© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
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N2-4. Aides to interpretation
Legitimate to look at pre-legislative materials where there is doubt
"[51] Where there is doubt as to the correct interpretation of a statutory provision, assistance may be derived from relevant consultation papers, reports, and explanatory notes: R (O) v Secretary of State for the Home Department [2022] UKSC 3, [2022] 2 WLR 343, paras 30-32; R v Luckhurst [2022] UKSC 23, [2022] 1 WLR 3818, para 23." (Rakusen v. Jepsen [2023] UKSC 9)
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External aides have secondary role
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"[28] Having regard to the way in which both parties presented their cases, it is opportune to say something about the process of statutory interpretation.
[29] The courts in conducting statutory interpretation are “seeking the meaning of the words which Parliament used”: Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591, 613 per Lord Reid of Drem. More recently, Lord Nicholls of Birkenhead stated:
“Statutory interpretation is an exercise which requires the court to identify the meaning borne by the words in question in the particular context.”
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(R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] AC 349, 396). Words and passages in a statute derive their meaning from their context. A phrase or passage must be read in the context of the section as a whole and in the wider context of a relevant group of sections. Other provisions in a statute and the statute as a whole may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which meaning is ascertained. There is an important constitutional reason for having regard primarily to the statutory context as Lord Nicholls explained in Spath Holme, 397:
“Citizens, with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament.”
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[30] External aids to interpretation therefore must play a secondary role. Explanatory notes, prepared under the authority of Parliament, may cast light on the meaning of particular statutory provisions. Other sources, such as Law Commission reports, reports of Royal Commissions and advisory committees, and Government White Papers may disclose the background to a statute and assist the court to identify not only the mischief which it addresses but also the purpose of the legislation, thereby assisting a purposive interpretation of a particular statutory provision. The context disclosed by such materials is relevant to assist the court to ascertain the meaning of the statute, whether or not there is ambiguity and uncertainty, and indeed may reveal ambiguity or uncertainty: Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), para 11.2. But none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity. In this appeal the parties did not refer the court to external aids, other than explanatory statements in statutory instruments, and statements in Parliament which I discuss below. Sir James Eadie QC for the Secretary of State submitted that the statutory scheme contained in the 1981 Act and the 2014 Act should be read as a whole.
[31] Statutory interpretation involves an objective assessment of the meaning which a reasonable legislature as a body would be seeking to convey in using the statutory words which are being considered. Lord Nicholls, again in Spath Holme, 396, in an important passage stated:
“The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the ‘intention of Parliament’ is an objective concept, not subjective. The phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the minister or other persons who promoted the legislation. Nor is it the subjective intention of the draftsman, or of individual members or even of a majority of individual members of either House. … Thus, when courts say that such-and-such a meaning ‘cannot be what Parliament intended’, they are saying only that the words under consideration cannot reasonably be taken as used by Parliament with that meaning.”
[32] In their written case the appellants sought to support their contention that a child’s acquisition of substantial ties with the UK by spending time in the UK in the first ten years of his or her life created a complete entitlement to citizenship by referring to statements by a Government minister, Timothy Raison, to the Standing Committee which considered an amendment which became section 1(4) to the 1981 Act. Such references are not a legitimate aid to statutory interpretation unless the three conditions set out by Lord Browne-Wilkinson in Pepper v Hart [1993] AC 593, 640 are met. The three conditions are (i) that the legislative provision must be ambiguous, obscure or, on a conventional interpretation, lead to absurdity; (ii) that the material must be or include one or more statements by a minister or other promoter of the Bill; and (iii) the statement must be clear and unequivocal on the point of interpretation which the court is considering. It was not argued, and I am not satisfied, that the first and third conditions are met in this case..." (R (oao O) v. Secretary of State for the Home Department [2022] UKSC 3, Lady Arden seems to have favoured a broader approach - §76)
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"[23] Our task is made much easier by the very recent authoritative restatement by the Supreme Court of the role of external materials in statutory interpretation. In R (on the application of O) v Secretary of State for the Home Department [2022] UKSC 3 Lord Hodge, writing for the majority, said by reference to R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] AC 349, that the object of statutory interpretation is to identify the meaning borne by the words of an Act of Parliament, in its statutory context; and that citizens should be able to rely on what they read in Acts of Parliament. He went on to say this at [30] [see above]..." (Hyman v. HMRC [2022] EWCA Civ 185)
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"[33] An objective approach is therefore required, in which the meaning of the words used is determined in their statutory context. Explanatory Notes may cast light on that meaning and other external aids may assist in identifying the mischief addressed and the purpose of the legislation, but all such external aids play a secondary role and they will not displace a clear and unambiguous meaning which does not produce absurdity. Rather, the words used are the “primary source” by which meaning is ascertained." (HMRC v. Aozora GMAC Investments Ltd [2022] UKUT 258 (TCC), Falk J and Judge Jennifer Dean)
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History leading to enactment
"[43] In arriving at our conclusion we have not attached any significant weight to the extrastatutory materials produced by HMRC. We accept, under reference to HMRC v SSE Generation Ltd [2020] STC (UT) 107 at paragraphs 63-65 and the authorities cited there, that these materials are admissible to place legislative provisions into context, notwithstanding that they do not fall within the conditions enunciated in Pepper v Hart [1993] AC 593 for reference to Parliamentary materials as aids to interpretation. We also accept that the terms of the Government observations on the draft Limited Liability Partnership Bill tend to suggest an intention that limited liability partnerships would be treated as partnerships for the purposes of TMA (albeit that the latter is incorrectly referred to as the Taxes Management Act 1988). Ultimately, however, we base our decision on the terms of the legislation enacted, which had not been formulated at the time when these observations were made." (HMRC v. Inverclyde Property Renovation LLP [2020] UKUT 161 (TCC), Lord Tyre and Judge Raghavan)
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“When determining purpose, it is permissible to have regard to the background and context of the provisions at issue. Thus, in UBS, the Supreme Court had regard to the historical perspective leading to the enactment of the statutory provisions in question which informed the purpose for which those provisions had been enacted.” (HMRC v Trigg (a partner of Tonnant LLP) [2016] UKUT 165 (TCC), §15, Asplin J and Judge Berner).
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Unchallenged regulations
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"[24]...The content of any unchallenged regulations can be a guide to the interpretation of their enabling Act even when they are not made contemporaneously with the Act: Hales v Bolton Leathers Ltd [1951] AC 531, at 541, 544, 548 and 553. In this case the 2016 Regulations are, in themselves, unchallenged." (Palestine Solidarity v. Secretary of State for Housing [2020] UKSC 16, Lord Wilson)
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Headings may be taken into account​
"[42]...The heading of the section, “Anti-avoidance”, is the only indication in the section which could support PBL’s contention. The heading is relevant to assist an understanding as to the mischief which the provision addresses, but it says nothing as to the motives of the parties to the scheme transactions. There is nothing in the body of the section which expressly or inferentially refers to motivation. The provision was enacted to counter tax avoidance which resulted from the use of a number of transactions to effect the disposal and acquisition of a chargeable interest. It is sufficient for the operation of the section that tax avoidance, in the sense of a reduced liability or no liability to SDLT, resulted from the series of transactions which the parties put in place, whatever their motive for transacting in that manner. This is clear from subsection (1)(c) which compares the amount of SDLT payable in respect of the actual transactions against what would be payable under the notional land transaction in section 75A(4), by which P acquired V’s chargeable interest on its disposal by V." (Project Blue Limited v. HMRC [2018] UKSC 30)
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"[78] We also take into account the heading of paragraph 7A which refers to “qualifying amounts of relevant motoring expenditure”. It is not necessary that there should be any ambiguity in a provision before reliance can be placed on a heading. The significance of headings was recently described by Whipple LJ in HM Revenue & Customs v Naghshineh [2022] EWCA Civ 19:
[41] On the issue of statutory construction, we were taken to Bennion, Bailey and Norbury on Statutory Interpretation (8th edn) which suggests that a heading is part of an Act and may be considered in construing an Act, provided that due account is taken of the fact that its function is merely to serve as a brief guide to the material to which it relates and that it may not be entirely accurate (see para 16.7). The parties both accepted that general proposition, as do I.
[79] In our view, it is significant that the heading treats QA as a part of RME. Mr Maugham accepted that on his case the heading contains a mistake. We do not accept that it does contain a mistake. Mr Mullan suggested that the heading was included because QA would be expected to be part of RME, but there was no condition to that effect. We do not accept that submission." (Laing O'Rourke Services Limited v. HMRC [2023] UKUT 155 (TCC), Green J and Judge Cannan)
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"[64] As stated above, the heading is "Effect of transfer of trading assets within a group". Our view is that the heading accurately captures the purpose of the provision. The significance of headings was recently described in HM Revenue & Customs v Naghshineh [2022] EWCA Civ 19:
" [41] On the issue of statutory construction, we were taken to Bennion, Bailey and Norbury on Statutory Interpretation (8th edn) which suggests that a heading is part of an Act and may be considered in construing an Act, provided that due account is taken of the fact that its function is merely to serve as a brief guide to the material to which it relates and that it may not be entirely accurate (see para 16.7). The parties both accepted that general proposition, as do I."" (M Group Holdings Limited v. HMRC [2023] UKUT 213 (TCC), Green J and Judge Ramshaw)
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But do not read too much into heading
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"[67] While a heading in a statute may assist an understanding as to the mischief which the provision aims to address, we should be wary of reading too much into a heading: see the comments of Lord Hodge in Project Blue Ltd v HMRC [2018] UKSC 30, §42. We therefore agree with Ms Wilson that it is going too far to use the heading of paragraph 8, on its own, to justify an interpretation of "met" as meaning met by way of a subsidy." (HMRC v. Perenco UK Limited [2023] UKUT 169 (TCC), Bacon J and Judge Baldwin)
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Side notes/marginal notes
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- Admissible in principle
“The side notes to sections of an Act of Parliament are, in principle, admissible as an aid to interpretation of those sections but the significance to be attached to the side notes and the effect on the interpretation of the sections will vary greatly from one case to another. In the present case, the reference to anti-avoidance in the side notes is readily explained by the fact that section 75A itself spells out what is meant by a case of “avoidance”. I consider that section 75A explains that a case which comes within section 75A(1)(c) is a case of “avoidance” and the sections are to operate to counter that avoidance. It is therefore neither necessary nor appropriate to read more into the side notes and to hold that the side notes are to be taken to refer to an unstated requirement that there be a purpose of tax avoidance.” (Project Blue Limited v. HMRC [2014] UKUT 564 (TCC), §54, Morgan J).
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“Whilst a marginal note to a section cannot control the language used in the section, it is at least permissible to approach a consideration of the section's general purpose and the mischief at which it is aimed with the note in mind.” (Farnborough Airport Properties Company Ltd v. HMRC [2016] UKFTT 431 (TC), §37 quoting Stephens v Cuckfield RDC [1960] 2 QB 373 at 383, Upjohn LJ)
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- But may be illustrative only
“I do not consider the marginal notes of assistance in the interpretative exercise. The difficulty which the appellants face, and in my view do not succeed in overcoming, is that these notes are all, by the use of the concluding 'etc', obviously intended to be illustrative at best.” (Farnborough Airport Properties Company Ltd v. HMRC [2016] UKFTT 431 (TC), §42)
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Previous legislation
"[148] It remains to consider whether it is legitimate, in the present case, to have recourse to the statutory antecedents of section 23 and List C as an aid to their construction. Given the clear and cogent assistance which such recourse provides, and the detailed references to the previous legislation contained in the explanatory notes, I would be dismayed if this were forbidden by binding authority. Fortunately, however, that is not the case. In Derry, loc. cit., the Supreme Court gave valuable guidance on the correct approach to interpretation of a Tax Law Rewrite statute: see the judgment of Lord Carnwath JSC at [7] to [10], and the further observations of Lady Arden JSC at [84] to [90]. The guidance emphasises that, in construing either a consolidating statute (such as CAA 1990) or a Rewrite statute (such as CAA 2001), it would in general be wrong for the court to refer back to antecedent legislation: see [9] and [87]. However, the fact that this is the general rule clearly allows for possible exceptions in an appropriate case. Moreover, in Farrell v Alexander [1977] AC 59, which is the leading case on the construction of consolidating statutes, Lord Wilberforce, while also affirming the general rule, recognised at [73] that recourse to antecedents "should only be had when there is a real and substantial difficult or ambiguity which classical methods of construction cannot resolve."
[149] In my judgment, the construction of section 23 and List C as they stand in CAA 2001 does give rise to a real and substantial difficulty, because of the striking differences in the drafting of the Items in List C, and the sheer implausibility of Parliament having wished to draw a distinction between expenditure "on" the items in the first part of the List and expenditure on the "provision" of those items. The absence of any explanation in the explanatory notes, which themselves refer back to the predecessor legislation and appear to indicate an intention to replicate it, subject only to specified minor changes, can only reinforce the nagging sense that something must have gone wrong in the drafting. Accordingly, this appears to me to be a classic instance of a case where recourse to the antecedent legislation is not only permitted, but is essential if justice is to be done.
[150] I should add that, in reaching this conclusion, I have had in mind the cautionary note recently sounded by the Supreme Court in NCL Investments Ltd v HMRC [2022] UKSC 9, [2022] 1 WLR 1829, at [44] to [47]. As I read those paragraphs, however, they cast no doubt on the guidance given by Lord Wilberforce in Farrell v Alexander, which must in my view apply with at least equal force to a Tax Law Rewrite statute such as CAA 2001." (Urenco Chemplants Limited v. HMRC [2022] EWCA Civ 1587, Henderson, Thirlwall, Arnold LJJJ)
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Subsequent legislation
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- Legitimate to consider subsequent legislation on the same subject if earlier legislation is ambiguous
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"[46] Dealing firstly with the submission that the amendments act as an aid to interpretation of the pre-amended legislation.
[47] In DSG Retail Ltd v Dixons Retail Group Ltd [2020] EWCA 671 it has been stated:
"57 … In the course of argument, a lengthy debate took place as to whether or not it was appropriate to use later primary and delegated legislation to interpret earlier legislation. Many authorities were cited, most of which were referred to in customarily erudite passages from Bennion on Statutory Interpretation at sections 24-19 and 26-10 under the respective headings: “Inferences from later Acts” and “Law should be coherent and self-consistent”. The principle stated under section 24-19 is that “[w]here the legal meaning of an enactment is doubtful, subsequent legislation on the same subject may be relied on as persuasive authority as to its meaning”. It is perhaps sufficient to record that Lord Sterndale MR in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 2 KB 403 at page 414 emphasised the point that the legislation being construed had first to be shown to be ambiguous when he said:
“I think it is clearly established in Attorney-General v Clarkson [1900] 1 QB 156 that subsequent legislation on the same subject may be looked to in order to see what is the proper construction to be put upon an earlier Act where that earlier Act is ambiguous. I quite agree that subsequent legislation, if it proceed upon an erroneous construction of previous legislation, cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier”.
[48] The section of Bennion referenced in Dixons goes on to state that “where one construction would render a later Act superfluous the presumption that the legislature does nothing in vain may be relevant.”
[49] It is plain that the interpretation to be applied by HMRC would render the amendments superfluous and in vain. As such unless it can be established that the pre-amendment legislation was sufficiently ambiguous that it required clarification and that clarification was the legislative purpose for the amendments the later amendments would indicate that the interpretation contended for my HMRC would be unlikely to succeed." (Sally Judges v. HMRC [2022] UKFTT 77 (TC), Judge Amanda Brown QC)
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- Absence of amendment in circumstances where another provision was amended may indicate the provisions should not be read as reaching the same result
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"[58] Moreover, if, as Mr Thomas submitted, Parliament intended no or an extended time limit in section 44(9), the obvious course would have been for Parliament to have adopted the approach it adopted in amended section 80(4) FA 2003. As originally enacted, section 80(4) FA 2003 provided:
"(4) If the effect of the new information is that less tax is payable in respect of a transaction than has already been paid, the amount overpaid shall on a claim by the purchaser be repaid together with interest as from the date of payment."
This provision did not prescribe how (or when) the claim was required to be made. However, section 80(4) was amended by section 299(4) Finance Act 2004 to insert a new subsection (4) as follows:
"(4) If the effect of the new information is that less tax is payable in respect of a transaction […] than has already been paid –
(a) the purchaser may, within the period allowed for amendment of the land transaction return, amend the return accordingly;
(b) after the end of that period he may (if the land transaction return is not so amended) make a claim to the Inland Revenue for repayment of the amount overpaid."
In other words, on amendment in 2004 express provision was made in subsection (b) to enable a claim for repayment to be made after the expiry of the period allowed for amendment. Section 44(9) FA 2003 could have been similarly amended in 2004 to enable claims for repayment to be made after the expiry of the period allowed for amendment. However, it was not amended then or subsequently to make such provision." (Candy v. HMRC [2022] EWCA Civ 1447, Simler, Arnold, Nugee LJJJ)
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- Purpose of subsequent legislation may be to remove doubt as to what the law has always been
“Lord Hodge referred, in Scottish Widows plc v Commissioners for HM Revenue and Customs (no.2) [2012] SC (UKSC) 19, to what Lord Diplock had said in Inland Revenue Commissioners v Joiner at pp 1715, 1716 namely that it was a legitimate purpose of legislation by Parliament to clarify the law by making it clear in which of two alternative meanings the ambiguous language of an earlier statute was to be understood, but that it would only be if the language of a provision in an existing statute was ambiguous that it would be legitimate to infer that a purpose of the subsequent statute was to remove doubts as to what the law had always been.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §66, Warren J).
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- Earlier legislation should not necessarily be construed to conform with tax rewrite statute
“The Corporation Tax Act 2010 formed part of the tax code rewrite: it was an Act “to restate with minor changes…certain enactments”. It was not a pure consolidating Act. It should not be interpreted so as to conform precisely with the legislation it supersedes if a difference in meaning is the natural meaning of the words used; nor should earlier legislation necessarily be construed so as to conform with the clear meaning of the superseding legislation.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §67, Warren J).
Meaning does not change as a result of amendments to other legislation
"[91] Moreover, the “anomalies” to which HMRC refer arise as a consequence of the enactment of the regime conferring capital allowances on lessees under long funding finance leases many years after s61(1)(a) was enacted. We do not consider that these anomalies are a permissible aid to the construction of s61(1)(a). As Lord Neuberger said at [23] of Boss Holdings Ltd v Grosvenor West End Properties Ltd [2008] 1 WLR 289: "In my opinion, the legislature cannot have intended the meaning of a subsection to change as a result of amendments to other provisions of the same statute, when no amendments were made to that subsection, unless, of course, the effect of one of the amendments was, for instance, to change the definition of an expression used in the subsection."" (Altrad Services Limited v. HMRC [2022] UKUT 185 (TCC), Falk J and Judge Jonathan Richards)
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Meaning of definition does not change as a result of use of in later legislation
"[1] The question which arises on this appeal is whether a form of arrangement for the financing of litigation by third party funders is lawful and effective. This depends on the interpretation of an express definition of a term as set out in a statute. The case concerns the proper interpretation of a definition first used in one statutory context and then adopted and used in another context.
[2] It is necessary to consider the meaning of the definition in the first context. Lord Neuberger of Abbotsbury explained the proper approach in Williams v Central Bank of Nigeria [2014] AC 1189, at para 50:
“Where a term in a later statute is defined by reference to a definition in an earlier statute, it seems to me self-evident that the meaning of the definition in the later statute must be the same as the meaning of the definition in the earlier statute. Hence, the meaning of the term in the later statute is determined by the definition in the earlier statute. Further, the adoption of the definition in the later statute cannot somehow alter the meaning of the definition in the earlier statute. It accordingly follows that one has to determine the meaning of the term in the later statute simply by construing the definition in the earlier statute.”
We also have to consider whether later legislation throws any light on the proper interpretation of the earlier legislation." (R (oao Paccar) v. CAT [2023] UKSC 28)
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- Legitimate to look at whether Parliament has acted on the basis of a particular interpretation
"[55] Even without explicitly requiring the courts to give a term in existing legislation a particular meaning, or to apply a specified rule when interpreting the term, Parliament may act in a way which treats the term as having a particular meaning and signals its approval of that meaning. A line of cases illustrates that this is a matter to which a court may properly have regard to resolve an ambiguity in the statutory language.
[56] In A-G v Clarkson [1900] 1 QB 156 the Court of Appeal had to decide whether property which was only contingently settled was "settled property" on which estate duty was payable under section 5 of the Finance Act 1894. In an earlier case a Divisional Court had decided that it was. The Court of Appeal was asked to overrule that decision. Lindley MR regarded the point as "an exceedingly nice one" but thought the question concluded by the fact that a subsequent statutory provision (section 14 of the Finance Act 1898) proceeded on the basis that estate duty was payable on contingently settled property. Lindley MR (with whom the other members of the court agreed) regarded this as "a parliamentary adoption" of the interpretation which the Divisional Court had put on section 5 of the 1894 Act.
[57] A similar point arose in Cape Brandy Syndicate v Inland Revenue Commissioners [1921] 2 KB 403, where Lord Sterndale MR said (at p.414):
"I think it is clearly established in A-G v Clarkson that subsequent legislation on the same subject may be looked to in order to see what is the proper construction to be put upon an earlier Act where that earlier Act is ambiguous. I quite agree that subsequent legislation, if it proceed upon an erroneous construction of previous legislation, cannot alter that previous legislation; but if there be any ambiguity in the earlier legislation then the subsequent legislation may fix the proper interpretation which is to be put upon the earlier."
In Ormond Investment Co Ltd. v Betts [1928] AC 143 at 156, Lord Buckmaster approved this statement as "an accurate expression of the law, if by 'any ambiguity' is meant a phrase fairly and equally open to diverse meanings". See also In re Macmanaway [1951] AC 161, 177; and Motala v A-G [1992] 1 AC 281, 291.
[58] A similar principle was endorsed in Re Billson's Settlement Trusts [1984] Ch 409, where the Court of Appeal thought it legitimate, if there was a doubt as to the true construction of the Legitimacy Act 1926, to take into account the fact that an Act of Parliament passed in 1969 was plainly drafted on the basis that the 1926 Act had a particular meaning. Browne-Wilkinson LJ said (at p.418):
"Although Parliament may, in 1969, have been mistaken as to the existing law, one should assume that it was not so mistaken; in the absence of clear words, one should seek to construe the earlier Act so as to accord with Parliament's understanding of its effect."
[59] This approach seems to me to respect the constitutional principle of Parliamentary sovereignty. Bennion (at p.801) quotes a statement of Thomas Hobbes in Leviathan (chapter 26) that "the legislator is not he by whose authority the laws were first made, but by whose authority they now continue to be laws." If Parliament has proceeded on the basis that an existing law has a particular meaning at a time when, if Parliament had understood the law to have a different meaning, it is reasonable to infer it that would have acted differently, that may properly be treated as an implied directive as to how a previously ambiguous law should be interpreted." (R (oao ZYN) v. Walsall Metropolitan BC [2014] EWHC 1918 (Admin))
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- Assuming Parliament made a mistake about the law is an interpretation of last resort
"[65] That suggestion might have force if ascertaining the intention of Parliament involved a sociological inquiry into what was actually in the minds of individual legislators. However, that would be to mistake the nature of the interpreter's task. When courts identify the intention of Parliament, they do so assuming Parliament to be a rational and informed body pursuing the identifiable purposes of the legislation it enacts in a coherent and principled manner. That assumption shows appropriate respect for Parliament, enables Parliament most effectively to achieve its purposes and promotes the integrity of the law. In essence, the courts interpret the language of a statute or statutory instrument as having the meaning which best explains why a rational and informed legislature would have acted as Parliament has. Attributing to Parliament an error or oversight is therefore an interpretation to be adopted only as a last resort." (R (oao ZYN) v. Walsall Metropolitan BC [2014] EWHC 1918 (Admin))
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Subordinate legislation
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- Can be an aid to interpretation if part of a single legislative exercise
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"[44] In certain circumstances, subordinate legislation made pursuant to powers in a statute can be an aid to interpretation of the statute. There is an issue as to how far this principle extends. The parties are agreed that the Scope Order is an admissible aid to interpretation of the 2006 Act. It was promulgated at a time roughly contemporaneous with the 2006 Act itself, and in Deposit Protection Board v Dalia [1994] 2 AC 367 the House of Lords held that it is permissible to refer to such contemporaneous subordinate legislation as an aid to interpretation: p 397 per Lord Browne-Wilkinson. In my view, on this basis and in line with the position for explanatory notes, the Scope Order is admissible as an aid to interpretation both for such light as it might throw on an assessment of the purpose of the primary legislation and to assist in resolving any identified ambiguity in a provision in that legislation.
[45] Further, Part 2 of the 2006 Act specifically contemplated that, for its operation, the Secretary of State would define its scope by an order. Given the broadly contemporaneous nature of the Scope Order, it can fairly be regarded as being, in combination with the 2006 Act, part of a single scheme to introduce the new statutory regime in Part 2 in a way that justifies reference to the Scope Order “to take account of indications of consistency between them” on the basis explained in R v McCool [2018] UKSC 23, [2018] 1 WLR 2431, para 105 (Lord Hughes, for the majority); cited as authoritative in Bennion, Bailey and Norbury, 8th ed, above, section 24.18. To similar effect, in R (A) v Director of Establishments of the Security Service [2009] UKSC 12; [2010] 2 AC 1, Lord Hope of Craighead said that where a statute which received Royal Assent on 28 July 2000 and subordinate legislation was made under it on 28 September 2000 and laid before Parliament the next day, “[t]he interval was so short that, taken together, they can be regarded as all part of the same legislative exercise” (para 42), albeit in that case it was not in the event necessary to refer to the subordinate legislation because the scheme of the primary legislation was clear. Where the primary legislation and the subordinate legislation are drafted by or on the instructions of the same government department at about the same time, as would be normal in this type of case, it is reasonable to suppose that they are inspired by the same underlying objective and are intended to reflect a coherent position as understood at the time the primary legislation is presented to Parliament. In that situation, it has been observed that the subordinate legislation made under a power in the primary legislation can be regarded as a form of parliamentary or administrative contemporanea expositio (exposition of contemporary understanding) in relation to the primary legislation which may provide some evidence of how Parliament understood the words it used in the primary legislation, even though this does not decide or control their meaning: Hanlon v The Law Society [1981] AC 124, 193-194 (Lord Lowry, with whom Lord Edmund-Davies, Lord Fraser of Tullybelton and Lord Scarman agreed). This point is strengthened where, as here, the subordinate legislation is broadly contemporaneous with the Act and is subject to review by the same elected Parliament which passed the Act according to the positive or the negative resolution procedure. This can provide grounds to infer that the Parliament which passed the Act regarded the subordinate legislation as in accordance with it and a fair reflection of it." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)
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- And explanatory memorandum of such subordinate legislation
"[46] Since the Scope Order is a permissible aid to interpretation of the statute, for similar reasons the Explanatory Memorandum which accompanied it to explain its effect to Parliament is also a permissible aid to interpretation of the statute." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)
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Explanatory notes
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- Explanatory notes are always admissible
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"Explanatory Notes are not endorsed by Parliament. On the other hand, in so far as they cast light on the setting of a statute, and the mischief at which it is aimed, they are admissible in aid of construction of the statute. After all, they may potentially contain much more immediate and valuable material than other aids regularly used by the courts, such as Law Commission Reports, Government Committee reports, Green Papers, and so forth." (R v. Chief Constable of South Yorkshire Police ex p. LS and Marper [2004] UKHL 39, §4)
"[82] But I think that it is legitimate to refer for the purposes of clarification to the notes to this section in the explanatory notes to the Act prepared by the Home Office. I would use it in the same way as I would use the explanatory note attached to a statutory instrument: see Coventry and Solihull Waste Disposal Co Ltd v Russell (Valuation Officer) [1999] 1 WLR 2093, 2103D-G..." (R v. A [2002] 1 AC 45, Lord Hope)
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“I was also referred to the Explanatory Notes to the Corporation Tax Act 2010. I am guided by the remarks of Lord Steyn in R (Westminster City Council) v National Asylum Support Service [2002] UKHL 38 at [5] where (albeit obiter) he supported the use of Explanatory Notes as an aid to interpretation, even in the absence of ambiguity (and hence falling outside the scope of Pepper v Hart) where these cast light on 'the objective' or 'contextual sense'. That approach was supported by Sales J. in Eclipse Film Partners (Nr 35) LLP v HMRC [2013] UKUT 639 (TCC) who nonetheless remarked that Lord Steyn's observations should be approached "with a little caution, since none of the other members of the Appellate Committee referred to them or endorsed them." I must bear that observation in mind.” (Farnborough Airport Properties Company Ltd v. HMRC [2016] UKFTT 431 (TC), §38)
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“It is well-established that it is permissible to have recourse to Explanatory Notes as an aid to the construction of a statute. In Westminster City Council v National Asylum Support Service [2002] UKHL 38 Lord Steyn said at [5]:
“Insofar as the Explanatory Notes cast light on the objective setting or contextual scene of the statute, and the mischief at which it is aimed, such materials are therefore always admissible aids to construction.”” (Christianuyi Ltd v. HMRC [2016] UKFTT 272 (TC), §295).
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- Use to identify the context
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"[32] In the House of Lords case of R (Westminster City Council) v National Asylum Support Service [2002] 1 WLR 2956 Lord Steyn held at [5] that a court can consider Explanatory Notes as an admissible aid to construction in so far as they “cast light on the objective setting or contextual scene of the statute, and the mischief at which it is aimed”. Because the starting point in an exercise of statutory construction is that the language “conveys meaning according to the circumstances in which it was used”, the context “must always be identified and considered before the process of construction or during it”. Accordingly, the Explanatory Notes to the bill for FA 2003 are a relevant aid to construction in determining the context." (HMRC v. Candy [2021] UKUT 170 (TCC), Mellor J and Judge Andrew Scott)
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"[64] This note of caution has been more recently reinforced by the Court of Appeal in Flora v Wakom (Heathrow) Ltd [2006] EWCA Civ 1103 in which Brooke LJ stated:
16 … The value of … Explanatory Notes as an aid to construction … is that it [sic] identifies the contextual scene … That is all. If, however, it is impossible to treat the wishes and desires of the Government about the scope of the statutory language as reflecting the will of Parliament, it is in my judgment equally impossible to treat the Government’s expectations as reflecting the will of Parliament. We are all too familiar with statutes having a contrary result to that which the Government expected through no fault of the courts which interpreted them.
[65] It is therefore entirely permissible and appropriate that this Tribunal to take account of the Explanatory Notes for ITTOIA 2005 at its introduction. HMRC included the note to section 535 as set out above in paragraph [26]. Taken alone the notes appeared to lend some support for their contention that the intent underpinning top slicing relief was only to provide relief in respect of the rate at which the chargeable event gain was to be taxed: “The relief is the difference between the tax otherwise chargeable on the full gain and the tax that would be charged if the full gain were taxed at the rate of the tax chargeable on the fraction” (emphasis added)." (Sally Judges v. HMRC [2022] UKFTT 77 (TC), Judge Amanda Brown QC)
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- May cast light on meaning and purpose
"[30]...Explanatory notes, prepared under the authority of Parliament, may cast light on the meaning of particular statutory provisions. Other sources, such as Law Commission reports, reports of Royal Commissions and advisory committees, and Government White Papers may disclose the background to a statute and assist the court to identify not only the mischief which it addresses but also the purpose of the legislation, thereby assisting a purposive interpretation of a particular statutory provision. The context disclosed by such materials is relevant to assist the court to ascertain the meaning of the statute, whether or not there is ambiguity and uncertainty, and indeed may reveal ambiguity or uncertainty: Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), para 11.2. But none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity..." (R (oao O) v. Secretary of State for the Home Department [2022] UKSC 3, Lord Hodge)
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- Only use explanatory notes to choose between equally straightforward interpretations
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“It is true that there was no such match. But it would be wrong on the basis of that mismatch to search for a meaning of the statute which reflected the Explanatory Notes unless there was a choice between two equally simple and straightforward interpretations of the statute, one of which did, and one of which did not, reflect the Explanatory Notes. The explanation for the mismatch, surely, is that either the wording of the statute fails to reflect what the draftsman meant to say or that the Explanatory Notes are inaccurate. It seems to me that the latter explanation is far more likely. If the construction for which Mr Ghosh contends is correct, I find it astonishing that the Explanatory Notes are drafted in the way that they are.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §75, Warren J).
“It is also clear from the Court of Appeal decision in Sun Life Assurance Company of Canada (UK) Limited v HMRC [2010] STC 1173 that the Explanatory Notes do not give a sponsoring Government Department a second bite of the cherry if the terms of the legislation as enacted do not produce the result that the department expected.” (Sippchoice Ltd v. HMRC [2018] UKFTT 122 (TC), §39, Judge Gething).
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- Strain the explanatory notes rather than the legislation
“In any case, if the mismatch is to be resolved, rather than left as an acknowledged error, it should surely be the Explanatory Notes, rather than the statute which should be given the strained construction.” (HMRC v. Hamilton & Kinneil (Archerfield) Limited [2015] UKUT 130 (TCC), §76, Warren J)
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- Explanatory notes to subsequent legislation not admissible
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"[73] The Tribunal has some concern at referencing Explanatory Notes which relate to later legislation when the terms of the legislation, as interpreted by the FTT in circumstances in which it is right to apply the principle of comity, are clear and for which no contrary view is evident in the Explanatory Notes to the legislation to be interpreted. It is acknowledged that these Explanatory Notes state that the provisions “confirm” the principles outlined. However, mindful of the warning of Brooke LJ as set out in paragraph [64] above the Tribunal considers that to interpret the pre amendment language by reference to this note is at risk of treating the “wishes and desires” of HMRC about the historic scope of the statutory language as reflecting the will of Parliament." (Sally Judges v. HMRC [2022] UKFTT 77 (TC), Judge Amanda Brown QC)
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- Omission of what would have been an important point from explanatory notes
"[55] Had a purpose of the Bill been to change the established feature of an RRO so as to enable it to be made against a superior as well as an immediate landlord (the latter being the position under the 2004 Act: see paras 35-36 above) one might have expected there to have been some mention of that in the explanatory notes." (Rakusen v. Jepsen [2023] UKSC 9)
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Consultation papers
"[109]...In carrying out their interpretative role, the courts can look not only at the statute but also, for example, at the explanatory notes to the statute, at relevant consultation papers, and, within the parameters set by Pepper v Hart [1993] AC 593, at ministerial statements reported in Hansard. We have seen that the EAT in this case took into account the explanatory notes and the Government’s response to the Public Consultation reviewing the Employment Relations Act 1999, published on 2 December 2003; and, in the light of those materials, it is not in dispute that one of the purposes of sections 145A-145F of the 1992 Act was to ensure that domestic law complied with the ruling of the ECtHR in Wilson and Palmer v UK which was itself concerned to ensure compliance with article 11 of the ECHR." (Kostal UK Ltd v. Dunkley [2021] UKSC 47)
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- Useful confirmation
"[51] I have already noted that neither the Upper Tribunal nor the Court of Appeal had the benefit of the submissions of specialist counsel, nor the assistance of the intervener, in the way that has been of great assistance to this court. Nor does it appear that they were shown paragraph 88 of the consultation paper on the draft Bill quoted above which, so far as is relevant, makes the then intention of the promoters of the Bill crystal clear on this very point.
[52] Paragraph 88 easily satisfies the requirement for admissibility that it squarely addresses the point in issue. But it is only part of a consultation paper, and counsel were not able to put before the court any of the replies to consultation, or the other travaux préparatoires which may have lain between that consultation stage and the passing of the 2002 Act. Mr Loveday was able to point to a significant change in wording between clause 53 of the draft Bill and section 71 of the Act, by the introduction of the phrase “in relation to” the management of premises. This, he said, was amply sufficient to widen the previous management of the premises alone to a concept of the management of related shared rights and facilities. But no similar change was introduced into clause 71(1) of the draft Bill, which became section 96(1) of the 2002 Act. There even the draft Bill used the expression “relating to” the whole or any part of the premises. At that stage the promoters clearly did not regard the use of “relating to” as wide enough to extend the scheme to the shared management of estate facilities. In my view nothing turns on the change made to clause 53, since section 71 which replaces it is only introductory, and merely reflects section 96(1) by way of summary.
[53] I would for my part be cautious in giving too much weight to a statement in a consultation paper, although I would not accept Mr Loveday’s supposed distinction between assistance in divining high level policy or purpose and detailed application, when the statement in question is so precisely on point. In the end it is the language Parliament has chosen to use which must be the primary guide, both to purpose and detailed application. In the present case that language easily persuades me that the right to manage conferred by the 2002 Act does not extend to the shared management of estate facilities. Paragraph 88 is just useful confirmation that this fully accords with the intention of the designers and promoters of the scheme." (Firstport Property Services ltd v. Settlors Court RTM Company Ltd [2022] UKSC 1)
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Previous versions of the bill that became law
"[111] Andrew Burns QC, counsel for Kostal, pressed upon us that we should also take into account earlier versions of the Bill. He pointed out that the words “will not” in section 145B(2) were only inserted in later versions of the Bill, once it had been decided to include not only recognised unions but also unions seeking recognition. This was to support his submission that, in the case of a recognised union, the relevant words were “will no longer” which supported the interpretation that one was concerned with workers relinquishing their rights in the future to have their terms of employment determined by collective bargaining (ie that the workers were “contracting out” of collective bargaining). We are not convinced that it is permissible to consider previous versions of the Bill that became law. But even if we were to take those earlier versions into account, we do not think that it takes matters much further. In particular, it would be very odd, if Mr Burns’ submission were correct, for the words applicable to the standard situation of a recognised union (“will no longer”) to be relegated to brackets." (Kostal UK Ltd v. Dunkley [2021] UKSC 47)
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HMRC internal management systems do not affect interpretation​
"[59] There was some uncertainty at the end of the hearing about the precise status of Mr Dean’s evidence, or the extent to which it was relied on in support of the Revenue’s submissions. Although we invited further submissions on certain questions apparently arising from it, I do not think the evidence itself is critical to our consideration of this issue. It is of some interest in explaining, not only the background to the present appeal, but more generally aspects of the Revenue’s approach to the self-assessment process, and the workings of its internal systems. However, as Ms McCarthy rightly submits, neither the Revenue’s internal management systems, nor Mr Dean’s subjective understanding of them, can ultimately be determinative of the issue before us. That must turn on the correct interpretation of the law, and an objective reading of the tax return within its statutory framework." ​(R (oao Derry) v. HMRC [2019] UKSC 19)
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Tax Journal articles not an aid to interpretation
"[76] We have not considered the tax journals; they are not an aid to construction. Even if Parliament had wished to achieve a particular result (we do not consider that it did), if the statutory language adopted is for a narrower purpose it is no part of an exercise in purposive construction to give effect to a wider outcome than can properly be borne by the statutory language. That would amount to rectification of legislation." (M Group Holdings Limited v. HMRC [2023] UKUT 213 (TCC), Green J and Judge Ramshaw)
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