© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
Procedure.Tax
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N5a. Judicial review jurisdiction
FTT has no general judicial review jurisdiction
“The statutory jurisdiction conferred upon the FtT by s.3 TCEA 2007 is in our view to be read as exclusive and the closure notice appeals under Schedule 1A TMA do not extend to what are essentially parallel common law challenges to the fairness of the treatment afforded to the taxpayer. The extra-statutory concession is, by definition, a statement as to how HMRC will operate in the circumstances there specified and its failure to do so denies the legitimate expectation of taxpayers who had been led to expect that they would be treated in accordance with it. We are not concerned as in these statutory appeals with the direct application of the taxing instrument modified, or otherwise, by any relevant principles of EU law. The sole issue in relation to ESC B41 is whether it was fairly operated in accordance with its terms…We therefore consider that the reasoning of Sales J in Oxfam v HMRC has no application to the statutory jurisdiction under s.3 TCEA 2007 in the sense of giving to the FtT and the Upper Tribunal jurisdiction to decide the common law question of whether HMRC has properly operated the extra-statutory concession. The appeals are concerned with whether the Trustees are entitled under s.231 to claim the benefit of the credits on FIDs and foreign dividends. Not with what is their entitlement under ESC B41. This reading of TCEA 2007 is strengthened by s.15 TCEA 2007 which gives the Upper Tribunal jurisdiction to decide applications for judicial review when transferred from the Administrative Court. It indicates that when one of the tax tribunals was intended to be able to determine public law claims Parliament made that expressly clear. There are no similar provisions in the case of the FtT.” (Trustees of the BT Pension Scheme v. HMRC [2015] EWCA Civ 713 at §§142…143).
“I suppose that in an extreme case it might be possible to challenge the decision to raise an assessment as so unreasonable as to amount to a breach of HMRC’s duties as a matter of public law; but no such case can be made before the F-tT which has no relevant judicial review jurisdiction.” (Martin v. HMRC [2015] UKUT 161, §46).
“None of these cases seem to me to provide any basis for the suggestion that the line of cases from Aspen v. Estill to Steibelt v. Paling is no longer binding on me in holding that it is not open to General Commissioners to entertain a challenge to an assessment on grounds of public law, that the Inspector was acting unreasonably (in a Wednesbury sense) in raising the assessment at all. In my judgment those cases are unaffected by Pawlowski v. Dunnington and Wandsworth Borough Council v. Winder [1985] AC 461. Accordingly the General Commissioners were wrong to consider that they could either substitute their own view of the right way to exercise the discretion whether or not to raise an assessment under s 30(1), or to review the Inspector's decision on the grounds that it was unreasonable in the Wednesbury sense. The former is not open to anyone. The latter is only open to the Administrative Court.” (Guthrie v. Twickenham Film Studios Ltd [2002] STC 1374, §39).
Query whether BT Pension Scheme was per incuriam:
“However, again, while it is regrettable that the Court of Appeal in BT Pension Fund did not have its attention drawn to this line of authority, firstly the earlier cases did not consider the taxing statutes at issue in this appeal and secondly, the first case preceded the TCEA and the second did not consider it. While the views expressed in those cases may have been persuasive, I do not think they could be said to bind the Court of Appeal in BT Pension Fund and so technically its decision was not per incuriam and must be followed unless it is right to distinguish it.” (Shanklin Conservative and Unionist Club v. HMRC [2016] UKFTT 135 (TC), §89).
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Consider jurisdiction case by case
“In each case therefore when assessing whether a particular public law point is one that the FTT can consider, it is necessary to consider the specific jurisdiction that the FTT is exercising, and whether the particular point that is sought to be raised is one that falls to the FTT to consider in either exercising that jurisdiction, or deciding whether it has jurisdiction.” (R & J Birkett v. HMRC [2017] UKUT 89 (TC), §30(4), Nugee J and Judge Greenbank)
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Public law arguments can be relied on unless excluded expressly or by implication
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"[69] It is clear from the detailed list of appeal subjects in section 83 that the FTT does not have a general supervisory jurisdiction (Corbitt). We agree with that proposition and nothing we say is intended to derogate from it.
[70] That is not, however, the same thing as saying that a taxpayer may not in at least certain of the cases described in section 83(1) defend himself by challenging the validity of a decision on public law grounds. The starting point is that he should be able to (see Beadle at [44]). The question which arises is whether the statutory scheme expressly or by implication excludes the ability to raise a public law defence (again, see Beadle at [44]).
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[74] Here the subject matter of subsection 83(1)(p) is, straightforwardly, “an assessment … under section 73(1) … or the amount of such an assessment.” And for there to be “an assessment … under section 73(1)” the Commissioners need to have made a decision that there should be one (see [72] above).
[75] On its face, therefore, we find it difficult to see that this statutory language excludes the availability of a general public law defence based on legitimate expectation. Such a defence would seem to fall squarely within the subject-matter described.
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[84] Coming back then to where we started our analysis, the critical question in this case (see Beadle at [44]) is whether the relevant statutory scheme expressly or by implication excludes the ability to raise a public law defence of legitimate expectation (again, see Beadle at [44]). For all the reasons given above, we do not consider that section 83(1)(p) does exclude that ability. On the contrary, on the facts of this case and given the broad subject-matter of section 83(1)(p), we see strong reasons for thinking that it would be artificial and unworkable to exclude a defence based on the public law principle of legitimate expectation from the tribunal’s appellate jurisdiction. We therefore consider that the FTT did have jurisdiction to determine that question in this case." (KSM Henryk Zeman SP Zoo v. HMRC [2021] UKUT 182 (TCC), Adam Johnson J and Judge Hellier)
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VAT assessments are discretionary and public law arguments are permitted
[154] In this appeal, the taxpayer appeals under s.83(1)(b) VATA, which permits appeals to the FTT with respect to “the VAT chargeable… on the importation of goods from a place outside the member States.” Like the right of appeal under s.83(1)(c) VATA, the VAT chargeable on the importation of goods is not a matter of discretion but is mandatory and in an appeal the FTT is concerned with whether the conditions prescribed for a charge to arise under the legislation are present and the amount of the charge.
[155] This is in contrast to the manner in which s.83(1)(p) VATA provides a right of appeal against the discretion of HMRC whether to make an assessment under section 73(1). Hence there is a distinction drawn between subsections 83(1)(c) and (p) VATA set in the authority on which the Appellant relies - Henryk:
“We note one point immediately, which is that on the face of it, the scope of section 83(1)(p) is broader than the scope of section 83(1)(c) (the provision in issue both in Oxfam and Noor), because an appeal lies only with respect to the amount of an assessment but instead with respect to “an assessment… under section 73(1).” And the wording of section 73(1), on the face of it, is permissive not mandatory - ‘the Commissioners may assess the amount of VAT due to the best of their judgment and notify it.”
There is a discretion inherent in s.83(1)(p) VATA read together with section 73, which were the statutory provisions considered in Henryk which led it to decide public law arguments could be pursued in the FTT appeal. However, there is no discretion conveyed by subsections 83(1)(b) or (c) VATA which are the mandatory provisions concerning the appeals applicable in this case and in Noor respectively.
[156] The same point applies to the appeal against the Customs duty. Section 13A(2) of the Finance Act 1994 defines a relevant decision for customs duty:
“(a) any decision by HMRC, in relation to any customs duty or to any agricultural levy of the [European Union], as to
(i) whether or not, and at what time, anything is charged in any case with any such duty or levy;
(ii) the rate at which any such duty or levy is charged in any case, or the amount charged;
(iii) the person liable in any case to pay any amount charged, or the amount of his liability; or
(iv) whether or not any person is entitled in any case to relief or to any repayment, remission or drawback of any such duty or levy, or the amount of the relief, repayment, remission or drawback to which any person is entitled.”
[157] These are mandatory provisions. As noted in Noor at para 194 “all Member States must apply the common external tariff to imports from third count[r]ies. HMRC does not have a discretion about whether or not to apply a customs duty”. On an appeal [2], the FTT is concerned with whether the facts prescribed for a charge to arise are present and the amount of the charge." (Caerdav Ltd v. HMRC [2023] UKUT 179 (TCC), Rajah J and Judge Ruper Jones)
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- Query correctness
"[71] Although it is a First-tier Tribunal decision and therefore only persuasive, I agree with Judge Amanda Brown KC and Mrs Sonia Gable in Drinks and Food UK Ltd v HMRC [2023] UKFTT 979 (TC), which dealt with a different statutory scheme, where they argued at paragraphs 143 to 146 that:-
"143. ...Finally, and in light of the Court of Appeal decision in David Beadle v HMRC [2020] EWCA Civ 562, (Beadle) and subsequent decisions of the Upper Tribunal, it is not clear that the decision [Henryk Zeman] is soundly reached.
144. In Beadle the Court of Appeal confirmed that the tax tribunals have no inherent judicial review jurisdiction but concluded that in the context of an enforcement decision (i.e. a decision to assess for tax or penalty) there is a presumption that a taxpayer will be able to challenge the decision on public law grounds save where the scope for challenging alleged unlawful conduct has been circumscribed by the relevant statutory scheme. In the context of enforcement action the question will be whether the statutory scheme in question excludes the ability to raise a public law defence in proceedings which are dependent on the validity of the underlying administrative act (see paragraph 44 in particular).
145. In the case of The Executors of David Harrison (Deceased) and others v HMRC [2021] UKUT 273 (TCC) (Harrison) the Upper Tribunal confirmed that in the context of an enforcement decision a challenge on public law grounds was permissible unless the statutory scheme precluded such a challenge. However, in the context of other (non-enforcement) decisions of HMRC clear words are required within the statutory language to permit the taxpayer to challenge the reasonableness of HMRC's decision on appeal. The UT considered that there was no strong presumption against the FTT having power to consider public law arguments in a non-enforcement appeal; rather it was a question of statutory construction (see paragraphs 34 - 36).
146. The Upper Tribunal has affirmed that position in Caerdav Ltd v HMRC [2023] UKUT 179 (TCC)."
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[77] 77. It is not for me to find that, in that context, Henryk Zeman was wrongly decided. MIS simply was not considered. Mr Randle's MIS point was not argued for the appellant in that case presumably since the argument there was that the statutory scheme did make express provision." (Houldsworth v. HMRC [2024] UKFTT 224 (TC), Judge Anne Scott)
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TMA appeal does not involve discretionary matter
"[104] It is clear that HMRC complied with the terms of section 28A TMA and concluded that the appellant was non-resident and the officer made the consequential amendment. That is what was appealed to HMRC in terms of section 31(1)(b) TMA. It is clear from the eighth principle enunciated in Daarasp (see emphasis in paragraph 96(8) above) that that was the matter in question at that stage.
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[109]...The scope of the "matter in question" is limited to the conclusion and amendment included in the Closure Notice. The eighth principle in Daarasp then makes it clear that the Tribunal's jurisdiction is restricted, in terms of section 50 TMA, to deciding whether or not the appellant has been overcharged to tax.
[110] The statutory scheme with which this appeal is concerned is not the same as that considered in Henryk Zeman. Both Caerdav and Shinelock are relevant to consideration of this issue.
[111] In summary, the appeal provision in this statutory scheme, namely section 50 TMA is not dissimilar to section 83(1)(c) VATA and in particular relates to the amount of the amendment resulting from the conclusion in the Closure Notice. It is not a discretionary provision." (Houldsworth v. HMRC [2024] UKFTT 224 (TC), Judge Anne Scott)
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Customs classification mandatory (no public law arguments)
"[98] We therefore adopt the approach taken by the Upper Tribunal in Caerdav, as it is equally applicable to classification appeals such as the present case given that the same appeal provisions are engaged, and also given that HMRC's underlying obligations are mandatory. It follows that the reasonableness of the C18 is not within our jurisdiction as HMRC was not exercising any discretion in that regard.
[99] Similarly, it follows that we cannot consider any domestic law legitimate expectation arising from the 2013 visit as our jurisdiction is as to whether the facts prescribed for a charge to arise are present and the amount of the charge. In any event, we find as a fact that no legitimate expectation arose from the 2013 visit that the Goods in the C18 could be classified using 3.7% CN Codes. First, HMRC did not inform Laurence Supply that all future goods could be classified using 3.7% CN Codes; at its highest, HMRC's conduct in not taking issue with the use of the 3.7% CN Codes can be treated as meaning that the goods considered at that time by HMRC were correctly classified. Secondly, there is no evidence as to the appearance of, or material used in, the goods considered by HMRC at the time of the 2013 visit. Thirdly, for the reasons set out above, there is no evidence as to the appearance of, and material used in, the Goods comprising the C18 and so it is not possible to assess their similarity (or otherwise) to the goods considered during the 2013 visit." (Laurence Supply Co (Leather Goods) Limited v. HMRC [2024] UKFTT 124 (TC), Judge Chapman KC)
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Cannot challenge amount of penalty on the basis that no penalty should have been imposed
“In our view therefore the FTT does have power under para 47(b) to consider an appeal against a decision as to the amount of a penalty assessed by HMRC, and is not limited to deciding whether the amount exceeds the statutory maximum or not…In the present case, the complaint of the appellants is not that the amount of the penalty, assuming one to be imposed, was excessive; it is that no penalty should have been imposed at all. It seems to us that raises the question whether this can be said to be an appeal against the decision of an HMRC officer “as to the amount of such a penalty”. We do not think it can. An appeal under para 47(b) assumes that the penalty has been incurred and challenges the amount, or to use terminology familiar in litigation generally, it is concerned with quantum rather than liability. If the basis of the appeal is that no penalty should have been imposed at all, that is a challenge to liability not quantum, and cannot we think be characterised as an appeal against a decision as to the amount of such a penalty.” (R & J Birkett v. HMRC [2017] UKUT 89 (TC), §48, Nugee J and Judge Greenbank)
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“Reading the statutory provisions in context, and with due regard to the purpose for which they are enacted, I do not consider that the Tribunal has jurisdiction to consider an argument that no penalty should be payable because the accelerated partner payment either is, or should be, less than the amount specified in the PPN.” (Beadle v. HMRC [2017] UKFTT 544 (TC), §42, Judge Jonathan Richards).
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Tribunal not to use case management powers to supervise HMRC’s pre-litigation conduct
“The Tribunal has case management powers to regulate the conduct of litigation that is before it. Yet Mr Hackett is not making any complaint as to how HMRC have conducted the litigation from the point at which the appellants notified their appeals to the Tribunal. He is, therefore asking the Tribunal to punish HMRC for what the appellants consider to be unacceptable delay before Tribunal proceedings were commenced. I do not consider that would be a proper exercise of case management powers. The authorities that Mr Hackett showed me dealt primarily with delay after proceedings were commenced and, although Foulser was not focused on questions of delay, it dealt with a situation where HMRC were argued to have taken certain prejudicial actions while proceedings before the Tribunal were current.” (Always Sheet Metal Ltd v. HMRC [2017] UKFTT 198 (TC), §106, Judge Jonathan Richards).
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VAT partial exemption methods
“The issue in Oxfam was whether the Tribunal should give effect, not to an extra-statutory concession, but to a bespoke partial exemption method agreed by the taxpayer with HMRC. While the PVD gives HMRC the freedom to agree a wide variety of partial exemption methods, I consider it likely that the Court of Justice of the European Union (‘CJEU’) would consider HMRC bound by a method properly agreed to, as the CJEU has never recognised a distinction between statutory law and administrative law, giving equal effect to both…So even if it is correct to see Oxfam as rightly decided in its particular circumstances and that this Tribunal must give effect to legitimate expectations in line with the PVD (even where there is no direct effect, such as with a bespoke partial exemption method), that does not help the taxpayer here. The Club wishes to rely on an ESC that actually flies in the face of the PVD.” (Shanklin Conservative and Unionist Club v. HMRC [2016] UKFTT 135 (TC), §§94…95).
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Legitimate expectations may be considered as part of special circumstances test
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"[119] Assuming that legitimate expectation, as explained in EU law, does arise in the application of Article 120, its consideration does not give any additional life to the consideration of special circumstances. In other words, any promise or statement made by a customs authority to a taxpayer which might be capable of being relied upon as giving rise to a legitimate expectation for EU law purposes would also be capable of being relied upon as giving rise to special circumstances for the purpose of Article 120. Therefore, there may be a distinction without a difference." (Caerdav Ltd v. HMRC [2023] UKUT 179 (TCC), Rajah J and Judge Ruper Jones)
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Non-compliance with a request that is unlawful on public law grounds as a reasonable excuse
“The Tribunal might have jurisdiction under Winder to discharge a penalty for non-compliance with an information notice if the notice was issued unlawfully even if it related to statutory records because there is no similar exclusion of jurisdiction in relation to penalties, but I do not need to consider this point as, for reasons explained below, I do not consider that the notices were issued unlawfully or for any reason other than to check the appellant’s tax position.” (Qualapharm Ltd v. HMRC [2016] UKFTT 100 (TC), §42).
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Exercises of HMRC’s care and management powers
“I take particular note of the caution exercised by the Upper Tribunal in its choice of words (“on one view” and “may be”). However, I conclude that the Upper Tribunal did have it in mind that an agreement reached by HMRC in their exercise of their para 1 sch 11 powers would be capable of being the subject matter of an appeal under s 83 to this Tribunal. I readily accept that the matter is not without doubt but, given the apparent equivocation of the Upper Tribunal on this point in Noor, I do not accept that it is sufficiently clear that the Tribunal does not have jurisdiction in relation to the grounds stated in paras 7-25 of the AGOA, sufficient to justify striking out those grounds.” (Pertemps Ltd v. HMRC [2015] UKFTT 512 (TC), §58).
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Nevertheless, criticism:
“Without warning (and, as [the taxpayer] pointed out, nine years after the supposed amendment to the law on which they rely) HMRC insisted on a change in the practice, not merely for the future but for the past, and they have demanded tax which there is every reason to think the branch secretaries have already paid. The correspondence to which I was taken revealed an uncompromising attitude on HMRC’s part based on an overarching presumption, which I regret to say spilled over into Mr Burke’s submissions, that if HMRC say so, then it is so. That attitude was reflected in the recitation in the statement of case of HMRC’s interpretation of the law rather than of the law itself, as if HMRC’s interpretation was unquestionably correct, and in HMRC’s overt reliance on s 50(6) of the Taxes Management Act 1970, a provision which makes it clear that an assessment is to stand unless the taxpayer shows that it is excessive. It is plain, however, by its own terms that the provision is directed at monetary amounts, but not at underlying issues of law. Thus although I have determined the main issue in the appeal in HMRC’s favour, I find much in their approach to deprecate.” (Community (a trade union) v. HMRC [2016] UKFTT 824 (TC), §45).
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Application of concessions: no jurisdiction
"[77] We first set out the position on jurisdiction. We agree with Ms Davies that the Tribunal has no jurisdiction to hear disputes over concessions. In BT Pensions Scheme v HMRC [2015] EWCA Civ 713, the Court of Appeal reaffirmed that the Tribunal only has the jurisdiction given to it by Parliament, so it can, for example, hear appeals against legal challenges where the statute gives a taxpayer a right of appeal. A concession, in contrast, is “a statement as to how HMRC will operate in the circumstances there specified”, and if a person disagrees with the way HMRC have operated the concession, this “denies the legitimate expectation of taxpayers who had been led to expect that they would be treated in accordance with it”, and any such a challenge must be brought by judicial review, see [133] and [142] of the judgment." (Phelan v. HMRC [2023] UKFTT 29 (TC), Judge Redston, albeit the FTT said the concession did not apply)
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