SKAT – UK Supreme Court in a VAT fraud case finds that the doctrine of issue estoppel has a narrow scope

The Danish tax administration (“SKAT”) brought proceedings in 2018 against the defendant (“EDFM”) on the basis that EDFM was liable for negligent misrepresentations contained in tax vouchers issued to its clients which they used in support of withholding tax refund applications to SKAT. This claim was found in the Commercial Court to be unavailable by virtue of the revenue rule.

In 2022, SKAT brought new claims against EDFM, alleging that it had prepared fraudulent tax vouchers for the sole purpose of inducing the payment of withholding tax refunds to EDFM’s clients, which were U.S. or Canadian pension plans. Regarding whether the 2022 proceedings were barred by issue estoppel, Lord Sales and Lord Doherty stated:

[A]n issue estoppel has a very narrow focus, being concerned with the facts that are fundamental or ultimate (in the sense that they necessarily had to be established to make good the cause of action being alleged or a defence put forward) and the legal quality of those particular facts. …

The 2018 Claim against EDFM alleged negligent misrepresentation. It did not allege fraud. The factual and legal bases of the 2018 Claim and the 2022 Claim are different. They were different causes of action.

By way of elaboration:

One reason why the scope of an issue estoppel is limited to the immediate foundation of a decision is that it would be potentially unjust for a party to be estopped by elements of judicial reasoning which went wider than was necessary for the prior court to determine the particular case before it. ... The scope of an estoppel should not depend upon the happenstance of how widely or narrowly a judge chooses to frame the reasoning in their judgment. …

It would be contrary to the coherent application of the law in this area, and would work injustice, to give the doctrine of issue estoppel an expansive interpretation which cut across and significantly displaced the rules on abuse of process, which provide the appropriate framework for regulation of what has happened in this case. …

Over-extensive application of the doctrine of issue estoppel, beyond the field in which it is strictly required to do justice between the parties to litigation, would undermine the balance struck more generally in the public interest, and taking account of the private interests of the parties, by the doctrine of precedent.

Neal Armstrong. Summary of Skatteforvaltningen (The Danish Customs and Tax Administration) v MCML Ltd (previously known as ED&F Man Capital Markets Ltd) (Rev1) [2026] UKSC 19 under General Concepts – Estoppel.