BT Plc v The Commissioners for HMRC

It was accepted both before the judge and this court that for present purposes there was no practical difference between the tests for striking out and reverse summary judgment. There was also no issue as to the correct legal test to apply, namely that summarised by Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) (“Easyair”) at [15] in the context of summary judgment. I am content to proceed on that basis, although it is worth bearing in mind that there are some differences between the summary judgment procedure under CPR Part 24 and applications for striking out for lack of reasonable grounds to bring or defend a claim under rule 3.4(2)(a). In particular, questions of striking out are generally determined by reference to the pleaded case and are not apt for the determination of any factual dispute, whereas applications under Part 24 are more likely to involve the scrutiny of evidence.

As Lewison J explained in Easyair, the court must consider whether the claimant has a realistic as opposed to a fanciful prospect of success. Realistic means that the claim must carry some degree of conviction. A mini-trial must not be conducted and the court must also take into account evidence that can reasonably be expected to be available at trial. However:

A number of authorities have considered whether a legislative scheme is intended to exist alongside common law remedies or is intended to be exhaustive and exclude them. Some of these are tax cases and some concern other areas. As Miles J explained, they include Johnson v Unisys Ltd [2001] UKHL 13, [2003] 1 AC 518, Deutsche Morgan Grenfell Group plc v Inland Revenue Commissioners [2006] UKHL 49, [2007] 1 AC 558 (“DMG”: discussed further below in the context of unjust enrichment), Revenue and Customs Commissioners v Total Network SL [2008] UKHL 19, [2008] 1 AC 1174 (“Total Network”), Monro v Revenue and Customs Commissioners [2008] EWCA Civ 306, [2009] Ch 69, R (on the application of the Child Poverty Action Group) v Secretary of State for Work and Pensions [2010] UKSC 54, [2011] 2 AC 15 (“CPAG”), Investment Trust Companies v Revenue and Customs Commissioners [2017] UKSC 29, [2018] AC 275 (“Investment Trust Companies”) and Littlewoods Limited v Revenue and Customs Commissioners [2017] UKSC 70, [2018] AC 869 (“Littlewoods”).

Miles J relied on the following summary by Hickinbottom LJ of the principles to be derived from these cases in Southern Gas Networks Plc v Thames Water Utilities Ltd [2018] EWCA Civ 33, [2018] 1 WLR 5977 (“Southern Gas”) at [37]:

As Lord Dyson explained in CPAG at [32], the test is “whether in all the circumstances Parliament must have intended a common law remedy to coexist with the statutory remedy”. He did not consider that there was a material difference between the principle to apply in tax cases and the social security legislation under review in that case, noting that Lord Mance had referred to non-tax cases in Total Network. This is reflected in this court’s application of the same principles in Southern Gas to the question whether a statutory compensation scheme for damage to gas pipes caused by a burst water main precluded a claim in negligence.

In Investment Trust Companies the Supreme Court had to consider whether s. 80 VATA 1994 excluded a common law claim to recover VAT from HMRC where the claim was made not by the supplier (to whom s.80(7) would clearly apply) but by a customer of the supplier. In concluding that it did, Lord Reed applied a purposive construction which took account of the fact that the legislation and regulations created a scheme for refunds to suppliers to be passed on to customers. He also relied on the time limit in s.80 (at the relevant time three years), commenting at [83] that:

Lord Reed was also unpersuaded by an argument that a right to recover money paid under a mistake of law was not intended to be excluded by legislation enacted before that remedy was established by the decision in Kleinwort Benson Ltd v Lincoln City Council [1999] 2 AC 349 (paragraphs [85]-[86] of Lord Reed’s judgment). He concluded at [87] that the statutory scheme was “inconsistent” with the existence of a non-statutory liability to consumers, and commented further that:

Littlewoods raised the question whether the right to interest on overpaid VAT conferred by s.78 VATA 1994 precluded a common law claim in restitution for compound interest. It was held that such a claim was impliedly excluded, despite the fact that s.78(1) expressly applied only “if and to the extent” that interest would not be due apart from s.78. Further, an award of interest at common law was not required to comply with the EU law principle of effectiveness.

Lord Reed and Lord Hodge relied on the limitations in s.78, including a three year time limit, and at [34] said that:

Lord Reed and Lord Hodge went on to acknowledge that the wording giving priority to other rights to interest would apply to common law rights on a literal interpretation, but applied a purposive approach, in that case taking account of the fact that when the provision was enacted s.78 was more generous than the common law as then understood, prior to Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Inland Revenue Commissioners [2007] UKHL 34, [2008] 1 AC 561 (“Sempra Metals”). (As explained below, Sempra Metals has since been departed from.)

Drawing some threads together:

A useful starting point in determining whether unjust enrichment has occurred is to ask the questions posed by Lord Steyn in Banque Financière de la Cité v Parc (Battersea) Ltd [1999] 1 AC 221 at 227, namely: (a) Has the defendant benefited, in the sense of being enriched? (b) Was the enrichment at the claimant’s expense? (c) Was the enrichment unjust? (d) Are there any defences? However, as Lord Reed explained in Investment Trust Companies at [41]-[43], these four questions are no more than “broad headings for ease of exposition”, intended to ensure a structured approach to the analysis. That analysis must be carried out having regard to the purpose of the law of unjust enrichment, which is to correct “normatively defective” transfers of value, meaning defective in a way recognised by the law of unjust enrichment, for example because of a failure of basis. (Failure of basis occurs when a benefit is conferred on the joint understanding that the right to retain it is conditional and the condition is not fulfilled: see Goff & Jones, The Law of Unjust Enrichment (10^th ed.) at 12-01.)

Investment Trust Companies contains a detailed analysis of the second of the questions posed by Lord Steyn, namely whether the defendant’s enrichment was at the claimant’s expense. As Lord Reed explained at [52] the receipt of a benefit is not enough. The claimant must incur a loss through the provision of the benefit, and a “but for” causal connection between the claimant’s loss and the defendant being better off is not sufficient. Moreover, as he went on to say at [59] and [60] the requirement that the defendant is enriched at the claimant’s expense is not satisfied by a connection that exists between the benefit and loss merely as a matter of economic or commercial reality. Apart from potential difficulties in determining where the economic burden of an unjust enrichment has fallen, a fundamental difficulty with that approach is that it conflicts with the purpose of restitution, which is “not to compensate for loss, but to reverse the defective transfer”.

Lord Reed’s analysis in Investment Trust Companies was applied and developed the following year in Prudential Assurance Co Ltd v Revenue and Customs Commissioners [2018] UKSC 39, [2019] AC 929 (“Prudential”). Lord Reed, Lord Hodge and Lord Mance explained at [69]-[77] that where money is paid by mistake a benefit is thereby conferred by the payment, and the transaction is normatively defective because the benefit is provided as a result of the mistake. In those circumstances an obligation arises immediately to reverse the enrichment. However, contrary to the conclusion in Sempra Metals, the defendant’s retention of the money thereafter does not result in any separate or additional transfer of value which must be reversed by an award of compound interest. Rather, the original mistaken payment creates a debt on which simple interest can be awarded under s.35A Senior Courts Act 1981. A failure to pay an amount which is legally due is not itself a transfer of value. The benefit of the use of the money is obtained from a failure to pay the debt.

As is well known, s.32(1)(c) can defer the commencement of a limitation period where the action is for “relief from the consequences of a mistake”. In such a case time will not start to run until the claimant has either discovered the mistake or could with reasonable diligence have discovered it.

It was confirmed in Test Claimants in the FII Group Litigation v Revenue and Customers Commissioners [2012] UKSC 19, [2012] 2 AC 337 (“FII 2012”) that in order to fall within s.32(1)(c), the mistake must constitute an essential element of the cause of action (see also FII 2020 at [14]). Further, FII 2020 departed from earlier authority in its analysis of what it means to “discover” a mistake. In summary, the Supreme Court departed from the House of Lords’ decision in DMG that a mistake of law was discovered only when the position was determined by a final judicial decision. The test established by FII 2020 was conveniently summarised by Sir Geoffrey Vos MR in Gemalto Holding BV v Infineon Technologies AG [2022] EWCA Civ 782, [2023] Ch 169 at [43] as follows:

After summarising the legislative background, Miles J considered the decisions of this court in BT CA and GMAC CA. He outlined BT’s claim for restitution, the principles to apply in deciding whether to grant summary judgment and the basis on which HMRC made their application, namely that (in respect of the main period) the Old Scheme excluded common law claims from 1 October 1978 and there was in any event no unjust enrichment, and in respect of the 9-month period that the claim was time-barred. Miles J noted at [63] that HMRC did not seek to contend that the claim for the 9-month period was excluded by the later enacted Old Scheme, and that they did not rely on the Limitation Act in respect of the main period.

Miles J decided that the question whether the Old Scheme ousted common law remedies was a short question of law which was suitable for summary determination. He applied Hickinbottom LJ’s summary in Southern Gas and listed seven features of the Old Scheme that led to the conclusion that Parliament intended it to be exhaustive (paragraphs [74]-[88]). In summary these were as follows:

Miles J concluded that BT’s submission that a common law remedy could coexist with the statutory scheme would make the various qualifications in that scheme optional for the taxpayer, which did not seem to be a sensible view of what Parliament intended (paragraph [91]). It was not material that claims for mistake of law had not been recognised when the Old Scheme was enacted (relying on Lord Reed’s rejection of that argument in Investment Trust Companies) (paragraph [92]).

The judge then addressed BT’s reliance on FII 2012, which is discussed further below. He preferred the submission of HMRC that that decision did not assist BT (paragraphs [93]-[102]). He also accepted that the absence of an express ouster was important, but it had to be considered with the other circumstances (paragraph [103]).

Miles J then went on to consider HMRC’s argument that there was no unjust enrichment on the basis that BT had not overpaid output tax but had simply failed to make a claim. He concluded that BT had a realistically arguable case on that point, and it was not suitable for summary determination (paragraph [119]). Similarly, the restitutionary claim for the 9-month period, in respect of which HMRC relied only on limitation, should not be determined summarily. BT had a realistically arguable case that any enrichment of HMRC was the consequence of a mistake, and as regards discoverability there were factual issues which should be resolved with the benefit of further evidence (paragraph [134]).

There are two preliminary points on which we sought clarification during the hearing.

The first point, relevant to issues 2 and 3, was what BT maintained was its mistake. BT’s pleaded case refers to a mistaken overpayment of VAT, and a Part 18 response refers to BT having “mistakenly [taken] the UK legislative position to be correct”. In oral submissions Mr Cordara identified the mistake as being BT’s belief that the UK domestic regime was compliant, and specifically that the insolvency condition was valid. However, some elements of his submissions also focused on BT mistakenly “missing the train” by failing to bring a claim under the Old Scheme before the enactment of s.39(5) FA 1997.

In relation to the 9-month period, Mr Cordara submitted that it could not be viewed in isolation from the main period. The mistaken belief that the insolvency condition was valid meant that BT was also mistaken in relation to the 9-month period, on the basis that any directly effective entitlement in respect of that period would have been thought to be no better than BT’s rights under the Old Scheme in respect of the main period. Put another way, the (assumed to be valid) Old Scheme with its insolvency condition provided the yardstick for the 9-month period.

The second point was exactly what was covered by the 9-month period. Given that quantum has been agreed, the lack of clarity about this is somewhat surprising. However that may be, it was unclear to us whether the amount attributable to the 9-month period (calculated as around £900,000, according to Miles J’s costs judgment and BT’s skeleton argument for this appeal) related to (a) supplies made during that period which gave rise to bad debts (either before or after the end of that period) or (b) bad debts arising during that period. A helpful explanation given by Ms Frawley, junior Counsel for BT, indicated that the calculations had been done on the basis of bad debts estimated as having arisen during the 9-month period, and that for those purposes debts had been treated as going bad after six months.

That suggests that the figure in dispute for the 9-month period would include bad debts arising in respect of supplies during the last six months of 1977, before Article 11C(1) came into effect on 1 January 1978, as well as supplies made during the first three months of 1978. Although Ms Mitrophanous KC, for HMRC, suggested that Article 11C(1) could have no effect in relation to supplies made before it took effect, it is not necessary to resolve that point and I will proceed on the basis of Ms Frawley’s explanation.

Mr Cordara’s submissions had some central themes, of which the most prominent were the following:

I cannot accept Mr Cordara’s submission that issue 1, which involves an exercise of statutory construction, needs to be conducted in this case in a manner affected by any EU law requirement to provide an effective remedy. That submission does not take proper account of the decisions reached and the reasoning in the statutory appeal, and in particular BT CA.

BT CA did not proceed on the basis that there was (or even might be) an alternative common law remedy in respect of the main period. Indeed, the only references to common law restitution are at [86] and [118], which relate to the 9-month period. Instead, what BT CA determined was that BT’s directly effective EU law rights were addressed by “moulding” the Old Scheme to exclude the insolvency condition. What was fatal to BT’s claim for relief under the Old Scheme was the court’s conclusion that s.39(5) FA 1997 did not fall to be disapplied, with the result that its claim under the Old Scheme in respect of the main period was out of time. That issue turned precisely on whether disapplication was required to provide an effective remedy under EU law. The Upper Tribunal had held that it was required and the Court of Appeal disagreed, with the result that BT’s claim under the Old Scheme failed.

It is obviously correct that BT’s statutory appeal did not determine that BT had no common law remedy. Indeed, there would have been no jurisdiction to make that determination in the context of a statutory appeal. But what BT CA did determine was, as Christopher Clarke LJ put it in BT CA at [138]:

The conclusion that s. 39(5) did not require to be disapplied was reached, and could only have been reached, on the basis that BT’s EU law rights were regarded as sufficiently protected in respect of the main period by the existence of the Old Scheme until s.39(5) was enacted. The Court of Appeal clearly did not have in mind the existence of a common law remedy in respect of the main period as a means of enforcing BT’s directly effective rights. Rather, Rimer LJ (with whom Kitchin and Christopher Clarke LJJ both agreed) reached his conclusions on the basis that the Old Scheme had provided a suitable mechanism to enforce BT’s directly effective rights, and that BT could not properly complain about the fact that they could no longer be exercised after s.39(5) was enacted. This is clear from the critical paragraphs of Rimer LJ’s judgment on this issue:

Section 39(5) FA 1997 did not establish a limitation period, but it had an analogous effect and similar principles must apply. As Lewison LJ explained in Leeds City Council v Revenue and Customs Commissioners [2015] EWCA Civ 1293, [2016] STC 2256 (“Leeds CC”) at [41], citing Fantask A/S v Industriministeriet (Erhvervsministeriet) (Case C-188/95) [1998] All ER (EC) 1, [1997] ECR I-6783 at [52], the fact that a Directive has not been properly transposed into UK law does not preclude taxing authorities from relying on a limitation period against a person who seeks to assert a directly effective EU law right. Further, and as Lewison LJ went on to say at [43] with reference to Lord Sumption’s judgment in FII 2012 at [151] and BT CA, there is no EU law requirement for a limitation period to be deferred, and ignorance of legal rights is not a basis to disapply a limitation period.

The conclusions in BT CA were echoed in Floyd LJ’s discussion of s.39(5) FA 1997 in GMAC CA. The points made included that:

Floyd LJ also pointed out at [130] that the effect of s.39(5) was the same as an alteration in time limits, which was the kind of procedural hurdle that was within the discretion of the member state (subject to the principles of effectiveness and protection of legitimate expectations), and noted at [131] the “prolonged crossover arrangement” between the Old Scheme and the New Scheme. He then said this:

It follows from BT CA and GMAC CA that BT and other taxpayers in its position had until the repeal of the Old Scheme to bring claims under it based on the direct effect of Article 11C(1). That was found to be compatible with their EU law rights, and there is no need to identify any other remedy for the pursuit of those rights.

It also follows that Mr Cordara’s reliance on FII 2012 to support the argument that the exercise of determining whether the Old Scheme provided an exclusive and exhaustive remedy should be affected by EU law considerations is misplaced.

The relevant statutory provision considered in FII 2012 was s.33 Taxes Management Act 1970 (“TMA”), which at the relevant time provided a limited statutory right to repayment of tax paid by mistake. Among other things it precluded recovery if the tax return in question had been made in accordance with generally prevailing practice. The question which the Supreme Court was required to consider was whether s.33 provided an obstacle to recovery by the test claimants as an exclusive remedy and, if so, whether it could be given a conforming interpretation under the Marleasing principle (Marleasing SA v La Comercial Internacional de Alimentación SA (Case C-106/89) [1990] ECR I-4135). That issue, which formed a small part of the overall appeal, was addressed by Lord Walker and Lord Sumption, with whom their other Lordships agreed on this point.

The Court of Appeal had applied a conforming interpretation of s.33 by reading the proviso relating to prevailing practice as subject to a limitation that it applied only to the extent that it was consistent with Treaty obligations. Lord Walker doubted that s.33 could be given a conforming interpretation in that form on the basis that the prevailing practice requirement appeared to be a cardinal feature of the legislation. He preferred a simpler approach under which s.33 was read as non-exclusive, saying at [119]:

Lord Sumption also considered that s.33 should be treated as non-exclusive, saying this:

As can be seen from these passages, both Lord Walker and Lord Sumption based their approach on what was required to provide an effective EU law remedy. If s.33 appeared to stand in the way of that then it had to be interpreted so as not to do so, and that could be done by treating it as non-exclusive so as to permit the remedy that EU law required.

That is not this case. BT CA determined that the “moulded” Old Scheme provided an effective remedy. To use Lord Sumption’s analogy, surgery has already been performed. No further surgery is required to treat the Old Scheme as non-exclusive.

Mr Cordara also sought to rely on Autologic Holdings plc v Revenue and Customs Commissioners [2005] UKHL 54, [2006] 1 AC 118 as a case where a statutory scheme did not exclude a common law remedy in an EU context. That case does not assist BT. It primarily concerned a procedural question. The House of Lords decided by a majority that claimants were first required to seek to vindicate their EU law rights by exhausting the statutory appeals procedure, because the alternative of seeking relief through the High Court would circumvent that and amount to an abuse of process. Only where claims could not be dealt with by that route could other relief be sought. That included cases where the claimant was too late to use the statutory procedure (see at [39], per Lord Nicholls), but the focus in that case was not on whether the statutory scheme precluded such other claims altogether and, apart from a brief reference in the dissenting judgment of Lord Walker at [126], the point appears not to have been considered.

Mr Cordara’s second overarching point was that regard had to be paid to the nature of the remedy sought to be excluded, and specifically to the mistake made in this case, which related to the words of the statute in question and only became apparent long after BT’s ability to access the Old Scheme had been removed.

I cannot accept this submission. Quite apart from the notion that Parliament might be more inclined to intend to permit claims based on a mistaken failure to use the scheme rather than other types of claim being one that is somewhat difficult to grasp, as I have sought to explain (see the summary at [35] above), the question is whether Parliament intended the Old Scheme to be exclusive. That is not a question that can or should be answered by reference to a specific alternative remedy, and still less one that had not even been identified at the time that the Old Scheme was enacted.

BT’s real complaint is about the enactment of s.39(5) FA 1997 before it appreciated that it had a claim. I would give two answers to that. First, s.39(5) has been held not to conflict with BT’s directly effective rights: see above. Secondly, to the extent that what is being said is that the Old Scheme would have provided an appropriate remedy while it existed, but once it has gone then other remedies should be treated as available, then that cannot assist BT. The question whether Parliament intended the Old Scheme to be exclusive must necessarily be answered on the hypothesis that the scheme exists.

Having addressed Mr Cordara’s overarching submissions, I now turn to the interpretation of s.12 FA 1978.

In determining that the domestic bad debt relief scheme could be “moulded” to comply with EU law, the UT found in GMAC/BT UT at [165] that the “Old Scheme was intended to reflect the obligations of the UK under Article 11C”. That is obviously correct. The Old Scheme was enacted nine months after the provisions of the Sixth Directive were required to be implemented. The predecessor directive included no equivalent to Article 11C(1) (see Grattan v Revenue and Customs Commissioners (Case C-310/11) [2013] STC 502 at [35]-[36]).

As Ms Mitrophanous submitted, this is material. Parliament clearly gave careful consideration to the terms on which it was prepared to permit the new relief to be granted. They included important limitations in the form of the insolvency condition and the property condition. They also included the following:

The original regulations were the Value Added Tax (Bad Debt Relief) Regulations 1978, SI 1978/1129. They illustrate the significance of some of these points, for example by requiring a claim to be made only for the period in which proof of insolvency was received (albeit that, as the judge found, the Commissioners did not insist on that until 1991 when a later set of regulations were introduced), by provisions which determined which supplies should be treated as having been paid for in the event of part payment by a debtor, for a deemed set off of amounts owed by the claimant to the debtor and for a requirement to repay to the Commissioners any refund obtained in the event of a failure to comply with the duties imposed by the regulations to preserve and produce records.

It is true that the most material conditions were the insolvency condition and the property condition, and that a number of the procedural requirements related to the insolvency condition. But I think the judge was right to conclude that it was not correct to disregard those elements because they have subsequently been found not to comply with EU law. As he said at [82], to ignore those parts of the Old Scheme would be to “exclude significant indicators of what Parliament meant to achieve”. It does not seem to me to be realistic to attempt to enquire, for example, into what Parliament might have intended to happen in the event that any of the conditions it was imposing proved unlawful. The intention of Parliament must be ascertained by reference to the words actually used, and not on the basis of the text as it might read following a “moulding” process to comply with EU law.

It is the case that the Old Scheme covers the same ground as the common law claim that BT seeks to advance. Fundamentally, BT seeks bad debt relief pursuant to Article 11C(1). The Old Scheme was enacted to give effect to the bad debt relief required to be conferred by that provision.

Further, Parliament chose to do so on qualified terms, in particular the insolvency condition but also the property condition, the detailed requirements that were to be governed by regulations and the route of appeal. Those qualifications would have little purpose if a taxpayer could simply circumvent them by bringing its claim in another form. They are clear indications that the Old Scheme was intended to be exclusive. An ability to circumvent them by bringing another form of claim would be incompatible or inconsistent with the statutory scheme.

As the authorities show, although the position is obviously more straightforward where there is an express provision for exclusivity and its absence is a relevant factor, such a provision is by no means essential. Littlewoods provides a powerful illustration of that in relation to s.78 VATA 1994, despite its proximity to the express exclusivity provision in s.80(7).

Mr Cordara sought to rely on the fact that other provisions of Article 11C(1) were not the subject of domestic legislation (apart from a regulation introduced years later to deal with price reductions: see [85] below) as indicating that Parliament must be taken to have permitted the existence of other remedies. I prefer Ms Mitrophanous’s submission that this point assists HMRC more than BT. Parliament chose to enact a specific statutory scheme to set out the conditions under which bad debt relief could be claimed. Given the practical difficulties in determining whether a debt is bad and when that occurs, that is unsurprising. In contrast, it is not generally difficult to determine whether a price has been reduced or a contract has been cancelled.

The judge also referred to the Old Scheme being expressed to be separate from the procedure for recovering overpaid VAT pursuant to s.80 VATA 1994 and its predecessor, and to the enactment of s.39(5) FA 1997 (at [87] and [88]: see [42] (vi) and (vii) above). I would not myself rely on either of those points because they materially post-date the enactment of the Old Scheme. As far as s.39(5) is concerned the most that can be said is that its existence illustrates that any scheme enacted by Parliament may be altered, or indeed removed, by it, and that Parliament must be taken to have been aware of that.

In conclusion on this issue, I consider that the judge was correct to conclude that Parliament cannot be taken to have intended that other means of seeking bad debt relief should coexist with the Old Scheme.

The conclusion that the Old Scheme provided an exclusive remedy means that it is not strictly necessary to address the question of whether HMRC were unjustly enriched in respect of the main period, which was the context in which this issue was raised by HMRC’s Respondent’s notice. However, it is necessary to consider the question of whether HMRC were unjustly enriched in respect of the 9-month period. What follows reflects the fact that the submissions we heard on this issue were directed primarily at the main period, but both parties also sought to rely on them in HMRC’s cross-appeal in relation to the 9-month period. I will deal in more detail with the latter.

In outline, HMRC’s case is that BT’s complaint is one of failure to make a claim in time, or “mistaken failure to claim”. BT cannot (and do not seek to) argue that the VAT originally accounted for on the supplies was not due for the period in which the supplies were made. Although BT could have claimed bad debt relief in a later period by setting it off against VAT due on later supplies, it did not do so. HMRC maintain that that involved no transfer of value beyond the initial payment.

Ms Mitrophanous used an example of BT accounting for £100 of VAT at time T1. At T2 BT reaches the view that £10 of this relates to debts that have become bad. BT makes further supplies and at T3 accounts for a further £150 of VAT in respect of those supplies without setting off the £10 from T1 that relates to bad debts. Ms Mitrophanous submitted that in doing so BT had simply failed to make a claim, and that involved no transfer of value. It is true that HMRC were better off as a result of BT’s failure, but as Investment Trust Companies explains the test is not merely one of economic or commercial reality.

Mr Cordora maintained that in this example HMRC were enriched by £10 and that this occurred at, or at least no later than, T3. Mr Cordara relied on Iveco Ltd v Revenue and Customs Commissioners [2017] EWCA Civ 1982, [2018] STC 364 (“Iveco”) and DMG to support BT’s argument that HMRC were unjustly enriched on the basis that, absent its mistake, BT would have paid £140 and not £150 at T3. Alternatively, Mr Cordara relied on Gibb v Maidstone & Tunbridge Wells NHS Trust [2010] EWCA Civ 678 as authority for the proposition that forbearance to bring a valid claim can amount to enrichment. He also submitted that HMRC’s case relied on the “machinery” of the VAT system, wrongly overlooking the distinction between the procedures for assessing and collecting tax on the one hand and the underlying liability on the other. I will deal with these points in turn.

Iveco was a decision of this court concerning the part of Article 11C(1) that dealt with price reductions. The appellant, Iveco, brought a statutory appeal against HMRC’s refusal to refund VAT related to price rebates granted by Iveco between 1 January 1978 and 31 December 1989. During that period no domestic legislation had been in place implementing Article 11C(1) in relation to price reductions. A provision was first included in the VAT regulations with effect from 1 January 1990 (see now regulation 38 of the 1995 Regulations).

Iveco’s claim was first made to HMRC in November 2011, and the issue which was appealed to this court was whether its claim was time-barred. Reversing the FTT, the UT had held that it was, on the basis that Article 11C(1) had direct effect at the point that rebates were paid, that s.80 VATA 1994 provided the means to enforce Iveco’s directly effective rights, and that Iveco’s claims were time-barred by reference to that provision.

Iveco appealed, contending that there was no automatic reduction in the taxable amount for the purposes of Article 11C(1) at the point that the price was reduced, but instead that it had a directly effective right to bring about a reduction in the taxable amount at a time of its choosing. The appeal was dismissed. Newey LJ considered both BT CA and GMAC CA, and at [38] rejected Iveco’s attempt to rely on a passage in the judgment of Floyd LJ in GMAC CA on the basis that Floyd LJ was considering bad debt relief, which “has always been something that a creditor must claim”. He concluded that there was nothing in Article 11C(1) to suggest that a reduction in the taxable amount could legitimately be deferred to any great extent, and on the contrary it required a refund to be available within a reasonable period. The United Kingdom was therefore required to provide for a reduction in the taxable amount at or soon after the time when a rebate was paid, and suppliers were therefore entitled to enforce their directly effective rights by making a negative entry in their VAT account when the rebate was paid. On that footing there was an overpayment of VAT (paragraphs [46] and [47]). However, that did not translate into a right to reduce the taxable amount whenever the taxable person chose (paragraph [48]).

In determining how Iveco’s Article 11C(1) right should be given effect, Newey LJ concluded at [54] that its remedy was to claim to recover overpayments under s.24 FA 1989 and (later) s. 80 VATA 1994. Iveco was out of time to do so. In the light of that conclusion it was unnecessary to consider whether some other form of remedy would have been required if Iveco had sought to enforce its rights before s.24 FA 1989 came into force (paragraphs [56] and [57]).

Mr Cordara submitted that Iveco demonstrates that, in the absence of effective domestic legislation, Article 11C(1) applied automatically and was not neutered by a requirement to make a claim as HMRC maintained. As the CJEU had said in Minister Finansów v Kraft Foods Polska SA (Case C-588/10) EU:C:2012:40, [2012] STC 787:

The difficulty with BT’s reliance on Iveco in respect of the main period is twofold:

The analysis in relation to the 9-month period is somewhat different. Although HMRC’s position in the proceedings as a whole is that the moulded Old Scheme can be “read back” to apply to the 9-month period, for the purposes of their strike out application they place no reliance on the Old Scheme. On that footing there was therefore no domestic implementing legislation in place for the 9-month period that provided for bad debt relief, and in that respect there is a direct parallel with Iveco. If the reasoning in Iveco were applied, therefore, BT would have been able to rely on its directly effective rights to obtain bad debt relief, including by setting off the £10 at T3 in the example above. In that respect Ms Mitrophanous correctly accepted that there is a distinction between the 9-month period and the main period.

For the main period there was a domestic scheme in place, and the lawfulness of the feature that it required a claim to be made has never been put in issue. That feature meant that s.80 was not engaged in respect of bad debt relief in respect of the main period, as BT CA determined. In contrast, on the hypothesis that the Old Scheme is not read back to the 9-month period there would have been no requirement for a claim, and it could then be argued that in the example only £140 was owed at T3, because the £10 was to be treated as automatically set off against the VAT of £150 that would otherwise have been due.

However, it does not follow from this that BT can successfully rely on Iveco in respect of the 9-month period, because point (b) at [90] above still applies. Iveco’s claim under s.80 failed because it was out of time. BT made an in time claim under s.80, but the effect of BT UT 2023 is that its claim under s.80 has been finally determined against it by the statutory appeal being struck out.

The reasoning relating to s.80 is put shortly in Rimer LJ’s judgment in BT CA. In summary, he agreed with the UT and with the submissions of Mr Lasok for HMRC. He said this:

Earlier in his judgment Rimer LJ had recorded Mr Lasok’s submissions in the following terms:

Ms Mitrophanous submitted, and Mr Cordara did not dispute, that Rimer LJ accepted Mr Lasok’s submissions in these terms, and that BT had not disputed that that was the case in submissions to the UT in BT UT 2023. I agree. It explains why the second half of the passage above is cited in BT UT 2023 at [52] on the basis that it records Rimer LJ’s rejection of the argument that, although VAT was properly due at T1 (in the example above), there was an automatic set-off at T3 such that there was an overpayment for the purposes of s.80 at that point.

The point was an important one. Mr Cordara’s submissions in BT UT 2023 were to the effect that, even though BT CA had determined that there was no overpayment at T1 pursuant to s.80(1), the (differently worded) s.80(1B) was not addressed, and that provision, together with the later guidance in Iveco, enabled BT to claim that there was an overpayment at least by T3.

The UT determined at [47] that Rimer LJ’s judgment extended to s.80 as a whole, including s.80(1B). In considering Iveco, it also recorded at [53] its acceptance of HMRC’s submission that there are good reasons to treat bad debts separately from other reductions in consideration, including a lack of clarity as to when a debt becomes bad. The UT’s conclusion as to what BT CA decided in relation to s.80 was expressed in the following terms at [65(c)]:

Importantly, the UT’s conclusions draw no distinction between the 9-month period and the main period as far as s.80 is concerned. Indeed, the UT expressly confirmed at [57] that BT CA had determined the claim for both periods. BT’s statutory appeal was accordingly struck out in full. The reason that no distinction was drawn is clear from an extract from the transcript of Mr Cordara’s submissions to the UT that Ms Mitrophanous showed us. Those submissions focused solely on the main period and indicated that BT was “not concerned” in the statutory appeal with the 9-month period, which had “very little money in it”.

It seems to me that this places an insuperable obstacle in the way of BT’s argument based on Iveco, in the form of s.80(7), set out at [21] above. As Lewison LJ said in Leeds CC at [13], s.80 is intended to be a complete statutory code for the repayment of overpaid VAT. Section 80(7) excludes other remedies for overpaid VAT. Iveco cannot therefore assist BT in relation to the 9-month period. This is because, if BT was right in its submission that Iveco demonstrates that BT’s directly effective rights for the 9-month period meant that it had overpaid VAT, the only route that it would have to vindicate those rights would be under s.80. However, its claim under s.80 has been finally determined, and in circumstances where BT chose not to press its claim for the 9-month period. Having made that choice it cannot assert a claim that is expressly excluded by s.80.

I should also refer to Floyd LJ’s comments in GMAC CA about s.80 and what at that time was the UT decision in Iveco. Floyd LJ confirmed the conclusion in BT CA that s.80 is not engaged in respect of bad debt relief. He said this at [134] (immediately after the passage cited at [58] above):

Although we did not hear detailed argument on the point and I do not need to rely on it, it seems to me that there is also a broader objection to BT’s reliance on Iveco based on res judicata and, potentially, abuse of process. The statutory appeal determined that BT did not have a s.80 claim on the basis that there was no overpayment of VAT. The conclusion that there was no overpayment was a necessary ingredient of the outcome of the appeal on that issue. That seems to me to fall within the classic definition of issue estoppel (see Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46, [2014] AC 160 at [20] per Lord Sumption, citing the speech of Lord Keith in Arnold v National Westminster Bank plc [1991] 2 AC 93). Although there are very significant limitations on issue estoppel in a tax context because of the way that tax is charged on a periodic basis (see Caffoor v Income Tax Commissioner [1961] AC 584, discussed in detail in a VAT context by Henderson J in the High Court in Littlewoods [2014] EWHC 868 (Ch), [2014] STC 1761), in this case the common law claim relates to precisely the same tax as was the subject of the statutory appeal. For that reason it seems to me that it is strongly arguable that it is simply not open to BT to raise arguments now based on an alleged overpayment of VAT. And if that were not correct, then the abuse of process principle derived from Henderson v Henderson (1843) 3 Hare 100 at 115 would in any event appear to be relevant. In respect of the 9-month period, BT chose not to pursue the argument that it overpaid VAT, even though it must have been aware that there was a difference in the analysis between that period and the main period.

DMG is an important case that established that English law recognises a restitutionary claim for tax paid under a mistake of law. It remains authority for that proposition, although it was departed from in FII 2020 as regards its conclusions about when the relevant mistake was discoverable.

The context of DMG was the ECJ decision in Metallgesellschaft Ltd v Inland Revenue Commissioners and Hoechst AG v Inland Revenue Commissioners (Joined Cases C-397 and 410/98) [2001] Ch 620 (“Metallgesellschaft”). In Metallgesellschaft the ECJ had determined that the regime under which UK subsidiaries could pay dividends to their UK parents without accounting for advance corporation tax (“ACT”) by making a group income election (“GIE”), but could not do so where the parent company was based in Germany because a GIE was unavailable, was contrary to European law.

The key parts of the decision in Metallgesellschaft are set out in Lord Walker’s speech in DMG. In principle, member states are required to repay “improperly levied” charges (ECJ decision at [84] and [85]). However, because the ACT in that case had subsequently been set off against corporation tax, the breach arose from the tax being levied prematurely rather than from the payment of tax itself. The ECJ ruled at [87] that in those circumstances an award of interest appeared to be “essential” to restore equal treatment. Further, the UK’s argument that it could rely on the failure of the taxpayers to attempt to make GIEs was rejected as contrary to the principle of effectiveness (at [106]):

In DMG there was no statutory mechanism that provided the remedy that the ECJ required domestic law to provide (the House of Lords having rejected an argument based on s.33 TMA). In those circumstances it is not surprising that the Commissioners conceded that some form of restitutionary remedy was required, albeit only by analogy with the Woolwich principle (Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70), which would have been subject to a six-year time limit (see [7], [107], [135] and [160]). DMG had pleaded that it was entitled to restitution based either on an unlawful demand (i.e., Woolwich) or money paid under a mistake of law. The decision of the majority was that DMG was effectively entitled to choose the latter and benefit from a longer limitation period.

As to the existence and nature of the mistake, Park J had accepted the evidence of Mr Thomason, DMG’s head of tax, that he believed that he was bound to act in accordance with the UK statute. Park J had also concluded that the mistake was not about whether ACT was payable but whether DMG should have been permitted to make a GIE.

Lord Hoffmann observed at [20]-[21] that the effect of Metallgesellschaft was that “the Inland Revenue had not been entitled to the money”, and English law provided a remedy in unjust enrichment for money paid without a legal basis. Instead of Park J’s “rather sophisticated” view of the nature of the mistake, the mistake was “about whether DMG was liable for ACT”, the election provisions being “purely machinery” to enforce DMG’s right to exemption ([32]).

Lord Walker reached a similar conclusion, commenting at [143] that the judge’s approach was “rather over-analytical” and that the procedural requirement for a GIE did not alter the substance of the mistake.

In contrast, at [62] Lord Hope accepted Park J’s analysis as to the nature of the mistake but concluded as Park J had that the ACT was nonetheless paid by mistake because the mistake about the availability of a GIE led inevitably to the liability to pay ACT. Lord Brown’s judgment does not cast much further light on the point because he agreed with the speeches of Lord Walker, Lord Hoffmann and Lord Hope on the “mistake” issue, albeit his primary focus seems to have been on the judgment of Lord Walker: see paragraph [161].

However, Lord Scott, in his dissenting judgment, concluded that the imposition of ACT was not unlawful. Rather, what was discriminatory was the GIE system. Like Lord Hope he agreed with Park J’s analysis of the nature of the mistake but decided that the ACT was lawfully paid and not paid under a mistake in a sense that justified a restitutionary remedy, as opposed to a claim for compensation to recover a loss caused by the breach of Community law (paragraphs [82], [89] and [91]).

Writing in 2012, Professor Burrows suggested that the normal approach in the law of unjust enrichment that an unjust factor does not override a legal obligation on the claimant to make a transfer of value is subject to limited exceptions, which might be explained by the legal entitlement being “easily outweighed by the unjust factor”. He sought to explain the result in DMG as an exception to the rule that restitution should be denied where the defendant has a statutory right to a payment on the basis that the defendant’s right arose only “in one technical sense” (Professor Burrows, A Restatement of the English Law of Unjust Enrichment, p.34).

Professor Burrows’ explanation of DMG is queried in Goff & Jones, The Law of Unjust Enrichment (10^th ed.) at 2-11 by reference to the fact that the tax was strictly due under the ACT system. Goff & Jones goes on to discuss the reliance placed on DMG by Thornton J in Surrey CC v NHS Lincolnshire Commissioning Group [2020] EWHC 3550 (QB), [2021] QB 896 (“Surrey CC”), where unjust enrichment was found to have arisen in circumstances where the claimant council’s payments of accommodation and care costs were made under a legal obligation, but the defendant primary care trust should have assessed the relevant individual’s needs and, had it done so, would probably have concluded that he was eligible for NHS continuing healthcare. However, the only reason why the claimant had been required to pay was because of the defendant’s unlawful refusal to do so. Thornton J applied the approach suggested by Professor Burrows to find at [115] that the claimant’s legal obligation to pay was outweighed by the unjust factors at play. But she also drew an analogy with Gibb v Maidstone, discussed below, at [121], concluding that the claimant had discharged a liability that but for an unlawful decision would have been owed by the defendant.

DMG was obviously decided well before the Supreme Court’s explanation of the concept of unjust enrichment in Investment Trust Companies, and its further decision in Prudential to depart from Sempra Metals. It was the decision in DMG that had allowed Sempra to frame its claim for interest as being one in restitution for ACT paid under a mistake of law: Sempra Metals at [19], per Lord Hope. However, the approach taken by Lord Hoffmann and Lord Walker on the nature of the mistake is consistent with the application in Prudential of Lord Reed’s analysis in Investment Trust Companies, namely that the payment of money by mistake is normatively defective and gives rise to an obligation to reverse the benefit conferred (see [38] above).

I would derive the following points from DMG relevant to this case:

In contrast, in this case a statutory remedy has already been identified that gives effect to BT’s EU law rights, at least for the main period, in the form of the Old Scheme. Further, at least for the main period the tax was not collected unlawfully. The tax was properly due in the absence of a claim: see BT CA at [30] (discussed above at [95] and [96]). The requirement to claim bad debt relief has not been treated as “purely machinery”, to use Lord Hoffmann’s words. Rather, that requirement has been found to be of real significance and has been held to prevent a claim under s.80 VATA 1994. In the light of that, if the approach suggested by Professor Burrows were to be applied, I would not describe BT’s legal obligation to pay the money as merely “technical” and would not conclude that it was outweighed by any unjust factors. BT had the opportunity to make a claim under the Old Scheme up to 1997 and did not do so. I would also add that I consider Surrey CC to be clearly distinguishable on the facts.

Again the position is somewhat different for the 9-month period. As I have said, HMRC do not rely on the Old Scheme for the purposes of their strike out application. On that basis BT’s directly effective rights to claim bad debt relief could be argued to mean that £10 of tax paid at T3 in the example above was not properly due. It would logically follow that VAT was overpaid.

However, this is not a case like DMG where there was no available statutory remedy to recover unlawfully levied (or in that case prematurely levied) tax. Overpaid VAT could be recovered pursuant to s.80 VATA 1994 and its predecessor, including (as the facts of Iveco illustrate) in respect of periods well before those provisions were enacted. Although HMRC’s position in its dispute with BT has been that s.80 has no application, that is on the basis that the requirement for a claim under the Old Scheme cannot be ignored and (I infer) also reflects the fact that HMRC’s position in the proceedings as a whole is that the Old Scheme can be “read back” to the 9-month period. Once the Old Scheme is left out of account for the 9-month period, such that BT’s claim that it has overpaid tax – and the analogy with DMG – gains traction, it seems to me that it would also follow that s.80 would have been in point, just as it would be in relation to BT’s argument based on Iveco.

On that basis, BT must again be faced with the problem of s.80(7), which has the effect that s.80 provides an exclusive regime to recover overpaid VAT. However, as already discussed BT’s claim under s.80 has been finally determined against it, including for the 9-month period.

I should clarify that I do not consider that anything in BT CA or BT UT 2023 requires a contrary conclusion. There are obiter references in BT CA to a possible common law restitutionary claim at [86] and [118] in relation to the 9-month period, but given the conclusion that s.80 had no application that is unsurprising. The fact that s.80 was held not to apply in a discussion that did not distinguish between the main period and the 9-month period cannot, it seems to me, prevent this court from analysing BT’s arguments in favour of a common law restitutionary claim and concluding that, if accepted in relation to the 9-month period, they would necessarily engage s.80. Mr Cordara did not seek to submit otherwise when Ms Mitrophanous raised the final determination of BT’s s.80 claim in the context of Iveco, and I cannot see a material difference between that and BT’s argument based on DMG. I further note that, in the grounds for HMRC’s strike out application, the point was raised in the following terms:

Alternatively, and more simply, the conclusion that s.80 did not apply arguably creates an issue estoppel such that BT may no longer assert that there was an overpayment of VAT, and/or engages Henderson v Henderson: see [102] above.

In Gibb v Maidstone Ms Gibb sought to enforce a contract in which she had agreed terms of severance with the respondent NHS Trust. She had been paid approximately £75,000, whereas the contract provided for a payment of approximately £250,000. This court allowed Ms Gibb’s appeal against the judge’s conclusion that the compromise agreement was ultra vires, so the court’s comments about Ms Gibb’s alternative claim in restitution were obiter. Ms Mitrophanous did not however seek to challenge their correctness.

In that alternative claim, Ms Gibb had asserted that her entry into the compromise agreement had conferred benefits on the Trust comprising giving up an unfair dismissal claim and agreeing to terms of confidentiality, to immediate cessation of employment and to the avoidance of any requirement to conduct an internal grievance procedure. Laws LJ, who gave the leading judgment, referred at [29] to the submission of Counsel for Ms Gibb that the “foregoing of a valuable claim may confer a benefit – an enrichment – on the party not so pursued” and went on to say this at [30]:

Laws LJ concluded that the unjust enrichment claim would have been made out if the contract had been ultra vires, and although the non-monetary elements of what Ms Gibb gave up would be valued very modestly the benefit to the Trust of releasing the unfair dismissal claim had been valued at nearly £70,000: see at [37]. Rimer LJ agreed with Laws LJ. Sedley LJ preferred not to express a view on the restitution issue.

Gibb v Maidstone is very different to the present case. Ms Gibb signed a document in which she gave up her right to pursue a claim for unfair dismissal. Laws LJ accepted at [36] that the fact that (on the alternative case) the contract turned out to be void did not affect the fact that the Trust had received and retained that benefit. In contrast, in this case BT merely failed to exercise its right to claim bad debt relief in time. It at no stage conferred a benefit on HMRC by giving up that right. A failure to take action before s.39(5) FA 1997 was enacted cannot be equated with “foregoing” a claim in the sense meant by Laws LJ.

As already mentioned, Mr Cordara further submitted that BT’s case wrongly overlooked the distinction between the procedures for assessing and collecting tax on the one hand (the “machinery”) and the underlying liability on the other. He relied on the classic description by Lord Dunedin, in Whitney v Commissioners for the Inland Revenue [1926] AC 37 at p.52, of the three stages of imposition of tax, namely declaration of liability, assessment and recovery, and an application of those principles by Cockerill J in XL Insurance Co SE v IPORS Underwriting Ltd [2021] EWHC 474 (Comm) at [34]-[37].

I have already explained that the procedure for claiming bad debt relief has been found in BT CA not to be a question of machinery. Rather, BT’s failure to claim bad debt relief meant that the tax it paid not only at T1 but also at T3 – and indeed in subsequent periods – was tax that was properly due as a matter of liability. It follows that even if the principle explained in Whitney can be translated from direct tax to VAT (a point for which no authority was cited), it cannot assist BT in this case. For the same reason BT can gain no assistance from s.81(3) VATA 1994, which provides for a set-off of VAT due against amounts owed by HMRC, on which Mr Cordara also relied. In respect of the main period, no amount was due from HMRC by way of bad debt relief in the absence of a claim. Although the position would have been arguably different for the 9-month period, it would also logically follow that BT would have overpaid VAT for the purposes of s.80, so engaging s.80(7): see above.

It follows that in my view none of Iveco, DMG or Gibb v Maidstone assist BT in establishing that there was the required normatively defective transfer of value to found a potential claim in unjust enrichment. The VAT paid at both T1 and T3 in HMRC’s example has been found to be properly due. If that was not the case then s.80 VATA 1994 would have been engaged, including the express exclusivity provision in s.80(7). BT has also not given up a right in a way analogous to Ms Gibb’s action in Gibb v Maidstone. It retained the right to claim bad debt relief until the enactment of s.39(5) FA 1997.

As explained in Investment Trust Companies, the purpose of restitution is to reverse a normatively defective transfer of value (see [36] above). In this case there has been no transfer of value in the sense explained by the Supreme Court. BT has simply failed to make a claim for VAT bad debt relief, whether by refund or by set off against VAT it owed, within the requisite period. Neither a failure to bring a claim for a refund nor a failure to exercise a right of set off can amount to a transfer of value, in circumstances where the right is not given up. The position is no different to that of a claimant who mistakenly omits to bring a valid claim before a limitation period expires. A mere omission of that nature cannot give rise to a claim in unjust enrichment.

Although the law of restitution remains a developing area, in my view this is a pure question of law. I cannot see that allowing the case to proceed to a fact-finding trial could make any difference to the arguments on this issue or to the court’s assessment of them. In my view, a claim based on unjust enrichment has no real prospect of success. This is therefore a case where the nettle referred to by Lewison J in Easyair should be grasped.

It follows that I respectfully disagree with the judge’s conclusion on this issue. In doing so, I should note that, unlike the judge, we have the benefit of the decision in BT UT 2023, which finally disposes of BT’s s.80 claim for both the main period and the 9-month period.

For the reasons I have already set out I cannot see how BT can make out a case in unjust enrichment for the main period. Although the argument that BT overpaid VAT is potentially different for the 9-month period, any analysis based on overpayment would necessarily engage s.80(7) VATA 1994. BT therefore has no claim in unjust enrichment in respect of that period either.

In those circumstances it is not necessary to consider the question of when the mistake was discoverable under the test established in FII 2020. However, I would observe that I consider that the judge was not only entitled to conclude that a trial of that issue would have been required, but could not properly have reached a different conclusion. The test established in FII 2020 requires a factual enquiry, which must be based in the evidence before the court. HMRC’s application did not include any witness evidence at all.

In those circumstances it would be wrong for the court to embark on what would essentially be its own judicial appraisal, unencumbered by evidence. This is so despite the apparent strength – at least with the benefit of hindsight – of aspects of HMRC’s case on this point, including the fact that the ECJ decided as long ago as 1997 that the power to derogate contained in Article 11C(1) was limited and that one element of the Old Scheme (the exclusion of barter transactions) contravened EU law: Goldsmiths (Jewellers) Ltd v Customs and Excise Commissioners (Case C-330/95) [1997] STC 1073. Although I was at one stage attracted by the argument that the position must be different for the 9-month period, in respect of which it should have been obvious to a well-resourced taxpayer like BT that the UK had not implemented any bad debt relief scheme at all, I was persuaded by Mr Cordara’s submission that the position could be affected by the subsequent introduction of the Old Scheme, because it could have induced a belief that anything available for the 9-month period would not be more favourable than that. In any event, however, the point already made about the requirement for evidence remains.

In conclusion, I would dismiss BT’s appeal in respect of the main period and allow HMRC’s cross-appeal in respect of the 9-month period, with the result that HMRC’s application for strike out or reverse summary judgment succeeds in full.