debt relief” in relation to supplies made before 1 April 1989 was not in accordance with EU law save to the extent the right to claim such relief had become time-barred by some permissible temporal limitation imposed under national law (or under EU law itself). As is well established, the imposition of a reasonable limitation period is not incompatible with EU law. 60. The UT continued, at [202], that the position in GMAC was much closer to Fleming than it is to Gemeente Leusden and Plantanol . (1) In both GMAC and in Fleming , the taxpayer had a claim to reduce its liability for tax. In contrast, the impact of the changes in Gemeente Leusden and Plantanol was on the amount of tax which would become payable because of the way the transactions in question would be charged. (2) The total exclusion of “bad debt relief” for supplies made before 1 April 1989 - in contrast with the adoption of a replacement scheme applicable to such supplies: “cannot…be justified as a condition or derogation within Article 11C(1). The only justification….is that the elimination of claims under section 22 (as appropriately adapted for directly enforceable claims) is the imposition of a reasonable time limit within which such claims must be made. The fact that a replacement scheme might have been adopted (and in such a case, the Gemeente Leusden and Plantanol approach might well be correct) is not an answer in the case where the section 22 claim was altogether abolished”. (3) A taxpayer in the position of GMAC with an accrued directly enforceable claim was in substantially the same position as Mr Fleming. GMAC had a “legitimate expectation” that the period during which it would be able to make a claim for “bad debt relief” in the absence of any replacement scheme would not be brought to an end without an adequate opportunity being given to make a claim. (4) Thus, just as the introduction of a shortened time limit without a transitional period in Fleming breached the principles of effectiveness and “legitimate expectation”, so, in the present case, the termination of the right to make a claim under s 22 without an adequate opportunity to make a claim would breach those principles unless an adequate transitional period was provided for. 61. At [204] they said that on the basis of the holdings in Fleming , it can be argued that: (1) Section 39(5) imposed a retrospective time limit in that it precluded a person with an accrued right prior to 18 March 1997 from making a claim. (2) It did not contain any transitional provision nor has any announcement been made since its commencement about the period within which claims could be made. (3) Although clear notice of an impending change in the legislation might be sufficient to satisfy the requirements of the principles of certainty, “legitimate expectations” and effectiveness, there was no sufficient notification on the facts. (4) The operation of section 39(5) must be suspended until certainty is provided either by legislation or an appropriate announcement. 62. They then highlighted three differences between Fleming and GMAC’s case at [205]: (1) In Fleming , HMRC attempted to correct the position with announcements made after the relevant legislation had come into force whereas in the present case HMRC’s position is that adequate notice was given by notices and the Finance Bill published before the legislation was passed. HMRC said that these, whether taken separately or cumulatively, were sufficient to put taxpayers generally on notice that the Old Scheme was coming to an end so that, on the footing that s 22 applied, they had the opportunity to make claims in respect of bad debts arising from supplies made from 1978 to 1989. HMRC considered that this is particularly so given that the possible ending of the Old Scheme had been signalled, they said, by the repeal of s 22 contained in FA 1990 and its continuance in VAT Act 1984 under the heading “Transitional Provisions and Savings”. (2) In Fleming , the taxpayer made his claim within a reasonable time of the date of as Lord Neuberger put it “the start of the end of disapplication period” meaning the date from which it is appropriate to start measuring the appropriate period within which the taxpayer must make his claim. GMAC did not in fact make its claims until sometime in 2006, around nine years after the Old Scheme was finally terminated. (3) In Fleming , the taxpayer’s substantive rights were clear: the case was concerned with the introduction of time limits. GMAC’s substantive rights are disputed by HMRC as set out above. 63. At [206] to [208] the UT concluded as follows: (1) “ Fantask shows that a domestic time limit can be effective against a claim under EU law” and there was no reason to apply a different approach as regards time limits “in the case of a right which has been validly transposed into domestic law and one which has not”; in both cases the protection afforded to taxpayers as a result of Fleming must be observed. But provided that this is observed, the introduction of a time limit should be as effective in relation to an EU right as it is in relation to a domestic right; and it should be effective notwithstanding that the existence of that right is not appreciated by the taxpayer and that HMRC deny its existence. (2) An announcement made prior to the passing of legislation to the effect that the Old Scheme would be withdrawn from a specified future date is capable of satisfying the principles of certainty, effectiveness and “legitimate expectations” in relation to accrued rights at the date of the announcement and, to some extent, in relation to rights which accrue between that date and the date of the withdrawal. The announcement would fulfil the same function as the sort of communication which it was acknowledged in Fleming would be sufficient to bring about an effective disapplication of the offending statutory provisions. The period thereby afforded to the taxpayer to make his claim could be certain enough to satisfy the legal requirement for certainty. Although the end date of the period (the commencement of the legislation) could not be known for sure at the date of the announcement, taxpayers and their advisers would have a very good idea of when an announced proposal to be included in the next Finance Bill would be likely to become law. The decision in Allen lent support to that last conclusion. (3) Whether the principles of effectiveness and “legitimate expectation” were fulfilled thus depends on the length of notice given of the termination of the Old Scheme and of the right to make a claim in respect of accrued rights. In contrast with Fleming , the adequacy of the notice should be judged by reference to the period appropriate to an express transitional period and not by reference to a reasonable period of disapplication; the period from the date of the announcement to the date when the legislation comes into effect is analogous to an express transitional period 64. The UT then addressed whether the announcements made in relation to the ending of the Old Scheme were effective notice of the ending of the Old Scheme and, if so, whether that notice was of adequate duration. 65. At [210] they set out an example of a taxpayer who (unlike) GMAC may still have been able to satisfy the Insolvency Condition when the announcements were made. Such a taxpayer who, immediately prior to 26 November 1996, owed a debt which he considered would never be paid, assuming he knew of the announcements and the Finance Bill, would have realised that he needed to satisfy the Insolvency Condition to be able to make a claim under domestic legislation. They considered it clear that: “if it was necessary, as a matter of EU law, for such a taxpayer to be provided with a transitional period sufficient to enable him to satisfy the Insolvency Condition, the period from 26 November 1996 to 18 March 1997 would have been insufficient.” 66. At [211], they held that such a taxpayer “who wished to take advantage of the domestic legislation cannot simply be deprived of that opportunity without an adequate transitional period, especially given that he was not provided with any replacement bad debt regime at all….”

“ It would be wrong in principle, we consider, for GMAC (and others in the same position) to be required to bring a claim within a shorter period than that applicable to persons potentially entitled to make such a claim under domestic legislation. A person seeking to enforce a claim under EU law must not be treated in a less favourable way than a person seeking to enforce an equivalent right under domestic law. Accordingly, we conclude that the period from 26 November 1996 to 18 March 1997 was not an adequate transitional period within which GMAC could be required to assert its directly enforceable rights.” 67. At [213] they considered that, even if they were wrong to determine the appropriate period by reference to the period appropriate to a taxpayer seeking to rely on domestic legislation, the announcements referred to (the Budget News Release, the Budget Notice and the Finance Bill) did not give adequate notice of the end of the Old Scheme so as to provide sufficient time for those with accrued EU rights to exercise them even viewing those rights in isolation. 68. The UT said that they were influenced in reaching that conclusion by what others (including the House of Lords in Flemin g) have said about the adequate length of a transitional period. They referred to the fact that in Fleming , Lord Neuberger considered that, on the basis of the limited argument and evidence which the House had received on the point, the duration of a transitional period would be between 6 months and 12 months: “In the present case, we, too, have had only limited evidence and we bear in mind that the necessary transitional period is to be determined in relation to very different circumstances from those in Fleming and Grundig . But with those steers from the ECJ and the House of Lords, it appears to us that a period of 16 weeks (from, at earliest 26 November 1996 when the announcements were made) until 19 March 1997 (from which date it became impossible to make claims under the Old Scheme) was inadequate.” 69. At [214], they said that even if they had concluded that the transitional period was adequate in relation to accrued rights subsisting on 26 November 1996, the period for making a claim in respect of bad debts arising after that date became shorter as time went by and disappeared altogether on 18 March 1997. 70. They continued, at [215], that on the basis of the above conclusion, they did not accept that “nonetheless, GMAC’s claims are barred because they were not brought within a reasonable disapplication period”

“ It follows from our decision in the GMAC appeal that, in relation to a taxpayer’s directly enforceable rights in respect of supplies made during the period from 1 October 1978 to 1 April 1989, claims in respect of bad debts arising during that period are not time-barred as a result of section 39(5) FA 1997. On our analysis, although that section introduced an effective time bar to claims where there was not one previously, adequate notice was not given of the impending change with the result that claims which accrued prior to 1 April 1989 could still be made after 18 March 1997 unless an appropriate disapplication period had been specified and had expired. The approach in Fleming must be applied with the result that subject to one point, the claim made by BT in 2009 was still in time. We have rejected the submission that Allen would apply to impose a time-bar as a matter of EU law .” 74. At [23], they continued that it could be argued that Fleming itself provides the start date for the running of the disapplication period and that, when BT made its claim in March 2009, that period had expired since, “on any view, a period of over a year from the decision in Fleming (January 2008) and the making of the claim was more than adequate”

“ it would only be, at the very earliest, once the decision in Allen had been published that taxpayers would know that instead of there being the need for a fixed period, the mere passage of reasonable time could bar their claims. Just as there had to be a disapplication period in relation to an inadequate transitional period, it must be the case, in our judgment, that a reasonable period after the decision in Allen for bringing a claim must be allowed. The decision in Allen did not appear until December 2011; BT’s claims were made two years before this. Accordingly, we conclude that BT’s claims are not barred by lapse of time.” 75. At [240] and [241] they considered an issue which did not arise in the GMAC appeal: the position as regards supplies made in the period from 1 January 1978 to 1 October 1978 when the Old Scheme was not in place but article 11C(1) was in place. They said that: (1) Where the debt arises after 1 October 1978, they considered it clear that s 12 FA 1978 could apply even where the supply pre-dated 1 October 1978. On that footing, the necessary adaptation or moulding of s 12 could be effected to give effect to BT’s EU right in respect of supplies made before 1 October 1978. In that case, the resulting position was no different from that in respect of supplies made after 1 October 1978. (2) As concerns bad debts arising before 1 October 1978, the position was “marginally less clear”

“1. That the [UT] erred in holding that the general principles of EU law did not bar any claim by BT , in particular, by rejecting the submission that there was an obligation under those general principles to act within a reasonable time. 2. That the [UT] erred in holding that [s 39(5)], which brought the “Old Scheme” of bad debt relief to an end, falls to be disapplied or construed in such a way as not to affect the exercise of any rights that BT might have, in particular that it erred in holding that inadequate notice of the termination of the Old Scheme was given. 3. That, on the basis of the [UT’s] own expressed view, BT did not have any directly effective rights and the [UT] ought therefore to have taken that into consideration. 4. That the [UT] erred in holding that the Insolvency Condition was disproportionate, unreasonable or otherwise unjustified so as to infringe directly effective EU law rights.”

“a. failed to hold that the only relevant pre-condition to the claim being a s 80 claim was whether it was a claim for tax which was not output tax due, and that BT’s claim was for just that; b. failed to hold that the availability or otherwise of a parallel domestic law claim via UK bad debt relief mechanisms……..did not preclude BT’s claim from ranking as a section 80 claim; c. failed to hold that section 80 was the only domestic law right available to BT to make the claim, when it did, given that there was no parallel domestic law claim available under the UK bad debt relief provisions…… d. failed to follow the reasoning…..in General Motors Acceptance Corporation (UK) PLC V Revenue & Customs [2007] UKVAT V19989 ….where considering the route to claim monies overpaid under another part of the same underlying EU law provision that BT relied on herein to the effect that if and to the extent that a right to reclaim under a specific procedure is not used timeously (there regulation 38 of the Value Added Tax Regulations 1995), the claim thereupon became a section 80 claim, by reason of the fact that tax was thereafter overpaid; e. failed to conclude that where the initial domestic route for the reclaim of output tax… is not used timeously, then the taxpayer’s claim falls under section 80 for a refund of overpaid tax ; f. failed to hold that on a fair reading of section 121 of FA 2008, it was intended to cover just such a situation as that of BT; g. failed to hold (in the alternative) that, insofar as it was not the case that the claim fell within the UK bad debt relief provisions, then section 80 was clearly the route for the claim; h. apparently considered that it would have been necessary specifically to mention section 80 in the letter of claim for the claim to count as a section 80 claim, whereas there is no such requirement of specificity in section 80 or elsewhere; i. further, it failed to consider the wider correspondence between the parties around the time of the claim which would have shown clearly that the claim was, in fact, a section 80 claim submitted in accordance with HMRC’s published “Fleming guidelines” and/or reached this view notwithstanding the absence of argument to this effect by HMRC.”

“the latest debts falling within its claim would have emerged at most a few months after March 1989 and years before 19 March 1997. On the face of it, by 19 March 1997 all debts owed to BT in respect of its pre-31 March 1989 supplies would have been either paid or statute-barred. The only possible (and hypothetical) exceptions would be any unsatisfied, but enforceable, judgment debts obtained by BT against customers in relation to whom the insolvency condition had not been satisfied.”

“whilst BT would be directly enforcing its EU law rights, it would be doing so under the umbrella of domestic machinery that subjected it to no such limits; and the application or otherwise of limitation periods to the bringing of claims is a matter for the domestic law of the member state where the claim is brought. HMRC can, in my view, point to nothing in such domestic law that can justify its assertion that the direct enforcement by BT of its EU law rights under the provisions of sections 12 and 22 (as appropriately moulded) would have been subject to the condition that such claims must be brought within a reasonable time. In particular, if the domestic legislation had properly implemented article 11C(1) but had expressly provided that refund claims could be brought without limit of time, that might have been unusual, but would not have been unlawful (compare the observations of Lord Scott of Foscote in Fleming’s case……at [20]). I can see no reason why the implied unlimited time for the bringing of BT’s directly effective claims under the section 22 machinery is not equally lawful.”

“it is a curiosity of this case that BT was plainly not aware of its directly effective rights, as Mr Cordara frankly accepted. Accordingly, it did not as a matter of reality have any expectation as to its entitlement to bring such a claim, and providing it with a longer period of notice would not have made the slightest difference to it .”

“ The illegitimacy or otherwise of any restriction on BT’s EU rights which is said to arise from section 39(5) because the Old Scheme was abolished is not, in my view, dependent on whether four months was too short a period to enable some taxpayers to satisfy the invalid domestic insolvency condition. The relevant question is whether the removal of the right to claim under the Old Scheme (ignoring the condition) was made without adequate notice. In my judgment, it was not.”

“BT has always frankly considered that it had no legitimate expectation of any relevance to do with the terms of the Old Scheme, since it fell outside it”. (5) BT later pointed out that the Court of Appeal overlooked the fact that there was yet to be any factual findings: “There is a sharp factual issue as to whether BT behaved prudently in the period prior to bringing its claim which turns on its conduct and state of knowledge in the legal and factual context, including positions taken by HMRC in connection with the issues over time, eg as to the nature of what was said, and with whom the statements reached. Thus, no witness evidence has yet been received…” (6) As regards the Court of Appeal’s rejection of BT’s cross appeal, BT stated that the central point relied on was that when BT initially paid over the money it did so under a proper legal obligation (see [126]): “ The Court of Appeal seems not to have appreciated that (i) BT’s reliance on s 80 was not confined to s 80(1) but included s 80(1B) nor (ii) to have factored in the [UT] decision to the effect that an unexercised Art 11 right in one period leads inexorably to s 80 claims arising in later ones”. (7) BT said that the point is that while (on a narrow, non-purposive, interpretation) s 80(1) may be confined to situations where there is no legal obligation to bring the sum into account at the moment it is paid, s 80(1B) deals with situations where VAT paid is treated as not due “ otherwise than as a result of …an amount that was not output tax having been brought into account as output tax .”

“i) Unless and until domestic legislation provided otherwise, Article 11C(1) gave rise to a reduction in the “taxable amount” when a reduction in price took place (paragraph 72 of the decision); ii) That being so, when Iveco accounted to HMRC without making any deduction for price reductions, it paid an “amount to the Commissioners by way of value added tax which was not due to them” (within the meaning of section 24(1) of FA 1989 and section 80(1) of VATA 1994, as originally enacted) or, once section 80 of VATA 1994 had been revised, “brought into account as output tax an amount that was not output tax due” (within the meaning of section 80(1)) or “paid to the Commissioners an amount by way of VAT that was not due to them” (within the meaning of section 80(1B)) (paragraphs 51 and 67-69 of the decision); iii) Iveco could have advanced all its claims during the Fleming window (paragraph 70). That window having closed, it is now too late for Iveco to make any claim (paragraph 73 of the decision); iv) If it is not possible to achieve this result as a matter of conventional construction of Section 80 and there is a need to mould a legislative provision so as to provide taxpayers with a means of enforcing their rights under Article 11C(1), the moulding should be of Section 80 rather than Regulation 38 (paragraphs 71, 76 and 77 of the decision).” v) As regards price reductions dating from 1983 or earlier, any claim would anyway be precluded because (i) Iveco would have had a restitutionary claim to recover overpaid VAT, (ii) that claim would have become time-barred by 1 January 1990 [at [10], Newey LJ noted that s 5 of the Limitation Act 1980 lays down a six-year limitation period for an “action founded on simple contract” and that it was common ground that this period applies by analogy to common law restitutionary claims to recover overpaid tax] and (iii) such claims will not have been revived when regulation 7 of the 1989 Regulations and section 24 FA 1989 came into force on that date (paragraph 95 of the decision).” 121. Turning back to GMAC CoA , at [123], Floyd J said the following as regards Iveco UT : “ ……The UT considered whether a claim to recover the VAT associated with the price reduction could be made under section 80, and the corresponding regulation, [regulation 38]. That regulation provided that the taxpayer should adjust his VAT account by making a negative entry in the VAT payable portion of his return. The UT however indicated that they considered that if the facts justifying a reduction existed, then it could be said in accordance with section 80 that the taxpayer had (a) … accounted ... for VAT for a prescribed accounting period …. and (b) in doing so, has brought into account as output tax an amount that was not output tax due .” (Emphasis added.)

“19. We also think that it is helpful to give a brief explanation of how this legislation works in an ordinary case where all the relevant events take place after the end of the Fleming window [namely, following the end of the additional period for claims allowed by s 121]. Take a simple example where a trader (T) sells a car to a purchaser (P) for £10,000 plus VAT of £2,000. Two years later, and thus in a later accounting period, the original price is reduced by £1,000 to £9,000 and T pays P £1,000 plus the relevant proportion of the VAT, £200. 20. In these circumstances, T ought to apply Regulation 38, the provisions of which appear to be mandatory. T should adjust his VAT account by making a negative entry for the relevant amount of VAT (£200) in the VAT payable portion of his VAT account: see Regulation 38(3)(b). The entry is to be made, under Regulation 38(5) in that part of the VAT account which relates to the prescribed accounting period in which the decrease is given effect in T’s business accounts. If T would otherwise have to account to HMRC for more than £200 of VAT, then the amount otherwise owing to HMRC will be reduced by £200. If T would otherwise account for less than £200 of VAT or no VAT then that will give rise to a negative balance in the VAT payable part resulting in a payment to T by HMRC. 21. If T [the taxpayer] fails to implement Regulation 38, that is not an end of T's claim to credit or repayment of £200. The result of failing to implement regulation 38 is that, in the case where the amount otherwise due exceeds £200, T has paid too much VAT in the prescribed period just mentioned. It is accepted by both HMRC and Iveco that section 80 is applicable. In other words, the reduction in VAT which T could have achieved by using regulation 38 remains VAT which was not due to HMRC so that T can make a claim under section 80 to recover it. We consider that that is a correct and purposive approach to the legislation.” 123. At [124] Floyd LJ noted that GMAC submitted that it had said enough for a claim under s 80 to be recognised, and the claim fell within s 80 “because the UT in Iveco considered that the failure to follow Regulation 38 meant that the VAT accounted for in the subsequent claim was not output tax due”

“What is adequate notice in the circumstances of an individual case is a matter for the national court to determine. In all cases the guiding lights are the principles of effectiveness and the protection of legitimate expectations”. (4) At [129], “the time limit must be fixed in advance” but the statements relied on in the present case did not fall foul of this requirement: “Taxpayers would understand that an announcement to end the old scheme in a pre-budget statement would take effect from the next Finance Act, and realise that steps needed to be taken to claim relief before that”. (5) At [130] it is important to appreciate what section 39(5) did: “ It is true that it ended the old scheme, and, in respect of a given supply, did not give the taxpayer access to the new scheme. It was not therefore an alteration in the conditions for claiming bad debt relief for that supply, in the sense that the relief could continue to be claimed subject to the altered condition. Claiming relief in respect of that supply was no longer possible after the enactment of that section. The effect was, however, not different to an alteration in a time limit for making claims, which would also terminate the right to claim relief in respect of that supply. The imposition of procedural hurdles of this kind plainly lies within the discretion of the member state, provided it acts in accordance with the principles of effectiveness and protection of legitimate expectations. ” (6) At [131], for the reasons explained by the Court of Appeal in BT CoA , with which “I am in full agreement, there was in truth a prolonged crossover arrangement between the old scheme and the new scheme” and: “Section 22 was repealed by the Finance Act 1990 in relation to supplies made after 26 July 1990 but was left in place in respect of supplies before that date with the rider that supplies between 1 April 1989 and 26 July 1990 could be made under either scheme. A supply which only had available to it a claim under the old scheme was therefore of considerable antiquity when section 39(5) was enacted in 1997. The four month notice period must, in my judgment, be seen in that context.” (7) At [132], the UT was wrong to speculate that there might be bad debts accruing to GMAC after the enactment of section 39(5). What was relevant for the purposes of EU law was whether there had been “total or partial non-payment”

“GMAC had more than adequate time to exercise their EU law rights and were given adequate notice of the withdrawal of the scheme. It is no answer to say that GMAC’s claim would have been rejected by the Commissioners in the same terms as their actual claim was rejected when it was eventually made in in 2006. As I have said, this part of the case must be approached on the basis of EU law for which GMAC contend and which I have held to be correct.” 126. At [134], he rejected the need to find any other route to give effect to GMAC’s EU law rights and, in effect, dismissed GMAC’s arguments based on the decision in Iveco UT : “I do not therefore consider that it is necessary for the court to find some other route to give effect to GMAC’s EU law rights, so as to avoid collision with section 39(5). I would simply record my view, which is in conformity with the view which GMAC expressed to the Commissioners in their original claim, that section 80 is not the appropriate domestic provision for giving effect to bad debt relief. When GMAC accounted for VAT on the whole value of the supply it did not account for VAT which was not due. That did not change at the point when GMAC considered the debt to be bad. To that extent, to the extent they are different, I prefer the views of the UT expressed in the present case to those expressed in Iveco .”

“There is nothing in the wording of Article 11C(1) to suggest that a reduction in the “taxable amount” could legitimately be deferred to any great extent (the more so since the French language version uses “est réduite” in place of “shall be reduced”), and it would be wholly inconsistent with the “precise and unconditional nature of the obligation” imposed by Article 11C(1), the “fundamental” principle that it embodies and the importance of VAT neutrality to allow a Member State to evade Article 11C(1) by delaying a reduction substantially. To the contrary, a refund must be made available within a reasonable period of time (compare paragraph 31 of the judgment in the Kraft Foods case).”

“A supplier is entitled to rely on Article 11C(1) in relation to the period between 1978 and 1989 notwithstanding the United Kingdom's failure to implement it, but nothing in Article 11C(1) indicates that the taxable person is intended to be able to determine the point at which a “taxable amount” is to be treated as having been reduced as a result of a rebate, let alone that he should be free to do so many years later.” (3) It was not correct, as Iveco suggested, that HMRC’s case was that s 80 had served to reduce the relevant “taxable amounts”

“drew an analogy with Birmingham Hippodrome Theatre Trust Ltd v HMRC [2014] EWCA Civ 684 , [2014] STC 2222 and the Leeds City Council case, each of which proceeded on the footing that s 80 was applicable to overpayments flowing from failure to implement a directive correctly. In the Leeds case, Lewison LJ noted (at paragraph 13) that Section 80 “is intended to be a complete statutory code for the repayment of overpaid VAT”.”

“….where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. .. Now, undoubtedly the whole of the case made by this bill might have been adjudicated upon in the suit in Newfoundland, for it was of the very substance of the case there, and prima facie , therefore, the whole is settled. The question then is whether the special circumstances appearing upon the face of this bill are sufficient to take the case out of the operation of the general rule.”

“….. The critical thing is that the dispute which alone can be determined by any decision given in the course of these proceedings is limited to one subject only, the amount of the assessable income for the year in which the assessment is challenged. It is only the amount of that assessable income that is concluded by an assessment or by a decision on an appeal against it (see section 75). Although, of course, the process of arriving at the necessary decision is likely to involve the consideration of questions of law, turning upon the construction of the Ordinance or of other statutes or upon the general law, and the tribunal will have to form its view on those questions, all these questions have to be treated as collateral or incidental to what is the only issue that is truly submitted to determination.”

“see no good reason why the Caffoor principle, with suitable modifications, should not apply to it in a similar way, at least where the dispute relates to the amount of VAT chargeable on supplies of goods or services in one or more (usually quarterly) periods, or to assessments (whether of VAT, interest, penalties or surcharges) made for particular periods, or to claims for the repayment of VAT originally paid in respect of particular periods. In all these cases, the periodic framework in which the issue arises may be reasonably regarded as analogous with the yearly assessment of income tax and other direct taxes, although there is of course no equivalent to years of assessment as such, and no limit to the number of VAT accounting periods which may be aggregated in a single assessment or determination. To my mind, however, these are differences of machinery rather than substance, and the more significant points are that VAT is in essence a transaction-based tax which is returned and accounted for on a periodic basis.” 170. He then considered whether the EU case law has any impact on the issue concluding, at [197], that the CJEU has held, in terms, that: “res judicata (in the sense of issue estoppel) cannot prevent application of the EU doctrine of abuse of rights in the field of VAT on a year by year basis. In such circumstances, the principle of legal certainty is trumped by the principle of effectiveness. The Court did not decide, no doubt because it did not need to, whether the same reasoning would apply in relation to other alleged breaches of EU law, but it must in my view be strongly arguable that the same approach should be adopted whenever an issue of liability to VAT arises….”. 171. HMRC submitted that is plain that the decision in Littlewoods , as based on the Caffoor principle, does not give an escape valve from the application of res judicata principles in this case. The circumstances in which, in line with that principle, it was held that issue estoppel does not operate in VAT cases are very different from the circumstances in this case: namely, where the Court of Appeal has determined how the VAT rules apply as a matter of law in relation to the relevant bad debts in all the relevant periods under consideration. In this case, the limitation on the operation of issue estoppel held to be applicable in Littlewoods would be in point only if, for example, at some future point, HMRC were to re-visit BT’s VAT position in relation to bad debts in subsequent VAT periods. BT’s submissions 172. BT argued that, as the UT recognised at [1] of GMAC/BT UT , the BT issues to which the Court of Appeal provided answers address only some of the issues in this appeal. Moreover, the UT and the Court of Appeal could only properly address pure questions of law; it is clear that the BT issues were transferred to the UT on the basis that it (and, hence, the Court of Appeal) were not to consider any analysis of the facts. The Presidents of the tribunal and of the UT were very clear that they did not want the UT to have to deal with questions of fact. Moreover, in BT’s view, it is apparent from the correspondence between the parties leading up to the transfer of the BT issues (as summarised at [8] above), that the parties did not intend that the issues of “due notice”, “legitimate expectation” and whether the BT claims were made outside the applicable time limits under s 80 and s 121 were to be transferred to the UT and the Court of Appeal for determination (particularly given the factual content of these issues). 173. BT submitted that, in a full hearing of its appeal, the tribunal should approach the answers to the BT issues provided by the Court of Appeal in the same way as answers provided by the CJEU on a referral to it. On that basis, the answers can be applied by the tribunal only in the light of the facts it finds on the evidence yet to be presented. Where the Court of Appeal has determined the BT issues by reference to assumed facts or hypothesis they cannot be applied to BT’s appeal unless and until they are proven in a hearing in the tribunal. 174. BT made various assertions in relation to HMRC’s behaviour in relation to agreeing the BT issues. BT suggested that HMRC were uncooperative, they “entirely scuppered” efforts to provide a statement of agreed facts to the UT, they “just would not entertain” a statement of facts prepared by BT and that, whilst the original questions were reasonably clear, HMRC wanted to narrow the scope and, in particular, “absolutely refused”, even to pose the question as to whether or not the Insolvency Condition was valid. The result was, so BT said, that the questions put to the UT ended up being made on certain suppositions and presented in a way that was not very succinct or clear. BT said that at the time it considered that it was better to go with some questions than none at all. 175. BT also noted that HMRC opposed its application for the facts to be determined by the tribunal prior to the hearing in the Court of Appeal and that the tribunal’s refusal of its application lead to the Court of Appeal considering the BT issues in a factual vacuum. BT explained that its application was not heard until 7 October 2013 and the tribunal’s decision was released only on 23 October 2013 by which point the Court of Appeal hearing was imminent; it started on 29 October 2013. 176. Overall, the suggestion was that BT has been treated unfairly, in particular, as regards what it considers to be the unsatisfactory framing of the BT issues which it attributes to HMRC’s actions, HMRC’s “refusal” to agree a statement of facts and BT’s inability to air the factual issues in the tribunal. BT asserted that it was a matter of HMRC’s choice that, in its view, as is entirely unsatisfactory and unfair, the relevant factual matters (in, particular, as regards whether the BT claims were made under s 80) were not dealt with properly in the proceedings in the UT and Court of Appeal. BT seemed to be of the view that this should weigh in favour of the tribunal adopting its view of the scope of the BT issues and its stance that this appeal should proceed to a full hearing. BT’s stance on res judicata 177. On the res judicata and issue estoppel issues, BT said the following: (1) It follows from the points made above, that the doctrine of cause of action estoppel does not apply. BT’s whole cause of action has not been completely addressed by the Court of Appeal. In effect, the whole appeal is still before the tribunal. Moreover, the general applicability of res judicata in public law cases and revenue cases in particular is not the same as in general private civil litigation (see Spencer Bower Fourth Edition at 1301 and Halsbury’s Laws Fifth Edition volume 12A (“ Volume 12A ”) at 1626). (2) The self-assumed burden on HMRC is to demonstrate that it would be an abuse of process for the appeal to be heard (see Volume 12A note 4). (3) Only issue estoppel could be in point but it is highly questionable that that doctrine applies at all in these circumstances (see Volume 12A at 1605) given that (a) the Court of Appeal’s views were given in a factual vacuum (by preference of HMRC) and (b) any factual assumption made by the Court of Appeal (even if expressed as a purported conclusion) is not binding (see Halsbury’s Laws volume 11 at 25 and note 15) given the pure question of law before the Court of Appeal and the lack of any evidence presented to it. By definition preliminary issues do not involve all the issues. They do not attract any Henderson v Henderson type obligations especially where one side prevented the issues being as wide as the other wished. There is no authority that a party may not raise other issues in the wake of findings on a first set of preliminary issues. (4) Before treating the decision of the Court of Appeal as functioning as an issue estoppel, the following points must be considered: (a) It is necessary to identify a clear issue as set out in the BT issues. Answers outside the scope of the BT issues put to the Court of Appeal are by definition obiter. (b) The conclusion must be within the jurisdiction of the Court of Appeal. Factual findings and answers to questions not asked are, therefore, excluded (see Volume 12A at 1603). (c) There is a well-established exception to the doctrine where subsequent relevant events, factual or legal come to pass which alter the position (see Spencer Bower at 8.31 and Volume 12A at 1603 and 1606). That has occurred here in the shape of the Iveco CoA and ITC decisions. Iveco CoA establishes that a failure to make a claim under article 11C(1) matures automatically into an overpayment of tax for the purposes of s 80 in the next accounting period thereby demonstrating that a purported claim in respect of bad debt relief made many years after the event is to be treated as a s 80 claim (in particular under s80(1B)). ITC establishes that all restitutionary claims in VAT should pass through s 80. (d) An overarching principle is that estoppels must be “certain to every intent” (see Volume 12A at 1632 and note 2) and “plain and obvious” leaving nothing to be disposed of (Volume 12A at 1624 note 8). That is far from the case here for the reasons set out below. Summary of asserted outstanding issues and of HMRC’s responses 178. A summary of the particular issues of law and fact which BT consider to be still outstanding (and which it considers give a reasonable prospect of its appeal succeeding) is set out below together with a summary of HMRC’s response to each point, as set out in italics below each of BT’s arguments: (1) BT: Whether or not the repeal of the Old Scheme for bad debt relief was done with due notice to taxpayers generally and BT in particular. This is a mixed question of fact and law. No evidence at all has been received as to the process of notification. As noted, this question and the “legitimate expectation” issue were alluded to by the Court of Appeal of their own volition and did not form part of the BT issues. The Court of Appeal’s view on those issues, therefore, must be disregarded by the tribunal or, at least, only considered in the light of all the evidence once presented. That this was the intention and scope of the transfer of the BT issues to the UT for determination must be respected by the tribunal to ensure that justice is done. HMRC: This point was within the ambit of the BT issues and has been decided by the Court of Appeal (see [123], [135] and [140] of BT CoA). The Supreme Court refused BT permission to appeal against these conclusions despite BT’s claim that the Court of Appeal erred on the basis that the question required a factual enquiry. (2) BT: Whether or not BT’s legitimate expectations have been recognised and respected in respect of all aspects of its claim (whether on withdrawal of the Old Scheme or otherwise). Again, this is question of mixed fact and law, no evidence has been presented and this question was not before the UT and the Court of Appeal. HMRC: This was decided by the Court of Appeal (see [120] to [123] of BT CoA). The test set out was an objective one that does not involve evidence of the subjective views or beliefs of a particular operator such as BT. See also the comments in Fleming at [64] for the rejection of a subjective intention as a basis for disapplication of primary legislation. In the SC application, BT disavowed any reliance on this point. (3) BT: The extent to which the withdrawal of the Old Scheme has any relevance to the BT claim and subsequent appeal given that BT could never have made a valid claim under the scheme before it was withdrawn. The Court of Appeal was wrong to assume, as it appears to have done, that this was the only gateway for BT to claim relief and that the BT claims were made under the Old Scheme; it was not. The BT claim was made under an EU right. The Court of Appeal held that EU law claim to be in time as a matter of EU law. Its holding that there was no “legitimate expectation” that the Old Scheme would be abolished was beside the point as explained below. (4) BT: Establishing the correct route to a remedy for BT in light of the finding that the Insolvency Condition represented a breach of EU law. This is a question of fact and law and arises in the context of other potential routes to give effect to BT’s EU right which were not considered by the Court of Appeal as the potential availability of other routes did not form part of the BT issues. The Court of Appeal did not deal with the possibility that the BT claims were to be treated as made under the New Scheme which was in force when the BT claims were made and which was EU law compliant. HMRC: Both this point and that in (3) were decided by the Court of Appeal (see [85] to [88] and [118] of BT CoA). This is a pure question of law and again BT’s application for permission to appeal to the Supreme Court against this was rejected. (5) Whether the correct route is under s 80 and whether BT make a valid claim under those provisions in time. The UT and Court of Appeal dedicated very little time to this issue and had very few factual reference points. As a factual matter the wording of the BT claim supports that it was made under s 80 as does the wider context which BT has not yet had the opportunity to provide through witness evidence. In any event the timing point was not before the courts for decision as noted above. These points are expanded on below. HMRC: This was decided by the Court of Appeal (see [126] of BT CoA) and BT’s application to appeal against this was rejected by the Supreme Court. (6) Whether or not BT acted as a reasonably diligent taxpayer when seeking to exercise its directly effective rights under EU law. This question was not before the Court of Appeal for decision. HMRC: This test, if different from the “due notice” and “legitimate expectation” test applied by the Court of Appeal, is an impermissible attempt to raise a point in the tribunal that was not raised in the Court of Appeal. (7) BT: Whether BT has or had been discriminated against in terms of its treatment by the Commissioners in respect of its claim for overpaid VAT and/or the exercise of its EU right. HMRC: The question whether BT has been discriminated against as regards the Insolvency Condition has been resolved in favour of BT. Any alleged discrimination based on differences in treatment of claims under s 80 and under the UK “bad debt relief” provisions was rejected by the Supreme Court when it refused to give permission to appeal. It is not clear that this was raised before the Court of Appeal but it could and should have been if it were to be taken. In any event, there is now a decision by the CJEU which means that this point has in effect been decided against BT (see below). (8) BT: Whether (a) as a matter of fact BT did make a claim under s 80 for repayment of overpaid VAT and such a claim was made in time and (b) payments on account of VAT were made to HMRC that were not in respect of VAT due at the time when paid for the purposes of s 80. As noted, BT’s stance is that it has at least an arguable position that its EU right is to be given effect under s 80 on the basis that the BT claims were in fact made under that provision and the Court of Appeal’s judgement in Iveco CoA has now established that s 80 is the correct route for a person in BT’s position to obtain relief. HMRC: Whether BT purports to have made the BT claim under s 80 is irrelevant given the Court of Appeal’s conclusion that it could not be such a claim in law. BT included a footnote in the SC that the Court of Appeal had erred in its application of the facts but the application for permission to appeal was refused. The decision in Iveco CoA does not assist BT’s case and does not detract from the conclusions reached in both BT CoA and GMAC CoA. HMRC’s further points on this are set out below. BT’s detailed submissions 179. BT expanded on the above points as follows: (1) Whilst HMRC assert that BT did not overpay VAT in terms of the express wording of the UK legislation in s 80, that is not the test. The test is whether BT overpaid VAT as a matter of European law, and if so, how BT is to give effect to its EU right. BT has plainly demonstrated that it has overpaid VAT as a matter of EU law. In Iveco CoA it was clearly held that such an EU right is to be given effect under s 80. (2) The UT and Court of Appeal confused the factual background in the GMAC litigation with BT’s own fact pattern and, in particular, the basis of the BT claims. BT’s position has always been that it made its claim under s 80 whereas (due to its different factual position) GMAC’s emphasis was on the “bad debt relief” provisions and the effect of s 39(5). BT’s case simply has not been considered yet on its own particular fact pattern and as regards any “legitimate expectation” that it may have had, if still relevant, in that context. (3) As a factual matter the wording of the BT claim supports that it was made under s 80, as does the wider context in which the BT claims were made, which BT has not yet had the opportunity to provide through witness evidence. As noted, the UT was not charged with making findings of fact and also arguably did not even make a purported finding in respect of the nature of the BT claims given the UT said “so as far as we can see” when making the relevant statements. To re-characterise the BT claims as made under Old Scheme, which had been long repealed when the claims were made, is unfair because BT never believed it had a claim under that scheme. Moreover, HMRC treated the BT claims as s 80 or “Fleming” claims. (4) The Court of Appeal took a subjective approach to the “legitimate expectation” test in terms of what BT ought to have known and the position of BT’s advisers. The tribunal still needs to consider what knowledge BT ought to have had at the relevant time and, in light of the developing caselaw, when BT could reasonably have identified a mistake. BT intends, therefore, to produce extensive evidence of BT’s knowledge at the time and of industry and professional experts who may reasonably comment on the knowledge that might be expected of a reasonably diligent and prudent taxpayer (in the light of the law) at the relevant time. This evidence will demonstrate that BT did act as a reasonably diligent and prudent taxpayer when it sought to exercise its rights in 2009 as set out below. In this regard, BT produced a witness statement from Mr Rhys Smithson, the Indirect Tax Director at BT dated 14 July 2017. In outline, Mr Smithson set out (a) that BT did not consider that it could make the BT claims under the Old Scheme but that it could make them under s 80, (b) that BT considered that the BT claims were in fact made under that provision, (c) that HMRC accepted that the BT claims were s 80/“Fleming claims”, and (d) other matters in support of the position set out at (5) and (6) below. (5) The Court of Appeal criticised BT on the basis that it ought to have appreciated that it had an EU right sooner than it did. However, in BT’s view, the introduction in 1997 of (a) s 39(5) and (b) the three year time limit in s 80 (which, under s 47 FA 1997, applied from 18 July 1996) barred a claim for relief by BT before it could reasonably have determined that the UK legislation was incompatible with EU law and that it may have an EU right. (BT might otherwise have a claim in restitution to the High Court but that is not a point for consideration here): (a) Neither it nor any other reasonably diligent taxpayer could reasonably have concluded that it had an EU right until, at the earliest, when the decisions in Elida Gibbs Limited v HMRC [1996] STC and Goldsmiths (Jewellers) Limited v CCE [1997] STC were made on 24 October 1996 and 3 July 1997 (being the cases which, in BT’s view, resulted in the three-year cap for the making of claims under s 80). (b) It was not until the three-year time limit in s 80 was in effect lifted as a result of Fleming that BT could bring a claim for the recovery of overpaid VAT arising during the relevant period as now recognised by it as having been “overpaid” in breach of EU law. (c) When the BT claims were made, it was thought that the time bar issue under s 80 was settled following the Fleming litigation (and the subsequent extension of the time limit under s 121) but the question of what effect s 39(5) had had not then been considered at any judicial level. The tribunal first considered this in relation to GMAC in its decision released on 6 May 2010. (6) BT did not say it had any “legitimate expectation” that the Old Scheme would continue forever which was impacted by s 39(5); that was GMAC’s “legitimate expectation”

“There is no clear indication in that judgment as to exactly what it considered, how much weight it attached to any of those documents or evidence, and it looks as if it did not really apply its mind to any of the additional materials presented to it (being additional to those presented to the UT). If it did not apply its mind to the relevant materials, then one has to question the reliability of that decision, so as to be bound by the policy of res judicata, issue estoppel or cause of action estoppel.” (b) Neither the UT nor the Court of Appeal applied their minds to what constitutes a claim for the purposes of s 80 but there is now further authority on that issue (see Bratt Autoservices Company Ltd v HMRC [2018] EWCA Civ 1106). BT complied with the relevant requirements (in regulation 37 of the Regulations 1995) and could clearly satisfy HMRC under their Fleming guidelines, that it had a claim, and of the amount of that claim. (c) The Court of Appeal did not give proper consideration to s 80 in the form in which it was in place when the BT claims were made. At that time, it had been amended to include s 80(1B) but the Court of Appeal only referred to s 24 of the Finance Act 1989 (which did not include equivalent wording). Given the Court of Appeal never actually applied its mind to the correct legislation, it cannot be argued that this point is res judicata or subject to issue estoppel. (8) It is “somewhat circular” to say that s 80 does not apply to provide relief in these circumstances because the Court of Appeal made that conclusion in BT CoA when, in that case, the Court of Appeal was not drawn to the same points by HMRC as those that HMRC made in Iveco CoA . The s 80 issue was approached by HMRC in BT CoA in a completely conflicting way to their approach in Iveco CoA (see below). (9) HMRC were concerned to say that the BT claims did not constitute claims under s 80 because of the size of the claims. In their very first submissions before the Court of Appeal, HMRC drew attention to the value of the BT claims. The size of the BT is simply a reflection of the fact that BT is a large supplier, who makes large returns for VAT and is also a large payer of tax across the board. For example, BT paid taxes in 2018 of just over £4 billion. Any objective test as regards a taxpayer’s “legitimate expectation” (although it is disputed that it is an objective test) should be applied in the same way in respect of all taxpayers; it should not matter whether or not the claim is for a large or small sum. The question arises of why HMRC did not seek to apply the time bar in s 80 in BT’s case. The reason is that, if BT are able to rely on s 80, the BT claims are clearly in time. However, when it has genuinely overpaid VAT (as it is now clear that it has) and made a claim which conformed with all the relevant requirements, like any other taxpayer BT expects to be refunded. 180. BT submitted that, even if, contrary to its view res judicata principles are in point, they should be permitted to bring their argument based on Iveco CoA. That is on the basis that, for the reasons set out above, only issue estoppel can be relevant and that permits new matters such as this to be raised, in particular, given that the law in this area is uncertain and developing. In BT’s view, the decision in Iveco CoA establishes that BT had a s 80 claim all along. Applying the principles in that case, it was entitled, under article 11C(1), to a reduction in the “taxable amount” when the bad debts arose thereby meaning that it had paid tax which was “not due” for the purposes of s 80 (and, in particular, for the purposes of s 80(1B)). 181. In support of this, BT made the following main points: (1) Article 11C(1) is stated to apply in precisely the same way as regards each of the five events it applies to. When any of those events occurs, the requirement is that “the taxable amount shall be reduced”

“I do not see why a supplier’s entitlement to rely on Article 11C(1) against the UK should permit him to reduce the taxable amount himself and so trigger a repayment claim years later”. (4) Finally BT referred to the UT’s decision in Iveco UT , where Warren J (who was also part of the panel in GMAC/BT UT ) said that the somewhat different conclusion the UT reached in GMAC/BT UT was lacking “in overall coherence” (see [60] and [62]) and that its comments were obiter meriting “little regard” (see [68]). 182. BT submitted that the wide applicability of s 80 has been confirmed by the Supreme Court in ITC . In that case they held that all claims made by taxpayers of a restitutionary nature are to be treated as funnelled through s 80. 183. BT added that if HMRC are correct that s 80, as a whole, has no relevance to BT’s claim, then BT’s claim equally cannot be subject to the “ouster clause” of s 80(7). On that basis, BT has a claim in restitution before the High Court which is not out of time. That is a reason why these points need to be considered in detail. It is in HMRC’s own interests to accept that s 80 applies as otherwise the clock will start ticking on restitutionary claims at six years from when somebody acting diligently could have identified the mistake in law which, at the earliest, would be when the Court of Appeal made its decision in BT CoA . 184. In BT’s view any issues regarding the scope of the tribunal’s jurisdiction to finally determine the appeal are entirely separate from the SC application whereby BT applied for permission to appeal against the Court of Appeal’s decision. That separate procedure does not supplant the jurisdiction of the tribunal and the overriding objectives that bind it under the Rules. To the extent that the utilisation of the procedure under rule 28 may give rise to unjust or unfair outcomes, the operation of that rule may need to be revisited. If the tribunal is to derive little assistance from the BT issues in the light of the facts the appeal it will need to consider the answers given in that context and apply its own mind to the rightful and just disposal of the appeal 185. BT emphasised that it is clear that it has overpaid tax and it has not been treated fairly as regards its appeal. The tribunal is seized of the whole appeal and has to apply the overriding objectives to dispose of a case fairly and justly including by enabling the parties to participate fully in the proceedings. In terms of its evidence and the way in which this appeal has been processed through the system, BT has not been able to participate fully, in particular, when it was denied the opportunity for the facts to be found by the tribunal before the BT issues were heard by the Court of Appeal. There is clearly a reasonable case to be argued, and a reasonable prospect of success of BT succeeding on its overall appeal in this tribunal. HMRC’s further submissions 186. HMRC made the following main points in response to BT’s arguments: (1) There is no basis for BT’s assertion that any factual matters determined in the proceedings before the UT and Court of Appeal were not within the remit of the BT issues transferred to the UT: (a) It is correct that a transfer of preliminary issues to the UT was thought of as a way to avoid the need for detailed factual findings or to minimise any factual disputes. However, nothing in rule 28 states that only preliminary issues of law can be transferred to the UT. Although that would be the most usual situation, quite often matters which usually involve limited questions of fact, such as limitation issues, are dealt with as preliminary issues. When the Presidents of this tribunal and the UT agreed to the transfer, the only requirement was that the parties were to produce agreed issues acceptable to the Judge; there was no requirement that the issues were to be confined solely to preliminary issues of law. (b) It is inherent in the questions posed under the BT issues that the matters which BT assert are not included in the BT issues are included. Moreover, the correspondence that took place between the parties when agreeing the BT issues plainly demonstrates that BT was fully aware that the BT issues covered these matters. (c) HMRC did not somehow force BT to proceed with the transfer of the BT issues to the UT without fact finding on the nature of the BT claims. At the time, HMRC’s concern was that the Insolvency Condition issue and related discrimination argument should not be presented to the UT without there being any factual determination. Whilst BT’s application for the facts to be heard in the tribunal was rejected, it was open to BT to appeal against that decision but it did not do so. (2) In any event, many of the matters BT refer to as factual matters, such as the nature of the BT claims and the “legitimate expectation” test, primarily raise objective questions of law. (3) Moreover, there is no conceivable factual finding that would be relevant that could possibly undermine the clear determinations made by the Court of Appeal in BT CoA . The only factual findings that are needed are those regarding the date of the BT claims, the terms of the claim letter, and the relevant legislative landscape; all those have been determined. (4) Whichever res judicata principle is in point, BT is estopped from raising the points it seeks to raise: (a) In effect BT assert that the Court of Appeal made a wrong decision in BT CoA but, even if that is right, a wrong decision is as binding as a correct one for this purpose. (b) Even if the doctrine of issue estoppel is in point, there are no special circumstances and there is no supervening decision of a court which entitles BT to raise its arguments. (5) The decision in Iveco CoA does not suggest that the decisions in GMAC CoA and BT CoA were wrong as regards the conclusion that, for the purposes of s 80, there is no overpayment of tax in bad debt cases (see [38] and [39]). There is nothing in that decision which casts doubt on the ability of the UK to put in place a regime for the relief of bad debts which requires a claim to be made. The comments in Iveco CoA at [34] to [36] do not support BT’s assertions. The decision in ITC is not relevant. In effect, I have addressed HMRC’s further submissions on these points in my conclusions. (6) On the position as regards whether the BT claims were made under s 80 as a matter of fact and law: (a) The UT’s finding that the BT claims were not, as a factual and legal matter, made under s 80 must encompass both sub-s(1) and sub-s(1B). (b) BT appealed to the Court of Appeal against the UT’s finding on this point on raising all the points it now argues. (c) As regards the “factual issue” as to whether BT made a claim under s 80: (i) BT raised no issue about factual findings relating to the nature of the BT claim when the parties were agreeing the scope of the BT issues. BT did raise this after the hearing in the UT but it did not appeal against the tribunal’s refusal of its application for the tribunal to conduct a hearing to make factual findings. (ii) In any event, determining the nature of the BT claims is not purely a question of fact. It raises an objective legal question as regards the correct legal construction of the relevant letter in which the BT claims were made. The transcript of the hearing in the Court of Appeal shows that when pressed on this point, BT accepted that this is a matter of legal analysis. (ii) Moreover, BT had the chance to appeal to the Court of Appeal on the basis that it was procedurally unfair for the UT to have made the relevant findings without considering the background facts. That issue was set out in BT’s skeleton argument and was developed in oral argument before the Court of Appeal as shown in the transcript of the hearing. (iii) It is plain that the Court of Appeal did not dismiss BT’s appeal so far as it related to the UT’s factual finding in ignorance of the underlying BT claims; it is evident from the transcript that the Court of Appeal were taken to the relevant letter and they commented on it (see [127] of BT CoA ). (iv) BT made a loosely articulated appeal against the Court of Appeal’s decision on this point in a footnote in the SC application but the Supreme Court refused permission to appeal. (v) The case of Bratt Autoservices Company Ltd v HM Revenue and Customs [2018] EWCA Civ 1106 simply demonstrates further that the Court of Appeal regard the issue of whether a claim is correctly made under s 80 as being one of law. (c) The Court of Appeal’s decision on this point must also be taken to encompass both s 80(1) and s 80(1B) given that it upheld the UT’s decision. In any event the reasoning adopted as to why s 80 is not in point, applies equally to s 80(1B). (d) The argument that s 80(1B) applies as a matter of law was raised in the SC application but the appeal was refused. In any event, the Court of Appeal has held in GMAC CoA , perhaps with the benefit of fuller argument, that s 80 is not the provision that gives effect to an EU right as regards a claim for bad debt relief. If BT now proposes to raise some variant of the s 80 legal argument already raised, that should have been raised before both of those courts; at the very least, it would be abusive for it to be raised now. (7) On the discrimination point, the recent decision by the CJEU in Compass Contract Services Ltd v HMRC (Case C-38/16) [2017] BVC 30 (“ Compass ”) has settled that there is no discrimination in circumstances such as these. 187. In Compass , as set out at [18] and [19], the question the CJEU considered was whether the principles of fiscal neutrality, equal treatment and effectiveness preclude UK legislation which, following the Fleming litigation, in s 121, in effect, set a different transitional period for the introduction of the three-year time limit as regards (a) claims for repayment of overpaid VAT and (b) claims for the deduction of input VAT: (1) On the one hand, under s 121(1) that three-year limitation period did not apply to a claim for repayment of overpaid VAT for an amount brought into account, or paid, for a prescribed accounting period ending before 4 December 1996 if the claim was made before 1 April 2009. (2) On the other hand, section 121(2) provided that the limitation period did not apply to a claim for deduction of input VAT that became chargeable in an accounting period ending before 1 May 1997 if the claim was made before 1 April 2009. 188. The CJEU explained, at [20], that Compass had made a claim for repayment of overpaid VAT which was rejected on the basis of s 121(1) but which would have been in time if the longer period specified in s 121(2) was applicable. 189. At [25 ], the CJEU set out that according to settled case-law: “a breach of the principle of equal treatment as a result of different treatment presupposes that the situations concerned are comparable, having regard to all the elements which characterise them …….The elements which characterise various situations, and hence their comparability, must in particular be determined and assessed in the light of the subject matter of the provisions in question and of the aim they pursue, whilst account must be taken for that purpose of the principles and objectives of the field to which the measure at issue relates.” (Emphasis added.)

“the element which characterises such a right to repayment, and from which it originates, is an overpayment to the tax authorities by a taxable person of an amount of VAT in breach of EU law. It is specifically the fact that the VAT is not due which underlies the right to recover and ensures, in accordance with conditions laid down in the national law of each Member State, having regard to the principles of equivalence and effectiveness, that the economic burden arising from that payment is neutralised in respect of that taxable person.” (2) At [33], they said that the right of taxable persons to deduct VAT due or paid on goods purchased and services received as inputs from the VAT which they are liable to pay “is a fundamental principle of the common system of VAT established by EU law” and “an integral part of the VAT scheme and in principle may not be limited”

“unlike the element characterising the right to repayment of overpaid VAT, the right to deduct VAT, which is a right inherent in the VAT scheme established by the common system of VAT, is based on the existence of a tax that is due.” 191. At [37] and [38] the CJEU concluded that: “….whilst the right to repayment of overpaid VAT is intended to remedy a situation which stems from an infringement of EU law by permitting the beneficiary of that right to neutralise an economic burden which is wrongly imposed, the right to deduct input VAT stems from the actual application of the common system of VAT, so that the VAT payable or paid is not borne by the taxable person in his economic activities that are subject to VAT, thus ensuring neutrality of taxation of those activities. As the Advocate General observed in point 60 of his Opinion, such a difference in the nature of the rights at issue and the objectives pursued justifies the existence of legal rules specific to each of those two rights, inter alia, as regards their content and the conditions for their exercise, such as the limitation period for actions to enforce those rights and, specifically, the date from which such a period applies.”

“If [BT’s] claim arises, instead, under s 80, it was not made before 1 April 2009 and was time-barred.”

“(1) The matter should be approached on the basis that the power to deal with matters separately at a preliminary hearing should be exercised with caution and used sparingly. (2) The power should only be exercised where there is a “succinct, knockout point” which will dispose of the case or an aspect of the case. In this context an aspect of the case would normally mean a separate issue rather than a point which is a step in the analysis in arriving at a conclusion on a single issue. In addition, if there is a risk that determination of the preliminary issue may prove to be irrelevant then the point is unlikely to be a “knockout” one. (3) An aspect of the requirement that the point must be a succinct one is that it must be capable of being decided after a relatively short hearing (as compared to the rest of the case) and without significant delay. This is unlikely if (a) the issue cannot be entirely divorced from the evidence and submissions relevant to the rest of the case, or (b) if a substantial body of evidence will require to be considered. This point explains why preliminary questions will usually be points of law. The tribunal should be particularly cautious on matters of mixed fact and law. (4) Regard should be had to whether there is any risk that determination of the preliminary issue could hinder the tribunal in arriving at a just result at a subsequent hearing of the remainder of the case. This is clearly more likely if the issues overlap in some way- (3)(a) above. (5) Account should be taken of any potential for overall delay, making allowance for the possibility of a separate appeal on the preliminary issue. (6) The possibility that determination of the preliminary issue may result in there being no need for a further hearing should be considered. (7) Consideration should be given to whether determination of the preliminary issue would significantly cut down the cost and time required for pre-trial preparation or for the trial itself, or whether it could in fact increase costs overall. (8) The tribunal should at all times have in mind the overall objective of the tribunal rules, namely, to enable the tribunal to deal with cases fairly and justly.” 199. The effect of the transfer of preliminary issues to the UT for determination under rule 28 is to remove the transferred issues from the tribunal’s jurisdiction in the sense that, (a) it is then for the UT, rather than the tribunal, to determine those issues (and, in the usual way, for the higher courts to do so, on any further appeal), and (b) as noted above, the tribunal’s role is confined to applying the binding determinations made by the UT or relevant higher court in deciding the overall outcome of the appeal in the same way as it would apply any relevant decision of a higher tribunal or court. 200. Usually, it is the role of the tribunal, as the judicial forum of first instance in tax disputes, to find the facts relevant to an appeal made to it on hearing evidence from the parties. Given the tribunal’s fact-finding role, it is to be expected that parties will usually make an application under rule 28, whether for the transfer to the UT of the whole case or of a preliminary issue, and that any such application will be approved, where the issue or case raises wholly or largely legal issues without the need for extensive fact finding (and as noted, often preliminary issues are in any event points of law only). 201. However, it is notable that the reference in rule 28 of the Rules is to the transfer to the UT of “preliminary issues”; any transfer is not expressly restricted to legal issues only. As noted, there is no general rule that matters dealt with as “preliminary issues” may only be questions of law although, in practice, they often are confined to questions of law and the UT has urged the exercise of caution in dealing with mixed questions of law and fact as preliminary issues. As HMRC submitted, the tribunal and courts do consider as preliminary issues matters which raise relatively limited factual questions, such as issues in relation to limitation periods. 202. In this case, leaving aside for a moment the dispute regarding the precise scope of the BT issues, it is reasonable to assume that, given the nature of preliminary issues, the parties expected that the transfer of the BT issues to the UT for determination would enable these appeal proceedings or, at least, aspects of these appeal proceedings to be determined in an efficient manner by referral to a higher authority than this tribunal. Jurisdiction of the UT and the Court of Appeal 203. In general terms it is open to the parties in tribunal and court proceedings to raise arguments on the jurisdictional scope of the relevant forum in which an issue is to be heard and it is for that forum to decide the point. It follows from the fact that, on a transfer of preliminary issues under rule 28, the UT (and, on any appeal, the higher courts) become the forums with jurisdiction to determine those issues that (a) those forums must also have jurisdiction to decide on the precise scope of what is before them for decision, and (b) accordingly, the tribunal does not have jurisdiction to decide on that scope. Indeed, deciding on the scope and correct interpretation of the preliminary issues transferred is an integral part of the UT/court determining those issues. It is fully open to the parties to make representations on the scope of the transferred preliminary issues in the course of the proceedings and, their redress, should they consider that the UT or other relevant court have addressed matters which were not transferred to them for decision, is to seek to appeal against the relevant decision on the basis that they have erred in doing so. I note that it is apparent from the correspondence that, at the relevant time, BT anticipated that the parties would make submissions on the scope of the questions put in the BT issues (see [8(7)] above). 204. In other words, in my view, the proceedings before the UT and the Court of Appeal have themselves settled conclusively both (a) the ambit of what was to be determined on the transfer of the BT issues to the UT, and (b) the answers to what was properly to be determined. On that basis, the tribunal must take the determinations made by the Court of Appeal to be properly within the ambit of that court’s jurisdiction for the purposes of assessing, (a) what, if anything would remain to be considered by the tribunal at a full hearing of this appeal before it, and (b) whether res judicata principles would apply to prevent BT from raising any of the arguments it wishes to raise in any such hearing. Tribunal’s decision on the scope of the BT issues 205. If, contrary to my view, as BT argued, it is the tribunal’s task to decide what was properly within the scope of the BT issues, for all the reasons set out below, the outcome would be the same as under the analysis set out above. 206. I note that the parties jointly applied for the BT issues to be transferred to the UT in a form which they presented to the Presidents of the tribunal and UT as agreed between them and that the Presidents simply agreed to the transfer of those issues in that form. BT’s main arguments were that (a) the Presidents of the tribunal did not intend factual matters to be included in the scope of the BT issues as BT considered is apparent from the relevant correspondence, (b) the true agreement and intention of the parties, which BT asserts is to be divined from the correspondence between the parties in which they negotiated the formulation of the BT issues, was that the disputed matters were not to be transferred to the UT, (c) it somehow has a bearing that BT was, so it says, (i) unfairly treated by HMRC who acted unreasonably as regards agreeing the BT issues, and (ii) denied the opportunity for facts to be found in the tribunal before the hearing in the Court of Appeal took place (as the tribunal refused its application for that to take place). 207. With that background in mind, it seems to me that the tribunal should approach the question of determining the scope of the BT issues much as it would approach the construction of a contractual document at any rate, as regards addressing, in the terms raised by BT, the question of what the parties intended the BT issues to cover. On that basis, the tribunal’s task is essentially to ascertain the objective meaning of the language used in the BT issues, as the embodiment of the agreement between the parties on what was to be transferred to the UT for determination (as then sanctioned by the Presidents of the tribunal and the UT), having regard to the principles of contractual construction. 208. I note that in Wood v Capita Insurance Services Ltd [2017] UKSC 24 [2017] 4 All ER 615 , in considering how contractual construction is to be approached, Lord Hodge explained, at [10], that, it has long been accepted that ascertaining the objective meaning of language “is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning” and a court “may have regard to the factual background known to the parties at or before the date the language was agreed but excluding evidence of the prior negotiations”

“(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) …Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, [the background] includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent . They are admissible only in an action for rectification….” 209. I also note Lord Hodge’s comments in Wood v Capita include: (1) At [11], that: “ where there are rival meanings [to the language in question], the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense. But…..the court must consider the quality of drafting of the clause….and it must also be alive to the possibility that one side may have agreed to something which with hindsight did not serve his interest…” (2) At [13], that the extent to which “textualism” and “contextualism” assist the court in construing a contract will vary according to the particular circumstances: “Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance......” 210. The above comments were made in the different context of how to approach the construction of commercial contracts. However, in my view, similar principles must apply to ascertaining the scope of the BT issues, to the extent that, on BT’s own argument, that depends on ascertaining the true agreement between the parties as to what was to be referred to the UT. I do not see how a determination of what the parties intended can be made at this stage fairly and justly other than by an objective assessment of the meaning of the BT issues which carries with it the need to take into account the context in which the BT issues were agreed between the parties (including whether both parties were acting with professional advice) but not the previous negotiations of the parties and their declarations of subjective intent. Moreover, given the impact which the Court of Appeal’s answers to the BT issues have on the parties, in making an objective assessment, it is entirely appropriate that the tribunal should be alive to the possibility that, with hindsight, a party may have agreed to something which does not suit its interest. Scope of the BT issues - ascertaining their plain meaning 211. In my view, having regard to their plain meaning, according to how a reasonable person would interpret the BT issues as assessed in the context of the dispute between the parties in these appeal proceedings, the disputed matters are included in the scope of the BT issues: (1) The consideration of (a) in BT issue 1, whether BT’s assumed EU right under article 11C(1) in respect of the relevant bad debts was subject to s 39(5), and (b) in BT issue 3, whether “BT’s claim” was subject to s 80 and s 121, necessarily requires consideration of the nature of BT’s EU right (on the assumption it had one) and of the BT claims, whether that requires a factual or legal analysis. (2) The question in BT issue 2 is very broadly framed by reference to whether “ EU law requires s 39(5) to be disapplied or construed under EU law , so as not to affect the exercise of”

“I n order to deflect what he saw as a criticism of his clients in not making their claims sooner, Mr Cordara cited Deutsche Morgan Greenfell…. for the propositions: (a) that a party who has a mistaken view of the law which is falsified by a subsequent decision of the courts is to be treated as having made a mistake, and (b) that such a person cannot be said to have failed to use reasonable diligence to discover his mistake if the true state of affairs could not be discovered until the court had pronounced its judgment.” (2) It is implicit in the decision in GMAC CoA that this argument was rejected. It is not clear if this was specifically raised in BT CoA but in any event, it is implicit in the Court of Appeal’s similar conclusions in that case, that this is not a relevant consideration. 220. As regards the discrimination argument: (1) As HMRC submitted, the question whether BT has been discriminated against as regards the Insolvency Condition has been resolved in favour of BT. (2) It is not clear that any alleged discrimination based on differences in treatment of claims under s 80 and under the “bad debt relief” provisions was raised specifically before the Court of Appeal in BT CoA . However, it is implicit in the Court of Appeal’s decision that, as a matter of law, the correct route for BT to obtain relief in respect of the relevant bad debts was the Old Scheme and that s 39(5) validly blocked the BT claims, as made in response to questions which were broadly framed by reference to the position under EU law, that they did not consider there was any principle of EU law (whether relating to discrimination or otherwise) which affected those conclusions. It seems to me that BT may have an arguable position that the decision in Compass has not necessarily, in effect, decided this point but, given my other conclusions on this point, that does not take its case any further forward. 221. BT made a number of criticisms of the approach the UT and the Court of Appeal took to BT issue 3, namely, that they were confused about the factual background and failed to distinguish between the different factual backdrops to the BT claims and the GMAC claim, they did not consider the s 80 point adequately, they did not apply their minds to what constitutes a claim for this purpose and they did not consider specifically s 80(1B) noting, in particular, that the Court of Appeal only referred to the earlier legislation which did not include that provision: (1) In general terms, I cannot see any grounds for the tribunal to disregard the answers to the BT issues provided by the Court of Appeal on the basis of assertions that they did not properly consider the issues (even if that is correct). The task for the tribunal is to assess the scope and effect of the Court of Appeal’s determinations and apply them accordingly. BT had the opportunity to seek to appeal against the Court of Appeal’s determinations in the usual way but the SC application was rejected. The Court of Appeal’s determinations, therefore, stand as they are and are binding on the tribunal. (2) It seems to me that, in upholding the UT’s view on s 80, the ambit of Rimmer LJ’s conclusion is broad enough to apply to any part of s 80 which is specified to apply only when a taxpayer has accounted for VAT which is not due (whether as output tax (under s 80(1)) or VAT which is not output tax which is not due (under s 80(1B)). I note that: (a) Whilst Rimmer LJ did not set out in the decision all the versions of s 80 in place at the relevant time and made no express reference to s 80(1B), he did appear to have later versions of s 80 in mind. At [29] and [30] (see [82] above), he explained that it was BT’s case that “s 24 and the subsequent versions of it provided an alternative jurisdictional basis upon which it was entitled to apply for VAT relief in respect of the bad debts it had suffered during the relevant period” and that HMRC’s submission was that “s 24 and its successors have nothing to do with claims for bad debt relief” (in each case, emphasis added). (b) It is apparent that he also had in mind that HMRC’s case on this point was put in broad terms when, at [30], he described their argument, that those provisions (s 24 and its successors ): “were and are concerned only with cases in which an overpayment of tax had been made to the Commissioners and provide a restitutionary basis for the recovery of the excess. In a bad debt case, there was no payment of VAT that was not due, or therefore any overpayment of VAT . A failure to make a bad debt relief claim in a subsequent return still did not mean that there was any overpayment in the tax actually paid. If no relief claim was made, the tax paid was the tax due.” (Emphasis added).

“it was common ground that, for persons who have accounted to the Commissioners for VAT that was not due, section 80 and the associated regulations provide a code for the recovery of VAT which is exhaustive and excludes other remedies such as a common law claim based on unjust enrichment…….”. 225. This simply leaves open the question of when persons are to be regarded as having accounted to HMRC for VAT that “was not due” for the purposes of s 80. As set out repeatedly above, the Court of Appeal has decided in both BT CoA and GMAC CoA that VAT accounted for in respect of consideration which a supplier cannot recover from its customer is not VAT that was not due for this purpose. Other points raised by BT 226. On the other points raised by BT: (1) Whether BT are able to bring other proceedings for restitution in a different forum has no bearing on the outcome of the proceedings in this tribunal. (2) I cannot see any basis for the suggestion that in the proceedings in the tribunal and those before the UT and the Court of Appeal BT has not been treated fairly, in that somehow it has not been treated in the same way as other taxpayers, and/or that it has been denied the ability to participate fully. BT appears to have had every opportunity for its arguments to be heard at each stage of the relevant proceedings in relation to this appeal. As in all such proceedings, BT’s form of redress where any application it makes is refused or its arguments are not upheld by a tribunal or court, is to seek to appeal against the relevant decision. The tribunal has no jurisdiction as regards any complaint in respect of HMRC’s conduct in its dealings with BT, if that is BT’s complaint. (3) In my view, contrary to BT’s stance, the contents of the SC application and the Supreme Court’s refusal of the application are relevant in the sense that: (a) In refusing the SC application, the Supreme Court chose, in effect, to approve the Court of Appeal’s determinations given that its refusal rendered them the final, definitive word on the scope of the matters raised by the BT issues and the correct answers to them notwithstanding BT’s fulsome arguments that the Court of Appeal had erred (see [111] above). See also the comments at [203] and [204] above. (b) As regards res judicata principles, the question arises as to why the arguments which BT raised in the SC application could not have been raised at an earlier stage in the proceedings before the UT and Court of Appeal (if indeed they were not raised) - I can see no reason. Moreover, their inclusion plainly indicates that BT itself considered they were integral to determining the BT issues. Res judicata 227. This scenario does not fit neatly within any of the categories referred to within the umbrella of res judicata as explained by Lord Sumption in the Virgin case. However, for the reasons set out below, my view is that these principles apply and, whichever sub-set of the principle is in point, BT is estopped from or should not be permitted to raise the arguments it seeks to raise on the basis that to permit it to do so would be an abuse of process. 228. I can see no reason why the principles underpinning the res judicata rules, namely, that there should be finality in litigation and that a party should not be twice vexed in the same matter, are not applicable as regards the determinations made by the Court of Appeal in BT CoA . I agree that, as HMRC argued, this situation does not fall within the exception from the res judicata principle which applies in some circumstances in VAT cases as set out in Littlewoods (on the basis of the Cafoor principle which is applied in direct tax cases). 229. As noted, it is reasonable to suppose that the purpose of the transfer of the BT issues to the UT for determination, as made following a joint agreed application by the parties was to obtain definitive, binding answers from a higher authority than the tribunal on the questions raised in the BT issues on the basis that may resolve this appeal or, at any rate, aspects of this appeal, efficiently. It would be wholly out of kilter with the principles underpinning the res judicata rules, if this appeal were to be heard in full in the tribunal, for either party to be able to raise (a) points which have already been determined by the Court of Appeal in answering the questions posed under the BT issues, and/or (b) points which are integral to the BT issues which were not decided because they were not raised in the proceedings in the UT or Court of Appeal but which, with reasonable diligence, could have been raised in those proceedings. In other words, the determination of the BT issues by the Court of Appeal has raised a form of cause of action estoppel which prevents either party challenging the determinations made by the Court of Appeal to this extent. 230. It seems to me that the circumstances in this case have a greater similarity to those where cause of action estoppel generally operates (namely, where there is a single set of proceedings between the parties) than those where issue estoppel generally operates (namely, where there are two sets of proceedings and some issue common to both is decided on the earlier occasion): (1) Essentially, there is only one set of proceedings between the parties which, as at the time of this hearing, had not yet been fully determined. As described above, in effect, certain matters were carved out of the appeal proceedings in the tribunal for a higher level of tribunal or court to decide, pending which the tribunal proceedings were stayed. Subject to the outcome of this hearing, it would remain for the tribunal to apply the resulting determinations made by the Court of Appeal in deciding the overall outcome of the appeal on also determining any other outstanding relevant legal issues and making any necessary factual findings. (2) As a matter of principle, the fact that the UT and Court of Appeal were asked to decide only preliminary issues (as part of the overall process required for deciding this appeal) does not render their findings any less binding or capable of being subject to cause of action estoppel than if they had been charged with deciding the full case. That is subject to the proviso that, of course, given the nature of the transfer of preliminary issues, any estoppel can only apply as regards the BT issues, in effect, as though they each individually or together form a cause of action. (3) The view that the stricter cause of action estoppel rule is more appropriate than the issue estoppel rule is supported by the comments in Arnold (as cited by Lord Sumption in Virgin ) that there is “room for the view that the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter of the two proceedings being identical, than they do in issue estoppel, where the subject matter is different”