Indirect effects: have bad debts ended non-statutory remedies in VAT?
18 May 2021
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Last month, the High Court may have ended 27 years of VAT bad debt relief (BDR) litigation.
The BDR saga started with Goldsmiths (Jewellers) Ltd (Case C-330/95). In BT Plc v HMRC [2021] EWHC 1095 (BT), the High Court may have sounded the final bell.
The history of BDR litigation is tortuous. A review would generate a substantial carbon footprint. Nevertheless, BT has wider implications for common law tax claims, and possibly HMRC’s unjust enrichment defence.
Background
BT deals with a claim for restitution and damages arising out historic defects in the UK BDR regime. It covered two periods:
1 January 1978 to 30 September 1978, when the UK had no BDR scheme; and
1 October 1978 to 31 March 1989, when the UK had a non-compliant BDR scheme (‘the old scheme’).
FA 1997 s 39(5) barred access to the old scheme after a long and confusing transition to the new scheme. The Court of Appeal has already found that s 39(5) was lawful, so BT’s only option was a common law claim. BT sought to avoid s 39(5) by bringing a restitution and damages claim.
