Upper Tribunal Tax and Chancery Chamber

UT (Tax & Chancery) UT/2022/000103 - [2024] UKUT 00183 (TCC)

Fecha: 13-Mar-2024

Introduction

Introduction

This is an appeal against a decision of the First-tier Tribunal (Tax Chamber) (“the FTT”) released on 3 May 2022 (“the Decision”). In the Decision, the FTT struck out the appeal of telent Technology Services Limited (“TTSL”) against a decision of HM Revenue & Customs (“HMRC”) refusing its claim for repayment of VAT. The circumstances in which HMRC made its strike out application are succinctly summarised by the FTT at [3] – [8] of the Decision:

The telent group provides network, transport, telecommunications and infrastructure services. In 2006, it placed a sum in escrow (“the Escrow Account”) to provide comfort to the Pensions Regulator as to the future funding of its occupational pension scheme. In 2014, telent Ltd informed HMRC that it had been recovering input tax on fees paid to investment advisers for the Escrow Account. At that time, telent Ltd was the representative member of the telent group.

On 17 November 2014, HMRC issued telent Ltd with an assessment to recover VAT for the periods 11/10 through to 05/14, a sum of £1,146,598.93 (“the Assessment”). On 10 September 2015, following a statutory review, telent Ltd appealed the assessment to the Tribunal (“the Assessment Appeal”). In March 2016, the Assessment Appeal was withdrawn.

Later that year, telent Ltd changed its professional advisers to PriceWaterhouseCoopers LLP (“PwC”). On 30 September 2016, PwC made a claim in the name of telent Ltd to recover VAT on the investment management services relating to the Escrow Account of £1,312,309 for periods 08/12 to 08/16 (“the Claim”). The Claim thus included eight VAT periods (“the Overlap Period”) which had also come within the Assessment Appeal; the related VAT totalled £855,754.

HMRC refused the Claim by writing to Telent Technology Service Ltd (“TTSL”), the new representative member of the telent VAT group. TTSL appealed that refusal to the Tribunal. In their Statement of Case, HMRC made no reference to the Assessment Appeal or to estoppel.

In July 2021, HMRC informed PwC that they were minded to concede the substantive issue, but also said “Telent is procedurally barred” from recovering the VAT for the Overlap Period, and inviting settlement on that basis. The parties failed to agree, and HMRC applied for the Tribunal to strike out of the part of the appeal relating to the Overlap Period; they conceded the remaining part of the appeal.

HMRC’s strike out application rested on Value Added Taxes Act 1994 (“VATA”), s 85(1) and (4), which state that where a person has withdrawn its appeal, the parties are deemed to have agreed that “the decision under appeal should be upheld without variation” and the Tribunal is deemed to have determined accordingly. In Mr Elliott’s submission, the effect of those subsections was that, when telent Ltd withdrew the Assessment Appeal, the parties were deemed to have come to an agreement with HMRC that input tax on the investment management services for periods 08/12 to 05/14 was not allowable, and the Tribunal was deemed to have determined that this was the case. As a result, there had been a judicial determination that the VAT was irrecoverable, and the principles of cause of action estoppel, issue estoppel and/or abuse of process prevented relitigation.

We shall adopt the same abbreviations as the FTT in this decision. We also refer to TTSL’s appeal in relation to the Claim for the Overlap Period as “the Claim Appeal”. HMRC’s application to strike out the Claim Appeal relied on section 85 VATA 1994 and cause of action estoppel, issue estoppel and/or abuse of process. TTSL contended that HMRC were themselves estopped from striking out the Claim Appeal because they had acquiesced in TTSL bringing that appeal. In the alternative, TTSL contended that section 85 did not give rise to any cause of action estoppel, issue estoppel or abuse of process. The overall findings of the FTT may be summarised for present purposes as follows, with references to relevant paragraphs in the Decision:

(1)

HMRC were not estopped from applying to strike out the Claim Appeal (at [72] to [107]).

(2)

The effect of section 85 was that on withdrawal of the Assessment Appeal, the FTT was deemed to have determined that input tax on investment management services for the Overlap Period was not allowable (at [108] to [185]).

(3)

Cause of action estoppel applied as an absolute bar to the Claim Appeal (at [186] to [193]).

(4)

HMRC’s application to strike out therefore succeeded (at [193]).

(5)

In the alternative, TTSL would be barred by issue estoppel from making the Claim Appeal (at [194] to [224]).

(6)

In the further alternative, TTSL was not seeking to raise any new issues relating to the Overlap Period and the Claim Appeal should be struck out as an abuse of process (at [225] to [238]).

On this appeal, the parties rely on broadly the same arguments that were put to the FTT. TTSL appeals with permission of the FTT and its grounds of appeal are as follows:

Ground 1 – the FTT erred in law in concluding that HMRC had not acquiesced in TTSL bringing the appeal, or were not otherwise estopped from raising their procedural objections.

Ground 2 – the FTT erred in law in its determination of the meaning and effect of section 85 VATA 1994.

Ground 3 – the FTT erred in law in concluding that TTSL was subject to cause of action estoppel.

Ground 4 – the FTT erred in law in concluding that TTSL was subject to issue estoppel.

Ground 5 - the FTT erred in law in concluding that TTSL was barred by abuse of process.

It would normally be logical to consider cause of action estoppel before issue estoppel. However, Ground 4 stands or falls with Ground 2 in that it is only if the FTT was right in its determination as to the meaning and effect of section 85 that there could be any issue estoppel. TTSL accepts that if the FTT was right on section 85 then there would be an issue estoppel. We shall therefore adopt the same approach as the parties and deal with Grounds 2 and 4 together before considering cause of action estoppel under Ground 3.

We are grateful to both counsel for their comprehensive and helpful submissions, both in writing and orally, and for the work of those instructing them. We have also been assisted by the obvious care which the FTT applied to the Decision. For the reasons which follow we have decided to dismiss TTSL’s appeal.