BT Reopens 10 Year Old Case – Demands HMRC Repay Millions

Broadband ISP and media giant BT appears to have successfully lifted a stay against a decade old restitution suit in the UK High Court for Value Added Tax (VAT) refunds, which originally claimed that HM Revenue & Customs (HMRC) owed them £91.8 million plus interest in overpaid tax.

The situation began in early 2009 after BT wrote to HMRC making a claim for hitherto unclaimed VAT on “bad debt relief” for the period 1st January 1978 to 31st March 1989, which arose because BT had accounted for the standard rate of VAT on its supplies to customers but, in some cases, those customers had failed to pay the operator (either in part or at all) for its supplies.

Naturally BT wanted a refund and complained that, at the time, the law wrongfully said that debtors had to be forced into insolvency before the VAT could be clawed back. HMRC refused to repay the disputed amount and BT ended up appealing before the First-tier Tribunal (Tax Chamber) against HMRC’s decision (see details of the last case here).

Long story short. The case ended up in a sort of legal limbo, until 2017 when HMRC made a legal application to strike out BT’s FTT case. According to The Register, BT then asked the High Court last August 2019 to lift the stay on its case there and Mr Justice Fancourt has now done exactly that.

At this point we note that, before everything was put into limbo, the parties had agreed a figure for the dispute of £65.2m excluding interest. However, were BT ultimately to succeed, that figure would need to be adjusted to take account of the fact that they had claimed bad debt relief in respect of the VAT when accounting for corporation tax.

In the meantime BT’s appeal won’t be able to make any further progress because the court will first need to make a decision on HMRC’s long running strike-out application. BT would certainly benefit from some extra cash right now (the past couple of years have been particularly difficult for them), but we can’t see this one going anywhere too quickly during the current COVID-19 crisis.