J9: Grounds of judicial review

LEGITIMATE EXPECTATION

Summary of requirements

"[43] I have been greatly assisted by the agreed list of legal principles which set out the considerable common ground between the parties. There is no real dispute as to the applicable legal principles governing when a legitimate expectation may arise, and the circumstances in which, in the context of tax, it would nonetheless be fair to allow the HMRC to depart from it. For present purposes, it is sufficient to summarise the relevant principles as follows:

(1) A legitimate expectation arises in circumstances where:

(a) the claimant has an expectation of being treated in a particular way favourable to the claimant by the defendant public authority;

(b) the authority has caused the claimant to have that expectation by words or conduct;

(c) the claimant's expectation is legitimate; and

(d) it would be an unjust exercise of power for the authority to frustrate the claimant's expectation.

See R (on the application of GSTS Pathology LLP) and others v. HMRC [2013] STC 2017 ("GSTS") at [72]-[73]." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

Summary of requirements

- Expectation that the ordinary law will apply is a matter of no legal significance

"[6]...As the appellants rightly stress, a legitimate expectation that the ordinary law will apply to them is a matter of no legal significance in that it adds nothing to the right of every citizen to due application to him of the ordinary law." (R (oao Davies) v. HMRC [2011] UKSC 47, Lord Wilson)

- Expectation that the ordinary law will apply is a matter of no legal significance

- Legitimate expectation arising from HMRC guidance/settled practice of a more benevolent interpretation

"[1]...For the main contention of the appellants is that, on its proper construction, the guidance contained a more benevolent interpretation of the circumstances in which an individual becomes non-resident and not ordinarily resident in the UK than is reflected in the ordinary law and that the appellants had a legitimate expectation, to which the court should give effect, that the more benevolent interpretation would be applied to the determination of their status for tax purposes. Their subsidiary and alternative contention is, that, even if, when properly construed, the guidance did not contain a more benevolent interpretation than is reflected in the ordinary law, it was the settled practice of the Revenue to adopt such an interpretation of it and that the practice was such as to give rise to a legitimate expectation, to which again the court should give effect, that the interpretation would be applied to the determination of their status.
[2] The latter limb of each of the appellants' alternative contentions is not in dispute. The Revenue accepts that, if either the proper construction of the booklet or its settled practice was as they contend, a legitimate expectation arose which requires that their status for tax purposes should be determined in accordance with the allegedly more benevolent interpretation of the circumstances in which an individual becomes non-resident and not ordinarily resident in the UK." (R (oao Davies) v. HMRC [2011] UKSC 47, Lord Wilson)

- Legitimate expectation arising from HMRC guidance/settled practice of a more benevolent interpretation

Representation must be clear, unambiguous and devoid of relevant qualification

"[27] Bingham LJ went on to state that where a representation had been made to a particular taxpayer following a request for a ruling it is necessary that the ruling statement relied on should be "clear, unambiguous and devoid of relevant qualification". In R (oao Davies) v HMRC; R (oao Gaines Cooper) v HMRC [2011] UKSC 47, [2011] 1 WLR 2625, where the issue was whether taxpayers who had moved abroad could claim non-resident tax status on the basis of certain paragraphs in a published booklet, Lord Wilson confirmed that Bingham LJ's requirement that representations should be "clear, unambiguous and devoid of relevant qualification" applied also to representations made in guidance formally published by HMRC to the world." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

"[43] (3) For a legitimate expectation to arise in relation to an HMRC non-statutory clearance:

(a) the communication from HMRC should be clear, unambiguous and devoid of relevant qualification: see R v. IRC ex parte MFK Underwriting Agents Limited [1990] 1 WLR 1545 at p.1569G." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

Representation must be clear, unambiguous and devoid of relevant qualification

- Meaning determined by court

"[30] The meaning of an extra-statutory concession falls to be determined by the Court. In Accenture, Sales J recognised at paragraph 33 that "[t]he proper interpretation of the concession [which was at issue] is a matter for the court". Earlier, in First Secretary of State v Sainsbury's Supermarkets Ltd [2005] EWCA Civ 520, Sedley LJ had said in paragraph 16 in a planning context that "the interpretation of policy is not a matter for the Secretary of State" and that "[w]hat a policy means is what it says". In a similar vein, in R (Ellis) v Secretary of State for the Home Department [2020] UKUT 82 (IAC), the Judge expressed the view that, although "[t]here are some jurisdictions where decision-makers subject to administrative law are permitted to interpret for themselves the norms that govern their action, subject to review on a reasonableness or rationality standard", "[t]he UK courts have never adopted this approach to the interpretation of a statute" and, likewise, "[i]t would be inimical to legal certainty if the Secretary of State were permitted (even subject to rationality review) to interpret [an extra-statutory immigration policy] other than in accordance with the objective meaning that a reasonable and literate person would ascribe to it": see paragraphs 34 and 35." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

- Meaning determined by court

- Assess objectively from perspective of person to whom representation addressed

"[30] As regards whether the representations were "clear, unambiguous and devoid of relevant qualification", the Board refers to what Dyson LJ said when giving the judgment of the Court of Appeal in R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397, at para 56: the question is how on a fair reading of the promise it would have been reasonably understood by those to whom it was made. The words "management" and "control" are ordinary English words whose meaning is well understood. The members of the Association had been controlling and managing their own affairs. They knew that they were being asked to move to a facility which was owned by PTSC. In that context, they would reasonably have understood the representations as reassuring them that they would be able to continue to control and manage their own affairs if they moved. Managing their own affairs would include not having to satisfy anyone else (still less a rival) that they were fit and proper persons who required a permit for the use of the facilities and not having to pay a fee each time they made an exit journey. The fact that there might have been some uncertainty as to precisely what management entailed does not mean that the representations were not clear and unambiguous. They were certainly devoid of any relevant qualification." (Paponette v. Attorney General of Trinidad and Tobago [2010] UKPC 32)

"[31] The meaning of an extra-statutory concession published by HMRC is to be assessed by reference to how it would "reasonably have been understood by those to whom it was directed" (to borrow from R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473, [2003] QB 1397, at paragraph 56, per Dyson LJ, giving the judgment of the Court; see also Paponette v Attorney General of Trinidad and Tobago [2010] UKPC 32, [2012] 1 AC 1, at paragraph 30). The "ordinarily sophisticated taxpayer" can be taken to be representative of those to whom an extra-statutory concession is directed: M.F.K., at 1569, and R (Davies) Revenue and Customs Commissioners [2011] UKSC 47, [2011] 1 WLR 2625 ("Davies"), at paragraph 29 ("the hypothetical representee is the 'ordinarily sophisticated taxpayer' irrespective of whether he is in receipt of professional advice", per Lord Wilson, with whom Lords Hope, Walker and Clarke expressed agreement, in the context of a booklet published by the Inland Revenue)." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

"[27]...Further, it is clear from the judgment in Davies that the content of the alleged representations is to be determined on an objective basis. As Lord Wilson expressed it at [29]:"… It is better to forsake any arid analytical exercise and to proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; the judgment about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part on the identity of the person to whom it is made, the hypothetical representee is the "ordinarily sophisticated taxpayer" irrespective of whether he is in receipt of professional advice."" (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

"[43] (2) Whether HMRC have created an expectation is to be objectively assessed and does not depend upon their intention: see R v. Barking and Dagenham LBC ex parte Lloyd [2001] LGR 86 at [31]-[35] and R (oao Vacation Rentals (UK) Limited) v. HMRC [2019] STC 251 at [60]-[62]." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

- Assess objectively from perspective of person to whom representation addressed

- Normally the ordinarily sophisticated taxpayer

"[29] In that the representations in the booklet are formally published by the Revenue to the world rather than being its response to approaches of a less formal nature, a literal reading of Bingham LJ's judgment suggests that, although they are binding in relation only to cases falling clearly within them, the requirement that they should be "clear, unambiguous and devoid of relevant qualification" does not apply to them. But in my view a case would fall clearly within them only if they were clear, unambiguous etc; and in R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No 2) [2008] UKHL 61, [2009] 1 AC 453, Lord Hoffmann, at para 60, applied the quoted words of Bingham LJ to a formal publication, namely a press announcement, on the part of the Foreign Secretary. It is better to forsake any arid analytical exercise and to proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; that the judgement about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part upon the identity of the person to whom it is made, the hypothetical representee is the "ordinarily sophisticated taxpayer" irrespective of whether he is in receipt of professional advice." (R (oao Davies) v. HMRC [2011] UKSC 47)

"[41] Nor do I accept that the judge failed to apply the ordinarily sophisticated taxpayer test. While he did not expressly refer to the test in that part of his judgment dealing with the NAC, he was clearly aware that it was the appropriate test for considering whether a taxpayer could rely on a legitimate expectation arising from an extra-statutory concession, as he quoted the passage from Rose LJ's judgment in R (Aozora) v HMRC [2019] STC 2486, at [31], in which the test was referred to (see [37] of the deputy judge's judgment). More importantly, for the reasons already given, I am satisfied that the judge's interpretation of the NAC is consistent with how it would be understood by the ordinarily sophisticated taxpayer." (First Alternative Medical Staffing Ltd v. HMRC [2022] EWCA Civ 249)

- Normally the ordinarily sophisticated taxpayer

- Avoid taking inappropriately technical approach

"[32] An extra-statutory concession should not be construed as if it were a statute (R (Greenwich Property Ltd) v Customs and Excise Commissioners [2001] EWHC Admin 230, [2001] STC 618)." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

"[76] Thirdly, [HMRC are wrong because they] take an inappropriately technical and rigorous approach to construing the words of the four components, in particular through their interpretation 30 of the word “transmitting”, which in our view must be given its ordinary meaning and is not nuanced in the way that HMRC suggest. The authorities that we have referred to at [60] and [61] above (Mohibulla and Paponette) make it clear that the question is how on a fair reading it would be understood by those to whom it was addressed, in this case the ordinarily sophisticated taxpayer. The guidance is not to be construed as 35 a taxing statute would be. " (R (oao Vacation Rentals (UK) Ltd v. HMRC [2018] UKUT 383 (TCC), Fancourt J and Judge Herrington)

- Avoid taking inappropriately technical approach

- Clear words required for concession to be relied on retrospectively

"The reasoning in [35] is that, because extra-statutory concessions operate as a decision by HMRC not to collect tax that is statutorily due in respect of supplies actually made, there would need to be clear words for a concession to be given retrospective effect. That applies equally in this case irrespective of any difference in the wording of the concession." (First Alternative Medical Staffing Ltd v. HMRC [2022] EWCA Civ 249)

- Clear words required for concession to be relied on retrospectively

- Court not inferring a 6 year limit to claiming relief for tax paid by trustees

"[42]...For my own part, I can see that HMRC might have chosen to impose a six-year income limit on Concession 3 for such reasons. I do not think, however, that any issues of practicality for HMRC would lead an "ordinarily sophisticated taxpayer" to infer that there is a six-year income limit if ESC B18 (1999) does not otherwise so indicate. That is especially the case given the stringency of the conditions specified in the sentence beginning "This treatment". For credit to be claimed pursuant to Concession 3, the trustees must, among other things, "have made trust returns giving details of all sources of trust income and payments made to beneficiaries for each and every year for which they are required" and "keep available for inspection any relevant tax certificates"." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

- Court not inferring a 6 year limit to claiming relief for tax paid by trustees

- HMRC's power to recover overpaid claim not undermining clarity of representation when accepting claim

"[190] Mr Simpson also submits that the relevant context for the ruling given by HMRC includes the fact that there is a two year time limit for making a recovery assessment (s 80(4AA(a) VATA). He suggests that, on this basis, the reference to the issue potentially being revisited during future audit activity must have been understood as a reference to the fact that HMRC may change their mind at some point within that two year window.

[191] We do not accept this. Given the background to the statement made, the possibility of HMRC making a recovery assessment on the basis that they had changed their view on whether or not the relevant items could be zero rated would simply not be on PwC's radar. There is certainly no basis for thinking that a reasonable recipient of the email would have made a connection between the statement made and the two year time limit for making any such assessment."(Queenscourt Limited v. HMRC [2024] UKFTT 460 (TC), Judge Vos)

- HMRC's power to recover overpaid claim not undermining clarity of representation when accepting claim

- Read consistently with international obligations

[47] In my view, however, EU law is of significance. The hypothetical "ordinarily sophisticated taxpayer" can, I think, be expected to appreciate that, read in the way favoured by HMRC, ESC B18 (1999) could favour UK trusts over non-resident ones and so, potentially, run counter to EU law principles. That, I think, would tend to confirm to an "ordinarily sophisticated taxpayer" that, contrary to HMRC's case, Concession 3 is not subject to a six-year income limit." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

- Read consistently with international obligations

- No assumption that ordinary taxpayer has read previous versions of a concession

"[52] I doubt myself whether it is in fact right to have regard to ESC B18 (1978) or ESC B18 (1994) when interpreting ESC B18 (1999). An "ordinarily sophisticated taxpayer" would not expect to have to research earlier versions of ESC B18 in order to understand ESC B18 (1999), especially when ESC B18 (1978) and ESC B18 (1994) are not readily available. Perhaps one or both could be found in old books, but an "ordinarily sophisticated taxpayer" should not be assumed to have looked at, or even to have had access to, these, and neither of the earlier versions of ESC B18 is readily to be found on the internet. If, however, it is appropriate to consider ESC B18 (1978) and ESC B18 (1994), it seems to me that, on balance, the prior history tends to support the appellants' case. The ways in which ESC B18 was altered between its 1994 and 1999 versions are much more telling than whatever might be said about what "A similar concession" meant in the 1978 version." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

- No assumption that ordinary taxpayer has read previous versions of a concession

- Disregard materials of which ordinary taxpayer not expected to be aware

"[56] I have queried above whether regard can properly be had to the "previous iterations" of ESC B18. However, the Judge was, in my view, plainly correct that no account should be taken of materials of which the "ordinarily sophisticated taxpayer" could not have been expected to be aware. If, therefore, the "ordinarily sophisticated taxpayer" would have had no means of knowing of an HMRC practice in relation to an extra-statutory concession, it must be right to disregard it. On the other hand, there may be cases in which the "ordinarily sophisticated taxpayer" would have been alerted to a settled practice of HMRC through, say, HMRC manuals, guidance published by HMRC or commentaries in practitioner texts. In such a situation, HMRC practice may be of relevance. In a sense, that might be said to result in the meaning attributed to an extra-statutory concession changing over time despite its wording remaining the same. As, however, Sales J explained in Accenture, a claim by a taxpayer to take advantage of an extra-statutory concession is "in the nature of a claim to benefit from an enforceable substantive legitimate expectation". Materials revealing a settled practice on the part of HMRC may bear on whether a taxpayer had such an expectation." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

- Disregard materials of which ordinary taxpayer not expected to be aware

- Burden on party asserting expectation

"[64] The onus of establishing that a sufficiently clear and unambiguous promise or undertaking, sufficient to give rise to a legitimate expectation, is cast on the party claiming it - see, for instance, In re Loreto Grammar School’s Application for Judicial Review [2012] NICA 1; [2013] NI 41, para 42 et seq. In Paponette v Attorney General of Trinidad and Tobago [2012] 1 AC 1, para 37, Lord Dyson said:

“The initial burden lies on an applicant to prove the legitimacy of his expectation. This means that in a claim based on a promise, the applicant must prove the promise and that it was clear and unambiguous and devoid of relevant qualification. If he wishes to reinforce his case by saying that he relied on the promise to his detriment, then obviously he must prove that too.”

[65] The respondent in the present case sought faintly to argue that the statements made by the government were not sufficiently unconditional and devoid of qualification to give rise to a legitimate expectation. Stephens J and the Court of Appeal rejected that argument, and, in my judgment, they were right to do so."(Re Finucane [2019] UKSC 7)

- Burden on party asserting expectation

Devoid of relevant qualification

- Qualification need not be unambiguous

"[189] We accept that there may be a relevant qualification if the qualification is itself ambiguous and one possible interpretation amounts to a relevant qualification. However, for the reasons we have explained, we do not consider that the qualification in this case can be interpreted as a suggestion that HMRC may retrospectively decide that the dip pots are in fact part of a single supply and cannot therefore be zero rated." (Queenscourt Limited v. HMRC [2024] UKFTT 460 (TC), Judge Vos)

- Qualification need not be unambiguous

HMRC can be bound by their opinions on what the law is

"[49] Equally, I do not consider that there is any force in the submission by Sir James Eadie QC that it is extremely difficult to build a legitimate expectation on a wrong view of the law. The authorities on which he relied all recognise in terms that, even where a statement or representation has been made by a public authority on a mistaken view as to what the law is, if the requirements of the doctrine of legitimate expectation are satisfied, it will apply and its application will not be rendered impossible or more difficult because the statement or representation was made on a mistaken view of the law. As in so many areas of public law, the applicable legal principle is stated with characteristic clarity by Laws LJ, who sadly died whilst this judgment was being written. In R v Education Secretary ex parte Begbie [2000] 1 WLR 1115 at 1127C, he said:
"Where the court is satisfied that a mistake was made by the minister or other person making the statement, the court should be slow to fix the public authority permanently with the consequences of that mistake. That is not to say that a promise made by mistake will never have legal consequences. It may be that a mistaken statement will, even if subsequently sought to be corrected, give rise to a legitimate expectation, whether in the person to whom the statement is made or in others who learnt of it, for example where there has been detrimental reliance on the statement before it was corrected."" (R (oao Alliance of Turkish Business People) v. Secretary of State for the Home Department [2020] EWCA Civ 553, Flaux, Newey, Rose LJJJ)

"[32] Although the courts have emphasised that HMRC does not have a general discretion to remit taxes that are lawfully due, it does not follow that a statement made in guidance as to the content of the law cannot give rise to legitimate expectation or that the only kinds of statements made by HMRC on which a taxpayer can rely are those relating to a policy, or a discretion or to the question of tax management. There is a managerial discretion being exercised here. That is the managerial discretion exercised by HMRC by publishing the guidance because the publication of guidance is an important aspect of the way in which HMRC manages the collection of taxes. It is inherent in the nature of guidance that it only fulfils the function of assisting in the management of the collection of taxes if taxpayers can rely on it. It is true, as the Judge said, that it is open to taxpayers to apply specifically to HMRC for a ruling on their circumstances, but an important function of publishing guidance is precisely to reduce the number of occasions on which a taxpayer or its advisers will need to seek an individual ruling from HMRC. Guidance as to the meaning of the taxing statutes also facilitates the self-assessment process by helping taxpayers and their advisers complete their self-assessment forms correctly. This in turn reduces the number of enquiries that HMRC will need to open into taxpayers' returns. Bingham LJ's exhortation in MFK Underwriting that taxpayers' only legitimate expectation is to be taxed according to statute is followed a few sentences later by the statement "No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them". His observation was not an indication that a representation about HMRC's view of the law can never give rise to a legitimate expectation. Such a principle would, in my judgment, greatly reduce the value of HMRC's published guidance and greatly increase the burden on taxpayers and their advisers trying to navigate their way through complicated legislation." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

HMRC can be bound by their opinions on what the law is

HMRC representation seeking to create certainty by guidance

"[31] There are some statements issued by HMRC which go beyond a mere expression of its opinion as to the law. For example, a taxing statute may contain wording which is inherently uncertain, such as where it describes something as needing to be 'substantial' or 'material' or states that something must be done within a 'reasonable time'. HMRC will wish to ensure that all members of staff apply the term in the same way so that taxpayers are dealt with consistently, regardless of which officer handles their case. That guidance may then be published so that taxpayers can conduct their affairs on the basis of the bright line created by HMRC's practice. In other cases, the legislation may by its terms confer a discretion on HMRC in the exercise of some power without spelling out the criteria to be applied. Again, in order to ensure consistent treatment, HMRC may issue guidance setting out what factors staff should take into account and may publish that guidance so that taxpayers know the kind of information that will be relevant to the decision that they are inviting HMRC to make." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

HMRC representation seeking to create certainty by guidance

Implied representation from long standing practice

"[40] ... The decision in Unilever was unremarkable on its unusual facts, but the reasoning reflects the case law as it then stood. Surprisingly, it does not seem to have been strongly argued (as it surely would be today) that a sufficient representation could be implied from the Revenue’s consistent practice over 20 years (see eg de Smith para 12-021)..." (R (oao Gallaher Group Ltd) v. The Competition and Markets Authority [2018] UKSC 25, Lord Carnwath)

"[43] (8) It is unreasonable and/or an abuse of power for HMRC to depart from a long-standing treatment of a taxpayer that HMRC has either agreed or implicitly accepted: see R v. IRC ex parte Unilever [1996] STC 681 at p.690-692." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

Not applicable where practice based on HMRC misapprehension of which taxpayer was/should have been aware

"[87] Unilever does not give APL any basis to contend that HMRC's resiling from the Clearance Letter retrospectively is abusive in circumstances where no legitimate expectation arises precisely because, in seeking the ruling which HMRC has resiled from, APL did not give full and frank disclosure. Unilever, which Ms Shaw accepts was an exceptional case and which Sir Thomas Bingham MR described as 'unique' is readily distinguishable. It involved a clear, consistent and consensual procedure which worked harmoniously between Unilever and HMRC for many years, which both parties viewed as very satisfactory and which operated to the mutual benefit of both Unilever and the taxpayer. The Court considered that the Revenue's decision revoking the procedure fell into the category of one so outrageously unfair that it should not be allowed to stand. This is plainly not the case in circumstances where, whilst the practice of VAT treatment was longstanding, that treatment had been since 2009 predicated on a specific ruling which had been given pursuant to a materially inaccurate and misleading request, and in respect of which APL had not placed all its cards face up on the table. Indeed, as I have pointed out above, in the communications which followed the ruling and in which HMRC explained the basis of its decision, it should have become more than clear to APL that HMRC was labouring under the misapprehension that the effect of the arrangement was that the airlines were paying for the training when, at least in relation to its biggest customer, this was plainly wrong. APL did not seek to correct the obvious misapprehension at any time. MFK is clear that in the absence of a legitimate expectation, HMRC is entitled to resile from its ruling. In circumstances where the ruling was obtained by omitting material facts and giving a materially inaccurate impression of the overall arrangement, the Decision is in no way unfair or otherwise an abuse of power." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

Implied representation from long standing practice

- No representation from HMRC's failure to question tax treatment during inspection

"[89] Much of the evidence was directed to the question whether the Defendants' officers did in fact consider whether the Relevant Supplies were exempt or not. I am prepared to accept that they should have done, especially given the amounts involved. I also acknowledge that there was no witness statement from any of the officers who conducted the inspections. However, the contemporary documents would surely have been very different if they had in fact carried out such an inquiry. Moreover, Mr Cutting, who was the only witness who had any involvement in any of the inspections of the Claimant, gave no evidence that the Defendants' officers said that they were carrying out such an inquiry. I find that none of the Defendants' officers in any of the inspections carried out a critical examination of the proposition that the Relevant Supplies were exempt from VAT. However, it is perhaps more significant that the Defendants did not tell the Claimant that they had done so. That much is evident from the follow-up letters written by the Defendants' officers to the Claimant.
[90] Balancing all of these different considerations, I conclude that the Defendants did not give rise to a legitimate expectation on the part of the Claimant to which the Defendants were bound to give effect. Alternatively, I find that any expectation which the Defendants created was such that the Defendants would only be bound to give effect to it if the Claimant had relied on it to its detriment." (R (oao Realreed Limited) v. HMRC [2023] EWHC 1572 (Admin), Lavender J)

Extra-statutory concession binding subject to its terms

"[29] Where HMRC or their predecessors have published an extra-statutory concession on such a basis, a taxpayer may be able to hold HMRC to it. In R v Inland Revenue Commissioners, Ex p M.F.K. Underwriting Agents Ltd [1990] 1 WLR 1545 ("M.F.K."), Bingham LJ said at 1569, "No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them". As Sales J said in R (Accenture Services Ltd) v Revenue and Customs Commissioners [2009] EWHC 857 (Admin), [2009] STC 1503 ("Accenture"), at paragraph 8, "Where a taxpayer claims to be entitled to take advantage of an extra-statutory concession promulgated by the tax authorities, its claim is in the nature of a claim to benefit from an enforceable substantive legitimate expectation".

[...]

[32]...Further, for HMRC to be bound by a statement it should have been "clear, unambiguous and devoid of relevant qualification": M.F.K., at 1569, per Bingham LJ. In Davies, Lord Wilson said in paragraph 29 that the right course was to:
"proceed on the basis that the representations in the booklet for which the appellants contend must have been clear; that the judgment about their clarity must be made in the light of an appraisal of all relevant statements in the booklet when they are read as a whole; and that, in that the clarity of a representation depends in part upon the identity of the person to whom it is made, the hypothetical representee is the 'ordinarily sophisticated taxpayer' irrespective of whether he is in receipt of professional advice"." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ)

Extra-statutory concession binding subject to its terms

Full disclosure must be made in seeking clearance/ruling

"[43] (3) For a legitimate expectation to arise in relation to an HMRC non-statutory clearance:

[...]

(b) the taxpayer must show that he has put all his cards face up on the table by giving full details of the specific transaction on which a ruling is sought. The taxpayer is to treat HMRC with complete frankness and make full disclosure of all the material facts known to him. The situation calls for utmost faith on the part of the taxpayer: see MFK at p.1569E, p.1575B.

(c) full disclosure will not have been made where statements made in the clearance request are materially inaccurate or misleading. It does not follow that full disclosure has been made because sufficient information was disclosed to enable inference to be drawn therefrom. Where a piece of information essential to the deliberations required of HMRC by the taxpayer was not furnished to them there is no unfairness in revoking a clearance: see R v. IRC (ex parte Matrix Securities Limited) [1994] 1 WLR 334 at p.342B, p.352B, p.354B & H and p.356A & G.

(d) the requirement for full disclosure will be especially difficult to satisfy if there has been a purely oral exchange with a tax official. Full disclosure requires the taxpayer to disclose the perceived problem which the taxpayer wishes to have addressed: see Corkteck Ltd v HMRC [2009] STC 1681, at [30]-[31]." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

Full disclosure must be made in seeking clearance/ruling

- Non-disclosure is material if real possibility it would have made a difference to decision

"[61]...Helpfully, on the second day of argument, [the taxpayer] drew the Court's attention to the Court of Appeal's decision in Bolton Metropolitan Borough Council v Secretary of State for the Environment and Greater Manchester Waste Disposal Authority (1991) 61 P.& C.R. 343 at p.352-353, in which Glidewell LJ set out (amongst other things) the following statements of principle:
'2. The decision maker ought to take into account a matter which might cause him to reach a different conclusion to that which he would reach if he did not take it into account. Such a matter is relevant to his decision making process. By the verb 'might' I mean where there is a real possibility that he would reach a different conclusion if he did take that consideration into account.
[…]
6. If the judge concludes that the matter was 'fundamental to the decision' or that it is clear that there is a real possibility that the consideration of the matter would have made a difference to the decision, he is thus enabled to hold that the decision was not validly made.'
[62] Drawing on these statements of principle by analogy, it was submitted by [the taxpayer], and accepted and averred by [HMRC] that I should consider that a matter is 'material' if 'there is a real possibility that the consideration of the matter would have made a difference to the decision'.

[...]

[68] Therefore, in order to determine whether the inaccuracy in the NSC Request was 'material', the Court must consider on the ordinary standard of balance of probabilities, had the NSC Request not been inaccurate, whether there is a real possibility that consideration of the matter as corrected would have made a difference to the decision." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

- Non-disclosure is material if real possibility it would have made a difference to decision

- Not generally possible to rely on alternative sources of information to demonstrate full disclosure

"[77] It is contended for by [HMRC] that a finding that the NSC Request was materially inaccurate and misleading is sufficient for me to conclude that there was not full and frank disclosure, and therefore no legitimate expectation has arisen. There is considerable force in this submission. As stated by Judge J in MFK, 'In those cases where the taxpayer has approached the revenue for guidance the court will be unlikely to grant judicial review unless it is satisfied that the taxpayer has treated the revenue with complete frankness about his proposals.' I consider that it will generally not be possible for a party who has submitted a materially inaccurate or misleading request for a ruling to point to other material not specifically referred to within the request in order to show that, notwithstanding the materially inaccurate and misleading nature of the request, it has 'treated the revenue with complete frankness'. To find otherwise would place an unfair burden on those considering the request: HMRC should generally be entitled to proceed on the basis that (taking Bingham LJ's phraseology from MFK) the taxpayer placed all his cards face upwards on the table within the four corners of the request and the materials attached. If other material is relied upon, it should be specifically appended to or identified within the Request.
[78] Nevertheless, it is right that I should, notwithstanding [HMRC's] submission, go on to consider whether, as contended for by APL, the fact of the disclosure within the ruling request in 2002, and/or the audit report of Officer Smith, mean that I should conclude that in all the circumstances APL did in fact treat HMRC with complete frankness because it had disclosed (through means other than the NSC Request) the fact of the salary sacrifice arrangement." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

No reliance on previous ruling request

"[81] APL suggests that, therefore, because APL made reference to the 2002 ruling in its 2009 NSC Request, all the details submitted for the earlier ruling may be effectively taken as having been imported into the 2009 NSC Request. This argument is unsustainable:
(1) There will be situations (as rightly identified by Ms Shaw in argument) where the specific transaction in respect of which a ruling is sought is identical to a previously ruled upon transaction but, for example because of a change of relevant company, a further ruling is required. In these circumstances, as Bingham LJ makes clear, a party need only identify the previous ruling, identify any material difference, and request the new ruling. It will not have to rehearse all the details again;

(2) This is entirely different from the scenario where, as here, whilst reference is made to a previous ruling, APL and its advisors considered it necessary to set out in detail what it considered to be all the relevant aspects of the new scheme (even if materially similar to an earlier one) for the purposes of seeking the new ruling. In these circumstances, HMRC is reasonably entitled to assume that in setting out all the details of the new arrangement, the taxpayer has done this fully and accurately; and

(3) Even if this were not generally the position, in the present case, APL's submission is particularly unattractive in circumstances where, upon receipt of the NSC Request, HMRC specifically told APL that it could find no record of the 2002 ruling and requested APL to provide 'a copy of any relevant correspondence and documentation'. The 2002 ruling request now relied upon by APL is plainly 'relevant […] documentation' and should have been provided in response to this request. APL provided the 2002 ruling itself but, although it was in possession of the ruling request (it was disclosed in the course of this dispute), APL did not provide it. It is not necessary for me to determine whether, consistent with the comment in the draft NSC request relating to the removal of any reference to salary sacrifice, this was a conscious decision or merely an oversight. However, in my view it does not lie well for APL now to place reliance upon the contents of a document that it was asked to provide, and did not. I also reject the contention advanced by Ms Shaw that HMRC has a burden to prove that it did not have a copy of the ruling request, but even if it does I am satisfied on the basis of the internal contemporaneous communication dated 17 March and quoted at paragraph 23 above that HMRC took reasonable efforts to locate the 2002 documents at the time but they could not be found for the reasons stated at the time." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

- Not generally possible to rely on alternative sources of information to demonstrate full disclosure

- Failure to disclose problem taxpayer perceives may exist may mean disclosure not complete

"[84](5) There will be some circumstances where a failure to identify the particular problem a taxpayer perceives may exist will be regarded as a failure to have been completely frank with the HMRC (as indeed was the case in R (on the application of Corkteck Ltd) v Revenue and Customs Commissioners [2009] EWHC 785 per Sales J as he then was at [30(b)]). In the present case, APL should have, as I have found, fully and frankly described the nature and extent of the salary sacrifice arrangements, their integral role in the easyJet contract, and APL should have corrected the misleading impression clearly given by the materials that the cadets' bond monies would be repaid by (all) the sponsor airlines. Doing this clearly identifies the facts which give rise to the perceived problem. As Deloitte correctly advised, some description of the 'the reason for uncertainty' should be included within a fully frank request. In this case, Deloitte flagged that the area of uncertainty was whether the deposit of a security bond by the Cadet with APL should, or should not, not be treated as a supply for VAT purposes. The identification of the issue was sufficient. What was problematic was the inaccurate and misleading representation of the overall arrangement, rather than in failing to alert HMRC to the perceived problem with more specificity." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J see also remainder of [84] for what should have been disclosed)

- Failure to disclose problem taxpayer perceives may exist may mean disclosure not complete

HMRC may depart from representation if fair to do so

"[43] (4) Where a clear and unambiguous undertaking has been made in a Clearance Letter it must be shown that it would nonetheless be fair to allow HMRC to depart from it: see In the matter of an application by Geraldine Finucane for Judicial Review for Judicial Review (Northern Ireland) [2019] 3 All ER 191 at [62].

(5) In a tax context it is for the taxpayer to demonstrate a high degree of unfairness in order to override the public interest in HMRC collecting taxes in accordance with the law: see R (oao Aozora GMAC Investment Ltd) v. HMRC [2020] 1 All ER 803 at [52]." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

HMRC may depart from representation if fair to do so

- Even if clear representation, high degree of unfairness required for HMRC to be bound

"[49] The need for a high degree of unfairness arises, in my judgment, from the fact that, as Lord Templeman put it in Preston the primary duty of the Commissioners is to collect, not to forgive tax. It is not linked with the existence or absence of a representation. Lord Carnwath in Gallaher was not dispensing with the need for a high degree of unfairness to be established before the court would prevent HMRC resiling from a representation, assurance or promise. I consider that wherever an express representation is established it is still essential for the court to consider all the factors relevant to whether it would be unfair to allow HMRC to frustrate an expectation arising from that promise, assurance or representation and further that a high level of unfairness is necessary to override the public interest in the collection of taxes to which I have referred." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

- Even if clear representation, high degree of unfairness required for HMRC to be bound

- Burden not on HMRC to justify resiling

"[46] Secondly I do not accept that, once a representation capable of giving rise to a legitimate expectation has been identified, the burden shifts to HMRC to adduce evidence to the court showing some public interest in it being able to resile from the representation. Such an approach fails to recognise that these supposed separate elements or stages in establishing unfairness are all part and parcel of the taxpayer making good his claim that he has a legitimate expectation arising from the representation which the court should protect. Further, the Upper Tribunal does not seem to have been reminded by HMRC of the important public interest in the collection of taxes imposed by Parliament." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

- Burden not on HMRC to justify resiling

- The court is arbiter of fairness

- Detrimental reliance relevant but not essential

"[62] From these authorities it can be deduced that where a clear and unambiguous undertaking has been made, the authority giving the undertaking will not be allowed to depart from it unless it is shown that it is fair to do so. The court is the arbiter of fairness in this context. And a matter sounding on the question of fairness is whether the alteration in policy frustrates any reliance which the person or group has placed on it. This is quite different, in my opinion, from saying that it is a prerequisite of a substantive legitimate expectation claim that the person relying on it must show that he or she has suffered a detriment.

...

[70] For reasons that will shortly appear and for those given at para 63 above, it is unnecessary for me in this case to decide whether it is a requirement that there be a reciprocal undertaking by the person or group to whom the promise is made or that they should suffer a detriment in order to sustain a claim for substantive legitimate expectation. But, if it had been necessary to decide that point, I would have concluded that it was not.

[71] Lord Carnwath has provided, in his judgment in this case, an explanation of his remarks in United Policyholders Group v Attorney General of Trinidad and Tobago [2016] UKPC 17; [2016] 1 WLR 3383. It is clear that those remarks were obiter - see the leading judgment of Lord Neuberger of Abbotsbury in the same case at para 40, where he said that, “for present purposes … it is unnecessary for the Board to consider the law on this difficult and important topic more fully”.

[72] I would disagree with any suggestion that it must be shown that the applicant suffered a detriment before maintaining a claim for frustration of legitimate expectation for a fundamental reason. A recurring theme of many of the judgments in this field is that the substantive legitimate expectation principle is underpinned by the requirements of good administration. It cannot conduce to good standards of administration to permit public authorities to resile at whim from undertakings which they give simply because the person or group to whom such promises were made are unable to demonstrate a tangible disadvantage. Since the matter does not arise, however, it is better that the point be addressed in a future case when it is truly in issue." (Re Finucane [2019] UKSC 7)

"[44]...As regards the role of detrimental reliance, I have already concluded that this is a relevant and indeed an important factor in cases such as the present where the issue involves HMRC's wish to resile from guidance issued either to an individual taxpayer or to the whole world. It is true, as Leggatt J said in GSTS, that some cases have recognised a legitimate expectation without detrimental reliance and I have described earlier other, different situations in which the absence of reliance on - or even knowledge of the guidance - does not rule out a successful claim. But Leggatt J's observation was limited to stating that it is not essential in all cases but that it is still relevant, he said, to the question of whether it would be unjust for the authority to frustrate the expectation created. There is nothing controversial in that statement of the law...

[45] In GSTS as in MFK and the other cases concerning representations made by HMRC in response to requests for guidance made in respect of specific proposed transactions, there is generally no difficulty with detrimental reliance - the claim for judicial review is likely to be brought only if the taxpayer in fact goes ahead with the transaction following the guidance and HMRC then seeks to tax the transaction less favourably than it said it would. I do not regard either GSTS or Vacation Rentals as deciding that detrimental reliance is not relevant. Further, I do not agree with Mr Ewart's contention that there was no reliance or detriment described in Vacation Rentals. It may well have been assumed that the very fact that the claimant treated its supplies as exempt rather than standard rateable gave rise to detriment since it would have organised its business in terms of setting the level of the fees and dealing with input tax on the basis that the supplies were exempt.

...

[53] ... If a taxpayer is unaware of the existence of guidance or if, as in Hely-Hutchinson, he only becomes aware of it after he is committed to the transaction giving rise to the tax dispute, then that may well prove fatal to his claim." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

"[92] I accept that there can be cases in which a claimant can enforce a legitimate expectation on which it has not relied to its detriment, but it does not follow that the present case is one of those cases, nor does it follow that the presence or absence of detrimental reliance is without significance in a case such as the present..." (R (oao Realreed Limited) v. HMRC [2023] EWHC 1572 (Admin), Lavender J)

- Detrimental reliance relevant but not essential

- Reliance on an specialist adviser may diminish reliance on HMRC's representation

"[55] That does not mean that the use of an external adviser to advise on the correct tax position is irrelevant to determining how much reliance there was. That is particularly the case with this kind of representation which simply states what the law is. If a taxpayer engages a specialist adviser to advise on the correct tax position that greatly diminishes the extent to which the taxpayer can then say that his view of the law was influenced by a representation of the kind given in this case. I accept that HMRC can be expected to have considered their opinion on the law carefully and they bring considerable expertise to bear in forming their opinion. But they are not in the same unique position in that regard as they are in relation to the other kinds of statements relating to how they interpret inherently uncertain terms used in the legislation or the criteria according to which they will exercise their discretion. The position might be different if the legal opinion needed to be based, as sometimes happens, on drawing together a number of heavily amended provisions found in a number of different taxing statutes and disparate schedules or sets of regulations. Here the opinion related to a single, relatively straightforward statutory provision. An expert tax adviser was not at so much of a disadvantage as compared to HMRC when it came to reading the Treaty in conjunction with section 793A and working out what it means. Further, ordinarily sophisticated taxpayers know that sometimes HMRC loses cases because the tribunals and courts prefer the taxpayer's construction of the legislation over that proposed by HMRC. A specialist tax adviser, whether an employee of the taxpayer or an external consultant, is engaged to come to his own conclusion about what the law says and not merely to read and repeat to his client the terms of guidance that is publicly available. That is the case regardless of whether in a particular case he in fact did a thorough job or took a short cut by simply relying on the guidance and presenting that to the client as his own work. It is the fact that the taxpayer receives advice on the law from someone whose expertise he expects to match that of HMRC that is the important point

...

[57] ...But I would also conclude that Aozora Japan's reliance on the representation made in the Manual was weak because (i) the representation was merely as to HMRC's opinion about the construction of a relatively straightforward legal provision; and (ii) Aozora Japan sought and obtained specialist advice on the meaning of the legislation and how it would apply to its particular circumstances." (R (oao Aozora GMAC Investments Ltd) v. HMRC [2019] EWCA Civ 1643)

- Reliance on an specialist adviser may diminish reliance on HMRC's representation

- No detrimental reliance where T had already decided to adopt tax treatment and would have continued even without representation

"[101] Dr Moran's statement makes clear that any reliance which he placed on what the Defendants said or did was placed in reliance on the negative proposition that the Defendants did not say that the Relevant Supplies were subject to VAT. The courts should not use the jurisprudence of legitimate expectation to reverse the burden created by the VAT Act. It is for the taxpayer to determine the correct treatment of its supplies. As a general rule, the fact that the Defendants do not challenge the taxpayer's treatment of a particular supply on a particular occasion or occasions is not to be treated as shifting the burden from the taxpayer to the Defendants.
[102] In any event, the Claimant does not claim in the present case that, as a result of the VAT inspections, it did anything different from what it would have done if there had been no VAT inspections. The Claimant treated the Relevant Supplies as exempt. It did so of its own accord. In the absence of the inspections, it would have continued to treat the Relevant Supplies as exempt.
[103] Equally, the Claimant does not contend that it has done anything different from what it would have done if the Defendants had said, in relation to the inspections, words to the effect of, "We make no assurances and you must not rely on anything said or done in relation to this inspection.

...

[105](1) the Claimant did not do anything in reliance on the alleged legitimate expectation, since the Claimant had already decided to treat the Relevant Supplies as exempt from VAT and would have continued to do so if the alleged legitimate expectation had not been created; alternatively" (R (oao Realreed Limited) v. HMRC [2023] EWHC 1572 (Admin), Lavender J)

- No detrimental reliance where T had already decided to adopt tax treatment and would have continued even without representation

- No serious detriment suffered where HMRC paid claim and later sought to recover payment

"[214] Our conclusion therefore is that, based on the evidence available to us, whilst Queenscourt may have suffered some detriment to its business as a result of having to repay the VAT which had been reclaimed, it has not shown that there has been, or is likely to be, any serious detriment to it which results solely or primarily from HMRC making the recovery assessments.

[215] Against this must be balanced HMRC's duty to collect the right amount of tax. If HMRC's error were not corrected, Queenscourt would be put in a better position than other taxpayers in respect of whom HMRC had applied the law correctly. As noted above, the Court of Appeal in Samarkand considered that there was a strong public interest in ensuring that no individual taxpayer is unfairly advantaged at the expense of other taxpayers.

[216] In addition, in our view, Queenscourt must also bear some responsibility for HMRC's mistake. On reviewing the error correction notice which led to HMRC accepting the first claim, it is apparent that, although this refers to over-declared output VAT on sales of zero rated products when sold as part of a meal deal, it does not refer in terms to the question as to whether the meal deal should be treated as a single standard rated supply or whether it could be treated as a multiple supply.

[217] Whilst Queenscourt cannot be criticised for not doing HMRC's job for them, given the existence of HMRC guidance referring to the Domino's case where dips supplied with hot food were treated as part of a single standard rated supply which, given PWC's expertise, they would no doubt have been aware of, it is hard for Queenscourt to say that it is conspicuously unfair for HMRC to recognise its mistake and to apply the law correctly despite its original acceptance of the claim.

[218] Overall, taking all these factors into account, we do not consider that any detriment which may have been suffered by Queenscourt is sufficient to enable us to say that HMRC's decision is so outrageously unfair that it should not be allowed to stand." (Queenscourt Limited v. HMRC [2024] UKFTT 460 (TC), Judge Vos)

- No serious detriment suffered where HMRC paid claim and later sought to recover payment

Query whether fair to frustrate test applies to ESCs

No test of whether it would be fair to frustrate applied to ESC that remained in force

"Where HMRC or their predecessors have published an extra-statutory concession on such a basis, a taxpayer may be able to hold HMRC to it. In R v Inland Revenue Commissioners, Ex p M.F.K. Underwriting Agents Ltd [1990] 1 WLR 1545 ("M.F.K."), Bingham LJ said at 1569, "No doubt a statement formally published by the Inland Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them". As Sales J said in R (Accenture Services Ltd) v Revenue and Customs Commissioners [2009] EWHC 857 (Admin), [2009] STC 1503 ("Accenture"), at paragraph 8, "Where a taxpayer claims to be entitled to take advantage of an extra-statutory concession promulgated by the tax authorities, its claim is in the nature of a claim to benefit from an enforceable substantive legitimate expectation"." (Murphy v. HMRC [2023] EWCA Civ 497, Newey, Andrews, Falk LJJJ - court did not consider fairness or reliance)

Query whether fair to frustrate test applies to ESCs

Reasonable notice of withdrawal of tax treatment

"[43] (6) Where the taxpayer has a legitimate expectation as to a particular tax treatment, they also have a legitimate expectation that it will not be withdrawn retrospectively and that any withdrawal will be managed fairly. Reasonable notice of any withdrawal should be given so as to allow the taxpayer time to make any necessary adjustments to its affairs: see R (on the application of Cameron v Ors) v HMRC [2012] STC 1691 at [71] and GSTS at [96]-[101].

(7) Where the taxpayer has a legitimate expectation from a Clearance Letter it is unfair for HMRC to depart from it retrospectively in circumstances where the Claimant has relied upon it in carrying on its business and has no mechanism for recovering the VAT now retrospectively demanded: see GSTS at [99] and in contrast to R (oao Dixons Retail plc) v. HMRC [2018] EWHC 2556 (Admin) at [67]." (Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

HMRC not arguing it would be fair to act inconsistently with prior agreement with statutory force

"[34] As [the taxpayer] helpfully articulated, the key dispute in this case is thus whether there is such an inconsistency. It is not a case, that sometimes arises in the context of legitimate expectation claims, where the public authority seeks to argue that, even if there is an inconsistency, such inconsistency is justified in the public interest. We agree with him that it does not much matter whether the unlawfulness is characterised as entailing: a) an error of law by HMRC; or b) an abuse of HMRC's statutory power and/or HMRC having acted irrationally. Reflecting the initial impression Foster J formed of the case when she granted permission, that its public law focus lay in a similarity with legitimate expectation cases, we consider the most apt analogy is with the kind of unfairness Lord Templeman referred to in Preston v IRC [1985] 1 AC 835. In that case, which concerned a taxpayer who had withdrawn claims for tax relief and paid tax on the basis a Revenue inspector had told the taxpayer the inspector did not intend to raise further inquiries, Lord Templeman considered that there would be "unfairness" amounting to an abuse of power entitling the taxpayer to judicial review (at 867B) where:
"the commissioners have been guilty of conduct equivalent to breach of contract or breach of representations on their part."
[35] Thus, as [the taxpayer] argued, the judicial review claim should be granted if we are persuaded that HMRC made an error of law by misconstruing the effect of a document to which it was required to give legal effect; and /or where it acted in a way which amounted to, or was, a breach of contract; and hence constituted an abuse of power. As [the taxpayer] pointed out, if the claimants' case regarding inconsistency with the APA is made out, the argument that that then gave rise to an abuse of power is all the more apparent given the statutory force given to such agreements under Part 5." (R (oao Refinitiv Limited) v. HMRC [2023] UKUT 257 (TCC), Green J and Judge Raghavan)

HMRC not arguing it would be fair to act inconsistently with prior agreement with statutory force

Legitimate expectation that a legal act will not be retrospectively invalidated to person's detriment

"[42] As just explained, in this and the next section of this judgment (starting at para 57), I am assuming that the effect of MGN v UK is that, where a claim involves restricting a defendant’s freedom of expression, it would normally be a breach of its article 10 rights to require it to reimburse the claimant any success fee or ATE premium which he would be liable to pay. Even if that contention is correct, it is argued on behalf of Mr Miller (and Mr Flood) that it would be wrong to invoke it to deprive him of the ability to recover from ANL (and TNL) the success fee and ATE premium for which he is liable to his legal advisers and ATE insurers respectively.

[43] If the Rule applies, it was effectively conceded on behalf of Mr Miller that, in the absence of any good reason to the contrary, it would mean that this Court should ensure that any order for costs should not impose such a liability on ANL. That is because section 6(1) of the Human Rights Act 1998 provides that it is “unlawful for a public authority to act in a way which is incompatible with a Convention right”, and subsection (3) provides that “public authority” includes “a court or tribunal”.

...

[46] In this connection, I consider that it would not simply be a plain injustice on Mr Miller to deprive him of the ability to recover the success fee and the ATE premium; it would in my view infringe his rights under A1P1, and that is a factor which can, indeed which must, be taken into account when considering how to dispose of ANL’s appeal. That view derives direct support from the concurring judgment of Lord Mance (with whom Lord Carnwath agreed) in Lawrence (No 3), para 106, where he said that claimants who had entered into a CFA and taken out ATE insurance under the 1999 Act regime must “have had a legitimate expectation that the system would apply and be upheld”, especially as “appellate courts have repeatedly endorsed the system”. Accordingly, he said:

“[The claimants’] legitimate expectation that the system would be enforced is one which falls to be taken into account at the present stage [ie when deciding whether to extend the costs order to payment of the success fee and ATE premium] and is not merely a matter that might (being itself a protected possession within A1P1) be raised as against the United Kingdom in Strasbourg.”

[47] Support for the notion that Mr Miller can rely on A1P1 in the instant circumstances appears to me to be found in the discussion on A1P1 in Simor and Emmerson on Human Rights Practice para 15.010, which includes the proposition that “where in reliance on a legal act, an individual incurs financial obligations, he may have a legitimate expectation that that legal act will not be retrospectively invalidated to his detriment”. Strasbourg jurisprudence also supports this proposition. Pine Valley Developments v Ireland (1991) 14 EHRR 319, Pressos Cia Naviera SA v Belgium (1995) 21 EHRR 301, and Stretch v United Kingdom (2003) 38 EHRR 12 are all cases where the applicant’s disappointed legitimate expectation of a legal right was held to justify his A1P1 claim. In Pine Valley (assumed validity of a planning permission) and Stretch (assumed validity of a contractual option), the basis of the claim was not as strong as here, where it is based on primary legislation whose validity was approved by the Law Lords; on the other hand, both cases related to loss of land-related rights rather than a money claim. Pressos provides a closer analogy for present purposes, as it involved retrospective amendment of legislation which deprived the applicant of an accrued statutorily based claim for damages." (Times Newspaper Limited v. Flood [2017] UKSC 33)

Not always, however

"[48] Having said that, not all retrospective deprivations of accrued rights will offend A1P1. As the Strasbourg court pointed out in Pressos, para 38, the question of proportionality will normally arise, and this typically involves balancing “the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights”. Even bearing that factor in mind, I find it very difficult to see how Mr Miller’s A1P1 claim could be defeated. Parliament did not see fit to render the LASPO regime retrospective: on the contrary, as explained above, the 1999 Act regime applies to all proceedings begun before 1 April 2013. Parliament thereby correctly recognised that, while the 1999 Act regime was unsatisfactory, it would be wrong to disapply it to proceedings which had been issued in the expectation that that regime would continue to apply to those proceedings." (Times Newspaper Limited v. Flood [2017] UKSC 33)

Applied to reject reliance on breach of Article 10 to refuse a costs order

"[53] It follows from all this that upholding Mitting J’s costs order would infringe ANL’s article 10 rights for the reasons given by the Strasbourg court in MGN v UK and would therefore involve an injustice, but amending that costs order in the way sought by ANL would not only involve an infringement of Mr Miller’s A1P1 rights: it would undermine the rule of law. It is a fundamental principle of any civilised system of government that citizens are entitled to act on the assumption that the law is as set out in legislation (especially when its lawfulness has been confirmed by the highest court in the land), secure in the further assumption that the law will not be changed retroactively - ie in such a way as to undo retrospectively the law upon which they committed themselves. To refuse the costs order which Mr Miller seeks would directly infringe that fundamental principle. While freedom of expression is, of course, another fundamental principle, it is not so centrally engaged by the issue in this case: the decision in MGN v UK is essentially based on the indirect, chilling, effect on freedom of expression of a very substantial costs order." (Times Newspaper Limited v. Flood [2017] UKSC 33)

Legitimate expectation that a legal act will not be retrospectively invalidated to person's detriment

RATIONALITY

Question is whether decision is irrational

"[40] I have quoted at some length from these judgments to show how misleading it can be to take out of context a single expression, such as “conspicuous unfairness”, and attempt to elevate it into a free-standing principle of law. The decision in Unilever was unremarkable on its unusual facts, but the reasoning reflects the case law as it then stood. Surprisingly, it does not seem to have been strongly argued (as it surely would be today) that a sufficient representation could be implied from the Revenue’s consistent practice over 20 years (see eg de Smith para 12-021). It seems clear in any event from the context that Simon Brown LJ was not proposing “conspicuous unfairness” as a definitive test of illegality, any more than his contrast with conduct characterised as “a bit rich”. They were simply expressions used to emphasise the extreme nature of the Revenue’s conduct, as related to Lord Diplock’s test. In modern terms, and with respect to Lord Diplock, “irrationality” as a ground of review can surely hold its own without the underpinning of such elusive and subjective concepts as judicial “outrage” (whether by reference to logical or moral standards)." (R (oao Gallaher Group Ltd) v. The Competition and Markets Authority [2018] UKSC 25, Lord Carnwath)

Question is whether decision is irrational

CONSISTENCY

An aspect of rational behaviour

"[24] Whatever the position in European law or under other constitutions or jurisdictions, the domestic law of this country does not recognise equal treatment as a distinct principle of administrative law. Consistency, as Lord Bingham said in the passage relied on by the appellant (para 19 above), is a “generally desirable” objective, but not an absolute rule.

[...]

[26] In the latter case, in an important passage under the heading “Democracy and Equality” ([1999] AC 98, para 9), Lord Hoffmann had emphasised the need to distinguish between equal treatment as a democratic principle and as a justiciable rule of law:

“9. … Their Lordships do not doubt that such a principle is one of the building blocks of democracy and necessarily permeates any democratic constitution. Indeed, their Lordships would go further and say that treating like cases alike and unlike cases differently is a general axiom of rational behaviour. It is, for example, frequently invoked by the courts in proceedings for judicial review as a ground for holding some administrative act to have been irrational: see Professor Jeffrey Jowell QC, Is Equality a Constitutional Principle? (1994) 7 CLP 1, 12-14 and de Smith, Woolf and Jowell, Judicial Review of Administrative Action, 5th ed (1995), pp 576-582, paras 13-036 to 13-045.

… Of course persons should be uniformly treated, unless there is some valid reason to treat them differently. But what counts as a valid reason for treating them differently? And, perhaps more important, who is to decide whether the reason is valid or not? Must it always be the courts? The reasons for not treating people uniformly often involve, as they do in this case, questions of social policy on which views may differ. These are questions which the elected representatives of the people have some claim to decide for themselves. The fact that equality of treatment is a general principle of rational behaviour does not entail that it should necessarily be a justiciable principle - that it should always be the judges who have the last word on whether the principle has been observed. In this, as in other areas of constitutional law, sonorous judicial statements of uncontroversial principle often conceal the real problem, which is to mark out the boundary between the powers of the judiciary, the legislature and the executive in deciding how that principle is to be applied.” (see now the current edition of De Smith’s Judicial Review 8th ed (2018) paras 11.061ff)

As that passage makes clear, in domestic administrative law issues of consistency may arise, but generally as aspects of rationality, under Lord Diplock’s familiar tripartite categorisation." (R (oao Gallaher Group Ltd) v. The Competition and Markets Authority [2018] UKSC 25, Lord Carnwath)

"[50] I agree with Lord Carnwath’s analysis of the relevant legal principles. In public law, as in most other areas of law, it is important not unnecessarily to multiply categories. It tends to undermine the coherence of the law by generating a mass of disparate special rules distinct from those applying in public law generally or those which apply to neighbouring categories. To say that a decision-maker must treat persons equally unless there is a reason for treating them differently begs the question what counts as a valid reason for treating them differently. Consistency of treatment is, as Lord Hoffmann observed in Matedeen v Pointu [1999] 1 AC 98, at para 9 “a general axiom of rational behaviour”. The common law principle of equality is usually no more than a particular application of the ordinary requirement of rationality imposed on public authorities. Likewise, to say that the result of the decision must be substantively fair, or at least not “conspicuously” unfair, begs the question by what legal standard the fairness of the decision is to be assessed. Absent a legitimate expectation of a different result arising from the decision-maker’s statements or conduct, a decision which is rationally based on relevant considerations is most unlikely to be unfair in any legally cognisable sense. In the present case nothing that the OFT said or did could have given rise to any other expectation than that it would act rationally. The questions which this appeal poses are (i) whether the OFT acted rationally in giving the assurance to TMR alone in 2008 and in repaying the penalty to TMR alone in 2012; and (ii) if not what are the consequences for Gallaher and Somerfield." (R (oao Gallaher Group Ltd) v. The Competition and Markets Authority [2018] UKSC 25, Lord Sumption)

An aspect of rational behaviour

ERROR OF LAW

Court to correct any error of law

"[112] The common law of judicial review in England and Wales has not stood still in recent years. Starting from the received checklist of justiciable errors set out by Lord Diplock in the CCSU case [1985] AC 374, the courts (as Lord Diplock himself anticipated they would) have developed an issue-sensitive scale of intervention to enable them to perform their constitutional function in an increasingly complex polity. They continue to abstain from merits review – in effect, retaking the decision on the facts – but in appropriate classes of case they will today look very closely at the process by which facts have been ascertained and at the logic of the inferences drawn from them. Beyond this, courts of judicial review have been competent since the decision in Anisminic [1969] 2 AC 147 to correct any error of law whether or not it goes to jurisdiction; and since the coming into effect of the Human Rights Act 1998, errors of law have included failures by the state to act compatibly with the Convention." (R (oao Q) v. Secretary of State for the Home Department [2003] EWCA Civ 364)

Court to correct any error of law

Decision must be taken on the correct legal basis

"In my judgment the decision in Anisminic Limited v. Foreign Compensation Commission [1969] 2 AC 147 rendered obsolete the distinction between errors of law on the face of the record and other errors of law by extending the doctrine of ultra vires. Thenceforward it was to be taken that Parliament had only conferred the decision making power on the basis that it was to be exercised on the correct legal basis: a misdirection in law in making the decision therefore rendered the decision ultra vires." (R (oao page) v. Hull University Visitor [1993] AC 682 at 701 )

Decision must be taken on the correct legal basis

Seeking to exercise power that did not exist

"[53] The officers were purporting to exercise a power under regulation 11 of the Police (Conduct) Regulations 2020 which did not exist. That was a material error of law, which vitiated the decisions made. The Defendant submitted that the error of law was not material, as the same decision could properly have been made under other powers. I do not consider that the case of R v Hull University Visitor ex parte Page [1993] AC 682 assists the Defendant, as it was made in a different context. Therefore, Ground 1 succeeds." (R (oao Philpot) v. Commissioner of Police For The Metropolis [2022] EWHC 1852 (Admin))

Seeking to exercise power that did not exist

Power to specify 'how' something should be done does not include power to specify 'what'

"[31] Irrespective of whether the misconception to which I have referred played a part in leading the Secretary of State to include in the guidance the two passages under challenge, I conclude that his inclusion of them went beyond his powers. HOW does not include WHAT. Power to direct HOW administrators should approach the making of investment decisions by reference to non-financial considerations does not include power to direct (in this case for entirely extraneous reasons) WHAT investments they should not make." (Palestine Solidarity v. Secretary of State for Housing [2020] UKSC 16, Lord Wilson)

Power to specify 'how' something should be done does not include power to specify 'what'

POWER MUST BE EXERCISED CONSISTENTLY WITH PURPOSE

Statutory powers must be exercised to promote the policy and objects of the Act as a whole

"[21]...Apart from the Convention, the company’s submission comes down to a short point: that is, given the existence of a discretion in section 66, it must in the absence of any specific restriction be treated as an unfettered discretion. That to my mind overlooks the basic principle that any statutory discretion must be exercised consistently with the objects and scope of the statutory scheme." (JP Whitter (Water Well Engineers) Ltd v. HMRC [2018] UKSC 31)

“Parliament must have conferred the discretion with the intention that it should be used to promote the policy and objects of the Act [which] must be determined by construing the Act as a whole … [I]f the Minister … so uses his discretion as to thwart or run counter to the policy and objects of the Act, then our law would be very defective if persons aggrieved were not entitled to the protection of the court.” (Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997)

No statutory discretion is unfettered

"[23]...Section 3(1) provides that the scheme regulations permitted by section 1(1) may make such provision as the Secretary of State “considers appropriate”. But the power cannot be as broad as that. No statutory discretion is unfettered. When we read further into section 3, we at once find a helpful signpost. For subsection (2)(a) states that the permitted provision includes, in particular, provision as to any of the matters specified in Schedule 3. It is only a signpost because the words “in particular” mean that the matters specified in Schedule 3 are not the only matters which can be the subject of provision in the regulations. But it valuably identifies the matters which, in particular, Parliament had in mind." (Palestine Solidarity v. Secretary of State for Housing [2020] UKSC 16, Lord Wilson)

Statutory powers must be exercised to promote the policy and objects of the Act as a whole

RELEVANT AND IRRELEVANT CONSIDERATIONS

HMRC must take into account all relevant considerations and exclude irrelevant considerations

"[32] The assessment and payment of fees to a legal representative who has replaced another at the sentencing stage of criminal proceedings was, self-evidently, a material consideration which should have been taken into account by the rule making body which introduced amendments to the 2005 Rules by the 2011 Rules. It has been frankly acknowledged that this situation was not adverted to at the time of the making of the 2011 Rules. There was therefore an admitted failure to have regard to a relevant factor and, on that account alone, judicial review will lie of the decision to introduce the 2011 Rules without making provision for the payment of fees which would properly reflect the preparatory work which a legal representative, new to the case at the sentencing stage, would have to undertake." (Re Brownlee [2014] UKSC 4, Lord Kerr)

"[59] In deciding whether or not to agree to a request for a reference under regulation 32(2), the police pension authority must, of course, act reasonably, taking into account relevant considerations and excluding any irrelevant matters." (R (Boskovic v. Chief Constable of Staffordshire [2019] EWCA Civ 676, Barker, Davies LJJ)

HMRC must take into account all relevant considerations and exclude irrelevant considerations

- Omitted relevant factor must be material (might have made a difference)

"[62] Accordingly, although the Secretary of State was in error in failing to take account of the appellants' case on prejudice, it was not an error of any consequence and the decision should in my view be allowed to stand despite it." (R (oao Chichvarkin) v. Secretary of State for Home Department [2011] EWCA Civ 91, Richards, Mummery, Longmore LJJJ)

'2. The decision maker ought to take into account a matter which might cause him to reach a different conclusion to that which he would reach if he did not take it into account. Such a matter is relevant to his decision making process. By the verb 'might' I mean where there is a real possibility that he would reach a different conclusion if he did take that consideration into account.
[…]
6. If the judge concludes that the matter was 'fundamental to the decision' or that it is clear that there is a real possibility that the consideration of the matter would have made a difference to the decision, he is thus enabled to hold that the decision was not validly made.'

Drawing on these statements of principle by analogy, it was submitted by [the taxpayer], and accepted and averred by [HMRC], that I should consider that a matter is 'material' if 'there is a real possibility that the consideration of the matter would have made a difference to the decision'." (R (oao Airline Placement Limited v. HMRC [2023] EWHC 1191 (Admin), Constable J)

- Omitted relevant factor must be material (might have made a difference)

- Irrelevant matter must have played a part in the decision

"[67] Where a decision-maker has taken a legally irrelevant factor into account when making his decision, the normal principle is that the decision is liable to be held to be invalid unless the factor played no significant part in the decision-making exercise. Thus, in Simplex GE (Holdings) Ltd v Secretary of State for the Environment (1989) 57 P&CR 306, 325-6, Purchas LJ (with whom the other two members of the Court of Appeal agreed) approved an observation of Forbes J in R v Rochdale Borough Council ex p Cromer Ring Mill Ltd [1982] 3 All ER 761, 766-7, explaining that a decision would not be set aside where the irrelevant factor was 'insignificant or insubstantial', as opposed to a case where the irrelevant factor's 'influence was substantial'." (R (oao FDA) v. Secretary of State for Work and Pensions [2012] EWCA Civ 332)

- Irrelevant matter must have played a part in the decision

- Burden on HMRC to show that irrelevant factor played no significant part in decision making

"[69] It appears to me that that is a theoretical point, at least in this case, because, if the Secretary of State cannot succeed in showing that the irrelevant factor was not a significant factor in his thinking or that he would have selected CPI as the relevant index anyway, it is hard to see how he could hope to persuade the court that there would be no point in setting aside the decision and requiring it to be reconsidered." (R (oao FDA) v. Secretary of State for Work and Pensions [2012] EWCA Civ 332)

- Burden on HMRC to show that irrelevant factor played no significant part in decision making

Relevance is a matter of law, weight is a matter of judgment

"[42] ... In Tesco Lord Hoffmann pointed out that the question of whether something is a material consideration is a question of law: p 780." (R (oao Wright) v. Resilient Energy Severndale Ltd [2019] UKSC 53)

"[54] In Tesco (above) Lord Hoffmann pointed out (780F-G) that the law has always made “a clear distinction between the question of whether something is a material consideration and the weight which it should be given”. The former is a question of law; the latter is a matter for the planning judgement of the planning authority. Accordingly, a failure by a planning authority to have regard to relevant guidance as a material planning consideration would be an error of law. A decision, after considering the guidance, not to follow it, would (absent another ground of challenge in administrative law) be a matter of planning judgement, in which the courts have no role." (Aberdeen City and Shire Strategic Development Planning Authority v. Elsick Development Company Limited [2017] UKSC 66)

Relevance is a matter of law, weight is a matter of judgment

No relief if decision would inevitably have been the same

"[68] Even where the irrelevant factor played a significant or substantial part in the decision-maker's thinking, the decision may, exceptionally, still be upheld, provided that the court is satisfied that it is clear that, even without the irrelevant factor, the decision-maker would have reached the same conclusion. Thus, in Simplex GE (1989) 57 P&CR 306, 326, Purchas LJ approved the following passage in the judgment of May LJ in R v Broadcasting Complaints Commission ex p Owen [1985] 1 QB 1153, 1177:

'Where the reasons given by a statutory body for taking ... a particular course of action are not mixed and can clearly be disentangled, but where the court is quite satisfied that even though one reason may be bad in law, nevertheless the statutory body would have reached precisely the same decision on the other valid reasons, then this court will not interfere by way of judicial review.'

In Smith v North East Derbyshire PCT [2006] 1 WLR 3315, para 10, (a different) May LJ said this:

'Probability is not enough. The defendants would have to show that the decision would inevitably have been the same and the court must not unconsciously stray from its proper province of reviewing the propriety of the decision making process into the forbidden territory of evaluating the substantial merits of the decision.'

(See also per Keene LJ at [2006] 1 WLR 3315, para 16, as well as Simplex 57 P&CR 306, 327 and 329, and R v Secretary of State for the Environment ex p Brent LBC [1982] QB 593, 646.)" (R (oao FDA) v. Secretary of State for Work and Pensions [2012] EWCA Civ 332)

No relief if decision would inevitably have been the same

- High hurdle

"[81] In all these circumstances, while acknowledging the high hurdle which has to be crossed by a decision-maker before he can persuade the court that his decision would have been the same if he had ignored a factor which he illegitimately had taken into account, I am satisfied that that hurdle would be crossed in the present case. It seems to me that the decision to use CPI as the index by reference to which the 2011 up-rating should be effected would certainly have been made by the Secretary of State even if he had put out of his mind any consideration of the benefit to the national economy of that decision." (R (oao FDA) v. Secretary of State for Work and Pensions [2012] EWCA Civ 332)

- High hurdle

Legitimate expectation is relevant factor

"[45] There is a further point. In Bibi, Schiemann LJ said that an authority is under a duty to consider a legitimate expectation in its decision making process. He said:

"49. Whereas in R v North and East Devon Health Authority, Ex p Coughlan [2001] QB 213 it was common ground that the authority had given consideration to the promises it had made, in the present cases, that is not so. The authority in its decision making process has simply not acknowledged that the promises were a relevant consideration in coming to a conclusion as to whether they should be honoured and if not what, if anything, should be done to assuage the disappointed expectations.
. . .
51. The law requires that any legitimate expectation be properly taken into account in the decision making process. It has not been in the present case and therefore the authority has acted unlawfully."

[46] The Board agrees. Where an authority is considering whether to act inconsistently with a representation or promise which it has made and which has given rise to a legitimate expectation, good administration as well as elementary fairness demands that it takes into account the fact that the proposed act will amount to a breach of the promise. Put in public law terms, the promise and the fact that the proposed act will amount to a breach of it are relevant factors which must be taken into account." (Paponette v. Attorney General of Trinidad and Tobago [2010] UKPC 32)

"[81] As we have seen, in 2006 the GMC was aware, at the very least, that over the years its officials had routinely made statements about the acceptability of the PMQs which had never been qualified by stating that the policy was subject to change or variation at any time. Nevertheless it appears that in taking these decisions in 2006 and again in 2010 no consideration was given to whether it was necessary to introduce the new rules with immediate effect or to the consequences of doing so. This in itself seems to me sufficient to lead to the conclusion that the decision to apply these rules to the appellant should be quashed. At the very least, the GMC should have taken account of the impact of its decision to depart from its previous policy with immediate effect on the appellant and anyone else who received a similar specific assurance. It should have done so before deciding whether to change course. Failure to do so vitiates the decision on Wednesbury grounds. This is the first category of case considered by the Court of Appeal in Coughlan (at para. 57). Similarly in R. (Bibi) v Newham Borough Council [2002] 1 WLR 237, the failure of the local authority properly to take account in its decision making process of the legitimate expectations to which it had given rise many years previously led to the conclusion on Wednesbury principles that it had acted unlawfully (at paras. 49-51). By the same token, the failure of the GMC to take account of the impact of its new policy on those currently pursuing such courses vitiates its decision." (R (oao Patel) v. GMRC [2013] EWCA Civ 327)

"[82(vi)] To justify frustration of a substantive legitimate expectation, the decision maker must have taken into account as a relevant consideration the undertaking and the fact that it will be frustrated: Paponette [45]-[46]." (R (oao RD v. Worcestershire CC [2019] EWHC 449 (Admin), Nicklin J)

"It is right that the commissioners' representations cannot be construed so as to override the will of Parliament. If Parliament were to legislate in such a way as to leave the commissioners no discretion but rather to oblige them to depart from their representations to the opticians' organisations, then that expression of Parliament's will must prevail, subject to any challenge on the basis of Community law. On the other hand, any such future legislation which may be passed may leave the commissioners some discretion as to making concessions in appropriate cases. In exercising any such discretion the commissioners would almost certainly have to take into account the existence of their representations already referred to." (R v. CEC ex p. Kay & Co Ltd [1996] STC 1500 at 1528, Keene J)

Legitimate expectation is relevant factor

UNLAWFULLY FETTERING DISCRETION

Decision-maker can have policy but must be willing to consider each case on its own merits

"[56] A person upon whom a discretionary power has been conferred:
(1) must exercise it on each occasion in the light of the circumstances at the time;

(2) cannot fetter its exercise in the future by committing himself now as to the way it will be exercised in the future, nor by ruling out of consideration factors which may then be relevant;

(3) may nevertheless develop and apply a policy as to the approach which he will adopt in the generality of cases, as long as it does not preclude departure from the policy or taking into account circumstances which are relevant to the particular case; if such an inflexible and invariable policy is adopted, both the policy and the decisions taken pursuant to it will be unlawful.

[57] The relationship between fettering discretion and the adoption of policy is further elucidated in R (West Berkshire DC) v. Secretary of State for Communities and Local Government [2016] 1 WLR 3923, per Laws LJ at §§16-30, where he identified two relevant principles:
(1) The exercise of public discretionary power requires the decision maker to bring his mind to bear on every case; he cannot blindly follow a pre-existing policy. This is the rule against fettering discretion.

(2) But a policy maker is entitled to express his policy in unqualified terms. He is not required to spell out the legal fact that the application of policy must allow for the possibility of exceptions. A general policy that does not, on its face, admit of exceptions will be permitted in most circumstances. The proof of fettering will be in the willingness to entertain exceptions to the policy, rather than in the words of the policy itself. This is the liberty to express policy without acknowledging exceptions. There is no requirement for a policy to state expressly that it must be applied consistently with the rule against fettering discretion. A policy may, but need not, incorporate exceptions as part of the policy.

Ultimately, a public authority may adopt a policy to guide the exercise of its discretion, provided always that it is prepared to listen to someone with something new to say: British Oxygen Co Ltd v. Board of Trade [1971] AC 610. Any policy adopted by a public authority has to be applied as "not a rule but a guide": R (Sainsbury's Supermarkets Ltd) v. First Secretary of State [2005] EWCA Civ 520, per Sedley LJ at §16." (R (oao MAS Group Holdings Limited) v. Secretary of State for Environment, Food and Rural Affairs [2019] EWHC 158 (Admin), Morris J)

Decision-maker can have policy but must be willing to consider each case on its own merits

Required to consider arguments put, but not required to cast around for reasons

"This, in my view, is fatal to the appellant's argument. The principle against fettering discretion requires a decision-maker to be willing to listen to and consider arguments for not acting in accordance with a rule or other established policy. But it does not require the decision-maker to cast around for possible reasons to do so. That is clear from the nature of the principle which, as the British Oxygen case shows, is a requirement founded in procedural fairness that the decision-maker must not "shut his ears" to an application or refuse to "listen to anyone with something new to say". It is also confirmed by R (Behary and Ullah) v Secretary of State for the Home Department [2016] EWCA Civ 702, para 39, where the Court of Appeal held that there was no obligation on the Home Office to consider whether to grant leave to remain outside the Immigration Rules in the absence of an express request to do so or, possibly, of facts which were so striking that it would be irrational not to consider the grant of leave outside the Rules even in the absence of any request. In my view, the same applies to the grant of refugee status." (R (oao AB) v. Secretary of State for the Home Department [2018] EWCA Civ 383, Leggatt LJ)

Required to consider arguments put, but not required to cast around for reasons

J9: Grounds of judicial review

LEGITIMATE EXPECTATION

Summary of requirements​

- Expectation that the ordinary law will apply is a matter of no legal significance

- Legitimate expectation arising from HMRC guidance/settled practice of a more benevolent interpretation

Representation must be clear, unambiguous and devoid of relevant qualification

- Meaning determined by court

- Assess objectively from perspective of person to whom representation addressed

- Normally the ordinarily sophisticated taxpayer

- Avoid taking inappropriately technical approach

- Clear words required for concession to be relied on retrospectively

- Court not inferring a 6 year limit to claiming relief for tax paid by trustees

- HMRC's power to recover overpaid claim not undermining clarity of representation when accepting claim

- Read consistently with international obligations

- No assumption that ordinary taxpayer has read previous versions of a concession

- Disregard materials of which ordinary taxpayer not expected to be aware

- Burden on party asserting expectation

Devoid of relevant qualification

- Qualification need not be unambiguous

HMRC can be bound by their opinions on what the law is

​

HMRC representation seeking to create certainty by guidance

​

Implied representation from long standing practice

Not applicable where practice based on HMRC misapprehension of which taxpayer was/should have been aware

- No representation from HMRC's failure to question tax treatment during inspection

Extra-statutory concession binding subject to its terms

Full disclosure must be made in seeking clearance/ruling

- Non-disclosure is material if real possibility it would have made a difference to decision​

- Not generally possible to rely on alternative sources of information to demonstrate full disclosure​

No reliance on previous ruling request

- Failure to disclose problem taxpayer perceives may exist may mean disclosure not complete​

HMRC may depart from representation if fair to do so

- Even if clear representation, high degree of unfairness required for HMRC to be bound

​

- Burden not on HMRC to justify resiling

- The court is arbiter of fairness

- Detrimental reliance relevant but not essential

- Reliance on an specialist adviser may diminish reliance on HMRC's representation

​

- No detrimental reliance where T had already decided to adopt tax treatment and would have continued even without representation

- No serious detriment suffered where HMRC paid claim and later sought to recover payment

Query whether fair to frustrate test applies to ESCs

No test of whether it would be fair to frustrate applied to ESC that remained in force

Reasonable notice of withdrawal of tax treatment

HMRC not arguing it would be fair to act inconsistently with prior agreement with statutory force

Legitimate expectation that a legal act will not be retrospectively invalidated to person's detriment

Not always, however

​

Applied to reject reliance on breach of Article 10 to refuse a costs order

RATIONALITY

Question is whether decision is irrational

CONSISTENCY

An aspect of rational behaviour

ERROR OF LAW

Court to correct any error of law​

Decision must be taken on the correct legal basis

Seeking to exercise power that did not exist

Power to specify 'how' something should be done does not include power to specify 'what'

POWER MUST BE EXERCISED CONSISTENTLY WITH PURPOSE​

Statutory powers must be exercised to promote the policy and objects of the Act as a whole

No statutory discretion is unfettered

RELEVANT AND IRRELEVANT CONSIDERATIONS

HMRC must take into account all relevant considerations and exclude irrelevant considerations

- Omitted relevant factor must be material (might have made a difference)

- Irrelevant matter must have played a part in the decision

- Burden on HMRC to show that irrelevant factor played no significant part in decision making

Relevance is a matter of law, weight is a matter of judgment

No relief if decision would inevitably have been the same

- High hurdle​

Legitimate expectation is relevant factor

UNLAWFULLY FETTERING DISCRETION

Decision-maker can have policy but must be willing to consider each case on its own merits

Required to consider arguments put, but not required to cast around for reasons

Summary of requirements

- Non-disclosure is material if real possibility it would have made a difference to decision

- Not generally possible to rely on alternative sources of information to demonstrate full disclosure

- Failure to disclose problem taxpayer perceives may exist may mean disclosure not complete

Court to correct any error of law

POWER MUST BE EXERCISED CONSISTENTLY WITH PURPOSE

- High hurdle