© 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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Distinction between mischief and intention criticised
"In any event, the distinction between looking at reports to identify the mischief aimed at but not to find the intention of Parliament in enacting the legislation is highly artificial. Take the normal Law Commission Report which analyses the problem and then annexes a draft Bill to remedy it. It is now permissible to look at the report to find the mischief and at the draft Bill to see that a provision in the draft was not included in the legislation enacted: see the Factortame case [1990] 2 AC 85. There can be no logical distinction between that case and looking at the draft Bill to see that the statute as enacted reproduced, often in the same words, the provision in the Law Commissions's draft. Given the purposive approach to construction now adopted by the courts in order to give effect to the true intentions of the legislature, the fine distinctions between looking for the mischief and looking for the intention in using words to provide the remedy are technical and inappropriate. Clear and unambiguous statements made by Ministers in Parliament are as much the background to the enactment of legislation as white papers and Parliamentary reports." (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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- Materials that would be difficult to access and digest
In Beswick v. Beswick [1968] AC 58, 74 Lord Reid said:
“For purely practical reasons we do not permit debates in either House to be cited: it would add greatly to the time and expense involved in preparing cases involving the construction of a statute if counsel were expected to read all the debates in Hansard, and it would often be impracticable for counsel to get access to at least the older reports of debates in Select Committees of the House of Commons; moreover, in a very large proportion of cases such a search, even if practicable, would throw no light on the question before the court.”
[...]
In Fothergill v. Monarch Airlines Ltd. [1981] AC 251, 279, Lord Diplock said:
“The constitutional function performed by courts of justice as interpreters of the written law laid down in Acts of Parliament is often described as ascertaining ‘the intention of Parliament;’ but what this metaphor, though convenient, omits to take into account is that the court, when acting in its interpretative role, as well as when it is engaged in reviewing the legality of administrative action, is doing so as mediator between the state in the exercise of its legislative power and the private citizen for whom the law made by Parliament constitutes a rule binding upon him and enforceable by the executive power of the state. Elementary justice or … the need for legal certainty demands that the rules by which the citizen is to be bound should be ascertainable by him (or, more realistically, by a competent lawyer advising him) by reference to identifiable sources that are publicly accessible.”
In Davis v. Johnson [1979] AC 264, 350, Lord Scarman said:
“such material is an unreliable guide to the meaning of what is enacted. It promotes confusion, not clarity. The cut and thrust of debate and the pressures of executive responsibility, the essential features of open and responsible government, are not always conducive to a clear and unbiased explanation of the meaning of statutory language. And the volume of Parliamentary and ministerial utterances can confuse by its very size.
[...]
It is said that Parliamentary materials are not readily available to, and understandable by, the citizen and his lawyers who should be entitled to rely on the words of Parliament alone to discover his position. It is undoubtedly true that Hansard and particularly records of Committee debates are not widely held by libraries outside London and that the lack of satisfactory indexing of Committee stages makes it difficult to trace the passage of a clause after it is redrafted or renumbered. But such practical difficulties can easily be overstated. It is possible to obtain Parliamentary materials and it is possible to trace the history. The problem is one of expense and effort in doing so, not the availability of the material. In considering the right of the individual to know the law by simply looking at legislation, it is a fallacy to start from the position that all legislation is available in a readily understandable form in any event: the very large number of statutory instruments made every year are not available in an indexed form for well over a year after they have been passed. Yet, the practitioner manages to deal with the problem albeit at considerable expense. Moreover, experience in New Zealand and Australia (where the strict rule has been relaxed for some years) has not shown that the non-availability of materials has raised these practical problems.” (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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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
"[35] We were taken by both counsel to various materials shedding light on the background to the legislation. It is undoubtedly well established that background materials can be looked at for the purpose of ascertaining the "mischief" which a statute is intended to address; quite how far one can go beyond that in using the evolution of draft legislation as an aid to resolving questions of statutory construction is not I think so clear, but we did not hear any argument on the point and in the present case it does not need to be addressed. Although interesting as background I do not think the material we were shown really assists in determining the appeal. Nevertheless for what it is worth I will set out what it consists of.
...
[40] What I take from this history is that the legislation was designed to combat what was perceived to be a practice of moving profits in fact derived from the UK offshore oil sector outside the UK tax net, and that after consultation the Government decided to confine the new legislation to what could be described as drilling rigs and accommodation vessels, and took steps to ensure that it was not too widely drafted so as to catch other assets. But that is not much more than is apparent from the legislation itself as it was in fact enacted, and the precise effect of that legislation must turn on the statutory language that was used and approved by Parliament. That as I have already said turns on the ordinary meaning of the words in s. 356LA(3), it not being suggested that they have any special or technical meaning." (HMRC v. Dolphin Drilling Ltd [2024] EWCA Civ 1, Nugee, Jackson, Newey LJJJ)
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"[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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- Known problem area identifies mischief​
"[42] Although I place little or no weight upon them, I also note that the wider construction is consistent with the contemporaneous documents relied upon before the UT and the background to the enactment of section 103. It is common ground that there had been numerous challenges to the validity of notices sent out on behalf of HMRC by the use of automated procedures. It seems to me that given that background and the terms of section 103 itself, the UT was right to describe the mischief that the section was intended to address as being to put beyond doubt that acts carried out by HMRC by the use of automated functions are valid without the need, on each occasion, to prove the direct involvement of an officer." (Marano v. HMRC [2024] EWCA Civ 876, Asplin, Coulson, Nugee LJJJ)
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Transitional and saving provisions​
"[40] The point is made even more clearly by the transitional provisions in sub-section 103(6). It provides that the section does not apply to anything which would fall within sub-section (1) done by HMRC, if before 11 March 2020, a court or tribunal determined that the relevant act was of no effect because it was not done by an officer or an officer of a particular kind and at that date the order of the court or tribunal had not been set aside or overturned on appeal. In other words, if before 11 March 2020, a taxpayer has been successful in proving that a particular act was invalid because HMRC had not proved that it was done by an officer or an officer of the necessary kind, that judgment will not be undermined or reversed by section 103. The inclusion of this saving provision is consistent with the wider interpretation of the section as a whole. It would be unnecessary if proof of the involvement of an officer were still required. To put the matter another way, the need for the saving provision is consistent with the section having rendered proof of involvement of an officer no longer necessary because anything capable of being done by an officer may be done by HMRC both prospectively and retrospectively." (Marano v. HMRC [2024] EWCA Civ 876, Asplin, Coulson, Nugee LJJJ)
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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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- Nature of explanatory notes
"Explanatory notes were introduced in about 1996 and they are drafted by or under the aegis of Parliament and published with the bill to which they relate. They are published again in an updated form when the Act receives Royal Assent. Their function is to explain the bill for the benefit of the Parliament in plain English. It is now clear that explanatory notes are admissible on interpretation. They are freely available on Parliament's website.
I can explain a little about how they came about. When I arrived at the Law Commission in 1996, I had several discussions with counsel assigned to the Law Commission, Geoffrey Bowman, later First Parliamentary Counsel. I explained that I would like to do a project on statutory interpretation. I found that the First Parliamentary Counsel, Sir Christopher Jenkins, was interested in this but had well developed views about the best way to present the content of legislation. He considered that it was not helpful if legislation included purely explanatory material. In his view, the function of legislation was to change the law, and indeed that is what Lord Lisvane said when he addressed the Statute Law Society recently. Sir Christopher took the view that another Law Commission project was not justified. Instead, he recommended to Parliament to approve the introduction of what we now know as explanatory notes.19
On difficult points of interpretation, the explanatory notes are not generally useful because they are too general and non-specific. Moreover, they can only deal with problems that were known about at the time of the legislation. The courts are regularly dealing with the problem that with time there have been developments which had not occurred to anyone when the legislation was before Parliament. But they are useful as a record of the contemporary understanding of the law, and also as providing an overview of the entire legislation." (What Makes Good Statute Law: A Judge's View, Lady Arden, Statute Law Review (2022) 43 (2) 139 at 149)
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- Explanatory notes are always admissible
​
"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
"[54] That the legislative purpose of aligning the capital expenditure position for investment companies with those for trading companies is readily inferred from the fact that the capital exclusion was re-enacted in section 1219(3)(a) of the 2009 Act using the same words "of a capital nature" as those found in section 53(1) of the 2009 Act without any limit or qualification signalling a contrary intention, is also reinforced by the Explanatory Notes to the Corporation Tax Bill (which became the 2009 Act). These are admissible to identify the mischief or purpose of this re-enactment. They demonstrate an intention to align the trading company and investment company rules in relation to capital expenditure, stating that clause 1219(3) was intended to exclude capital expenditure "in terms that follow closely the trading income rule": see para 3089 of the Explanatory Notes. The Explanatory Notes to the 2009 Act were expressed in identical terms: see para 3091." (Centrica Overseas Holdings Ltd v. HMRC [2024] UKSC 25, Lady Simler)
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"[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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"[43] Furthermore, the background materials are consistent with this interpretation. I come to this conclusion without the need to consider the extract from Hansard. The Explanatory Note to clause 100 repeats at paragraph 10 that any function capable of being done by an individual officer may be done by HMRC using a computer or otherwise. Like section 103 itself, if it had been the intention to replicate section 113 or to continue to require proof that an individual officer had authorised the function, it seems to me that both section 103 and the Explanatory Note would have been worded differently." (Marano v. HMRC [2024] EWCA Civ 876, Asplin, Coulson, Nugee LJJJ)
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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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- Legitimate to use as guide to purpose of legislation
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"[25]...It is legitimate to have regard to this paragraph as a general statement of the purpose of the CLRA. The Consultation Paper stood as an explanation of the government's policy to which the Bill which became the CLRA was to give effect, in a manner which made it functionally equivalent to a government white paper and other types of report proposing draft legislation, which are legitimate guides to the purpose of legislation adopted in the light of them: see Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591, in particular p 647 per Lord Simon of Glaisdale; Wilson v First County Trust Ltd (No 2) [2003] UKHL 40; [2004] 1 AC 816, para 56; and R (O) v Secretary of State for the Home Department; R (Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department [2022] UKSC 3; [2023] AC 255, para 30. The Explanatory Notes dated 20 December 2000 for the Bill which became the CLRA referred to the Consultation Paper as the relevant statement of government policy: for the relevance of Explanatory Notes for identification of the purpose of legislation, see R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28; [2023] 1 WLR 2594, para 42.
...
[98] ​First, the purpose of the legislative scheme as explained in the Consultation Paper includes the objective that opportunities for obstructive landlords to thwart the transfer of the right to manage should be kept to a minimum. The procedural requirements have not been included to create traps for the unwary, nor to afford unwarranted opportunities for obstruction on the part of objecting landlords who have not themselves been significantly affected by any particular omission to comply with them."​ (A1 Properties (Sunderland) Ltd v. Tudor Studios TRM Company Ltd [2024] UKSC 27)
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- Use to identify mischief not the meaning of words used
"The exclusionary rule was later extended so as to prohibit the court from looking even at reports made by commissioners on which legislation was based: Salkeld v. Johnson (1848) 2 Exch. 256, 273. This rule has now been relaxed so as to permit reports of commissioners, including law commissioners, and white papers to be looked at for the purpose solely of ascertaining the mischief which the statute is intended to cure but not for the purpose of discovering the meaning of the words used by Parliament to effect such cure: Eastman Photographic Materials Co. Ltd. v. Comptroller-General of Patents, Designs and Trademarks [1898] AC 571 and Assam Railways and Trading Co. Ltd. v. Commissioners of Inland Revenue [1935] AC 445, 457–458. Indeed, in Reg. v. Secretary of State for Transport, Ex parte Factortame Ltd. [1990] 2 AC 85 your Lordships' House went further than this and had regard to a Law Commission report not only for the purpose of ascertaining the mischief but also for the purpose of drawing an inference as to Parliamentary intention from the fact that Parliament had not expressly implemented one of the Law Commission's recommendations." (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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But see above Lord Browne Wilkinson's criticism of the distinction between mischief and intention.
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Draft legislation (comparison with)
"[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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- Deliberate decision to omit clause that would have achieved effect now sought
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"If section 31 of the Act of 1981 were to be construed in isolation, I would see great force in the reasoning set out in the judgment of Woolf L.J. in S.K.F. [1989] 2 W.L.R. 378, 390-391 which I have cited. But in the light of the history it seems to me that there are three reasons why it is impossible to construe section 31(2) as having the effect attributed to it by Woolf L.J. of conferring a new jurisdiction on the court to grant injunctions against the Crown. First, section 31(2) and Ord. 53, r. 1(2) being in identical terms, the subsection and the sub-rule must have the same meaning and the sub-rule, if it purported to extend jurisdiction, would have been ultra vires. Secondly, if Parliament had intended to confer upon the court jurisdiction to grant interim injunctions against the Crown, it is inconceivable, in the light of the Law Commission's recommendation in paragraph 51 of its report, that this would not have been done in express terms either
in the form of the proposed clause 3(2) of the Law Commission's draft Bill or by an enactment to some similar effect. There is no escape from the conclusion that this recommendation was never intended to be implemented." (R v. Secretary of State for Transport (ex p. Factortame) [1990] 2 AC 85)
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Statements by a government minister (Pepper v. Hart)​
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- General exclusionary rule
"Under present law, there is a general rule that references to Parliamentary material as an aid to statutory construction is not permissible (“the exclusionary rule”): Davis v. Johnson [1979] AC 264 and Hadmor Productions Ltd v. Hamilton [1983] 1 A.C. 191. This rule did not always apply but was judge made. Thus, in Ash v. Abdy (1678) 3 Swans. 664 Lord Nottingham took judicial notice of his own experience when introducing the Bill in the House of Lords. The exclusionary rule was probably first stated by Willes J. in Millar v. Taylor (1769) 4 Burr. 2303, 2332. However, the case of In re Mew and Thorne (1862) 31 L.J.Bank. 87 shows that even in the middle of the last century the rule was not absolute: in that case Lord Westbury L.C. in construing an Act had regard to its Parliamentary history and drew an inference as to Parliament's intention in passing the legislation from the making of an amendment striking out certain words.
...
Thus the reasons put forward for the present rule are first, that it preserves the constitutional proprieties leaving Parliament to legislate in words and the courts (not Parliamentary speakers), to construe the meaning of the words finally enacted; second, the practical difficulty of the expense of researching Parliamentary material which would arise if the material could be looked at; third, the need for the citizen to have access to a known defined text which regulates his legal rights; fourth, the improbability of finding helpful guidance from Hansard." (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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- Limited exception if 3 conditions are met
"[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. The court was not referred to any relevant provision of primary legislation that was said to be ambiguous and the statements in any event did not meet the stringent requirements of the third condition. Sir James Eadie in para 10 of the Secretary of State’s written case referred to a ministerial statement in the House of Lords during the passage of the 2014 Act which sought to explain the policy behind what became section 68 of that Act. But it is not argued that this reference is admissible because the first condition in Pepper v Hart has been met. I am satisfied that there is no such ambiguity, obscurity or absurd result in the relevant statutory provisions which would allow the court to have regard to that statement." (R (oao O) v. Secretary of State for the Home Department [2022] UKSC 3, Lord Hodge)
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"My Lords, I have come to the conclusion that, as a matter of law, there are sound reasons for making a limited modification to the existing rule (subject to strict safeguards) unless there are constitutional or practical reasons which outweigh them. In my judgment, subject to the questions of the privileges of the House of Commons, reference to Parliamentary material should be permitted as an aid to the construction of legislation which is ambiguous or obscure or the literal meaning of which leads to an absurdity. Even in such cases references in court to Parliamentary material should only be permitted where such material clearly discloses the mischief aimed at or the legislative intention lying behind the ambiguous or obscure words. In the case of statements made in Parliament, as at present advised I cannot foresee that any statement other than the statement of the Minister or other promoter of the Bill is likely to meet these criteria." (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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- Justification: Parliament may have been told what ambiguous words meant and accepted that
"I accept Mr. Lester's submissions, but my main reason for reaching this conclusion is based on principle. Statute law consists of the words that Parliament has enacted. It is for the courts to construe those words and it is the court's duty in so doing to give effect to the intention of Parliament in using those words. It is an inescapable fact that, despite all the care taken in passing legislation, some statutory provisions when applied to the circumstances under consideration in any specific case are found to be ambiguous. One of the reasons for such ambiguity is that the members of the legislature in enacting the statutory provision may have been told what result those words are intended to achieve. Faced with a given set of words which are capable of conveying that meaning it is not surprising if the words are accepted as having that meaning. Parliament never intends to enact an ambiguity. Contrast with that the position of the courts. The courts are faced simply with a set of words which are in fact capable of bearing two meanings. The courts are ignorant of the underlying Parliamentary purpose. Unless something in other parts of the legislation discloses such purpose, the courts are forced to adopt one of the two possible meanings using highly technical rules of construction. In many, I suspect most, cases references to Parliamentary materials will not throw any light on the matter. But in a few cases it may emerge that the very question was considered by Parliament in passing the legislation. Why in such a case should the courts blind themselves to a clear indication of what Parliament intended in using those words? The court cannot attach a meaning to words which they cannot bear, but if the words are capable of bearing more than one meaning why should not Parliament's true intention be enforced rather than thwarted?" (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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- Justification: similar to looking at white papers and official reports
"A number of other factors support this view. As I have said, the courts can now look at white papers and official reports for the purpose of finding the “mischief” sought to be corrected, although not at draft clauses or proposals for the remedying of such mischief. A ministerial statement made in Parliament is an equally authoritative source of such information: why should the courts be cut off from this source of information as to the mischief aimed at? In any event, the distinction between looking at reports to identify the mischief aimed at but not to find the intention of Parliament in enacting the legislation is highly artificial." (Pepper v. Hart [1993] AC 593, per Lord Browne-Wilkinson)
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- (1) Legislation is ambiguous, obscure or, on a conventional interpretation, leads to absurdity
"[32] ... I am satisfied that there is no such ambiguity, obscurity or absurd result in the relevant statutory provisions which would allow the court to have regard to that statement." (R (oao O) v. Secretary of State for the Home Department [2022] UKSC 3, Lord Hodge)
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- Cannot rely on materials to identify ambiguity
"[25]...I do not consider that these criteria can be used to create an ambiguity where none would otherwise exist;..." (Hyman v. HMRC [2022] EWCA Civ 185, Lewison, Simler, Snowden LJJJ)
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- (2) Material must be or include one or more statements by a minister or other promoter of the Bill
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- - Need not be statement to whole House (statement to standing committee sufficient)
"[21] In support of that submission, Mr Cannon sought to rely on a statement in Parliament by the Financial Secretary to the Treasury (Dawn Primarolo MP) as the bill which became the Finance Act 2002 was passing through its committee stage in the House of Commons. In response to a proposed amendment to the bill, she said that HMRC would produce a statement of practice to deal with what kind of building would count as residential property. I assume that that is the origin of SP 1/03. The statement itself was not in existence at that time; but it came into existence at or shortly before section 92B was brought into effect by regulations. It follows that that guidance was not available (even in draft) during the passage of the bill through Parliament. It therefore falls outside the principle as stated in Bennion.
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[25] Of these conditions, only the second is arguably satisfied in the present case in relation to the statement made by the Financial Secretary." (Hyman v. HMRC [2022] EWCA Civ 185, Lewison, Simler, Snowden LJJJ)
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"[111] I should note that at one point Ms Brown submitted that the relevant ministerial statement was not admissible because it was made only to a standing committee and not the whole House but of course that was the case in Pepper v Hart itself.
[112] Ms Brown also submitted that the Hansard extract does not expressly discuss the provision in question or the transitional scheme at all. I disagree.
[113] Ms Brown also submitted that the passages relied upon represent the intention of the Minister not the intention of Parliament. I disagree. Inevitably a relevant ministerial statement will express the intention of the Minister (or the Government) as to what words in a Bill are to mean if enacted but if that intention is expressly set out to Parliament and Parliament accepts the relevant wording then the intention of the Minister/Government is adopted by and becomes the intention of Parliament." (Devon and Somerset Fire and Rescue Authority v. HMRC [2023] EWHC 257 (Ch), HHJ Davis-White KC)
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- (3) The statement must be clear and unequivocal on the point of interpretation being considered
"[25]... I consider that it is unarguable that the third of the conditions is satisfied where the Minister in question did not purport to express a view about what the draft legislation actually meant. Nor did the proposed amendment she was addressing concern itself with the quantity of land that could count as "garden or grounds". It was concerned with a different question: namely what kinds of use might qualify as residential property. In my judgment the statement by the Financial Secretary to the Treasury is inadmissible." ​(Hyman v. HMRC [2022] EWCA Civ 185, Lewison, Simler, Snowden LJJJ)
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HMRC guidance/statements of practice
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- Guidance not in existence at time of legislation cannot be used/of little weight
"[54] He sought to draw support for this reading of the substituted provisions from the answers to the frequently asked questions that Lord Walker has quoted in para 34. The Finance Act 2003 received the Royal Assent on 10 July 2003 and they were published on or about that date. The key points were that personal restrictions were to be taken into account and that market value would be determined on a consistent basis throughout Chapters 1 to 5 of Part 7. He submitted that post-enactment official statements of that kind could be taken into account as persuasive authority as to the meaning of these provisions: Bennion, Statutory Interpretation, 4th ed (2002), section 232; R v Montila [2004] UKHL 50, [2004] 1 WLR 3141, para 40; Chief Constable of Cumbria v Wright [2006] EWHC 3574 (Admin), [2007] 1 WLR 1407, para 17.
[55] But, as Lloyd Jones J said in Chief Constable of Cumbria v Wright, para 17, it is for the courts to interpret legislation, not the executive. Mr Johnston QC for the respondents said that the answers on which Mr Sherry sought to rely, which he accepted could not be reconciled with his argument, were not accurate. The point which mattered in this case was that, while the definition of market value was to be applied consistently, the property to be valued under each Chapter varied. The answers had been withdrawn towards the end of 2005 and replaced by a manual dealing with the taxation of employment-related securities from which the points made in the answers were absent. He invited the court not to attach a great deal of weight to them. I agree. I do not think that the points that they make are sufficiently precisely framed to amount to an official statement on the particular issue that arises in this case to carry the persuasive authority that the statement in Bennion contemplates." (Grays Timber Products Limited v. HMRC [2010] UKSC 4, Lord Hope)
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"[21] Since the words of section 92B and section 116 (1) (b) are closely aligned, [the taxpayer] argues that section 116 (1)(b) should be given the same meaning as section 92B. In support of that submission, [the taxpayer] sought to rely on a statement in Parliament by the Financial Secretary to the Treasury (Dawn Primarolo MP) as the bill which became the Finance Act 2002 was passing through its committee stage in the House of Commons. In response to a proposed amendment to the bill, she said that HMRC would produce a statement of practice to deal with what kind of building would count as residential property. I assume that that is the origin of SP 1/03. The statement itself was not in existence at that time; but it came into existence at or shortly before section 92B was brought into effect by regulations. It follows that that guidance was not available (even in draft) during the passage of the bill through Parliament. It therefore falls outside the principle as stated in Bennion.
[22] Before the UT, [the taxpayer] also relied on guidance given by HMRC after the Finance Act 2003 had passed into law. That guidance was in similar terms to that I have quoted, and related specifically to section 116; although it was altered in 2019 (after the relevant transactions in these appeals). But [the taxpayer] no longer relies on that guidance. His submission is confined to the guidance that he says Parliament must be taken to have had in mind when considering the Bill that became the Finance Act 2003." (Hyman v. HMRC [2022] EWCA Civ 185, Lewison, Simler, Snowden LJJJ)
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- Existing guidance that Parliament may have had in mind may be relevant depending on the quality of the reasoning
"[15] [The taxpayer] does not suggest that the proposed limitation is in the express words of section 116 (1) (b) itself. But, he says, HMRC (then the Commissioners for Inland Revenue) had published guidance on analogous legislation which was extant at the time that what became the Finance Act 2003 was making its way through Parliament. In enacting section 116 in the way that it did, Parliament should be taken to have had that guidance in mind and to have intended it to be equally applicable to section 116.
[16] In support of this argument, he relies on passages in Bennion, Bailey and Norbury on Statutory Interpretation (8th ed) ("Bennion"). At paragraph 24.10 the editors say:
"While views expressed by officials are not generally admissible they may be relevant if expressed in public before an Act is passed. For example, the drafter of a consolidation Bill will give public evidence to Parliament and there seems to be no reason why this kind of material should not be referred to on the basis that it forms part of the material that was in the contemplation of Parliament at the time at which the Act was passed"
[17] In R v Wandsworth London Borough Council, ex p Beckwith [1996] 1 WLR 60 the House of Lords rejected an argument that counsel sought to support by relying on guidance issued by the Department of Health. Lord Hoffmann said:
"'The opinion of the department is entitled to respect, particularly since I assume that the Act was drafted upon its instructions. But in my view this statement is simply wrong."
[18] Commenting on that decision in paragraph 24.17 the editors of Bennion say:
"There may, of course, be cases where guidance was available in draft during the passage of a Bill through the legislature. In that case it forms part of the relevant contextual material to be borne in mind when construing the resulting Act."
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[31] As Bennion says at the start of paragraph 24.17, guidance by a public authority may be persuasive authority "depending on the quality of the reasoning". Where, as here, there is neither reasoning nor explanation, SP1/03 cannot be given any significant weight. In my judgment, HMRC's interpretation of section 92B (if that is what it was) was simply wrong." (Hyman v. HMRC [2022] EWCA Civ 185, Lewison, Simler, Snowden LJJJ)
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- Guidance on stamp duty not relevant to SDLT even if similar wording
"[27] Although the guidance on which Mr Cannon relies was in existence as the bill which became the Finance Act 2003 passed through Parliament, it was given in the context of stamp duty; not SDLT. As the Upper Tribunal pointed out in Pollen Estate Trustees v HMRC [2012] UKUT 277 (TCC), [2012] STC 2443 at [19]:
"SDLT is an entirely new tax invented to replace stamp duty because of the unsatisfactory nature of that tax [i.e. stamp duty]. It is clearly not the case that the new tax carried with it any of the intellectual or other baggage of the old tax."
That observation was approved in this court: [2013] EWCA Civ 753, [2013] 1 WLR 3785. There is no reason, therefore, why Parliament should have intended that the guidance given in relation to stamp duty should apply to SDLT. Second, the guidance given by HMRC did not, even in its own terms, purport to be an interpretation of section 92B. At best it amounted to guidance on how HMRC would, in practice, apply a test. Third, HMRC did not explain why they decided to apply a test derived from the express wording of section 222(3) of the Taxation of Chargeable Gains Act 1992 to section 92B. Section 222 was in very different terms..." (Hyman v. HMRC [2022] EWCA Civ 185, Lewison, Simler, Snowden LJJJ)
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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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