TC09680 - [2025] UKFTT 01332 (TC)

HMRC submit the principles to be applied are found in the speech of Lord Nicholls of Birkenhead (with whom the other Law Lords agreed) in Inco Europe Ltd and Others v First Choice Distribution [2000] UKHL 15; [2000] 1 WLR 586, 592C-593A (“Inco Europe”) where he said:

“I freely acknowledge that this interpretation of section 18(1)(g) involves reading words into the paragraph. It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors. In suitable cases, in discharging its interpretative function the court will add words, or omit words or substitute words. Some notable instances are given in Professor Sir Rupert Cross’s admirable opuscule, Statutory Interpretation, 3rd ed. (1995), pp. 93–105. He comments, at p. 103:

‘In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role.’

This power is confined to plain cases of drafting mistakes. The courts are ever mindful that their constitutional role in this field is interpretative. They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature. So the courts exercise considerable caution before adding or omitting or substituting words. Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance of the provision Parliament would have made, although not necessarily the precise words Parliament would have used, had the error in the Bill been noticed. The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see per Lord Diplock in Jones v Wrotham Park Settled Estates [1980] AC 74, 105-106. In the present case these three conditions are fulfilled.

Sometimes, even when these conditions are met, the court may find itself inhibited from interpreting the statutory provision in accordance with what it is satisfied was the underlying intention of Parliament. The alteration in language may be too far-reaching. In Western Bank Ltd v Schindler [1977] Ch 1, 18, Scarman LJ observed that the insertion must not be too big, or too much at variance with the language used by the legislature. Or the subject matter may call for a strict interpretation of the statutory language, as in penal legislation. None of these considerations apply in the present case. Here, the court is able to give effect to a construction of the statute which accords with the intention of the legislature.”

HMRC say that this Tribunal can be abundantly sure that:

The insertion is not too big, it simply completes a list of institutions reflecting devolution arrangements as they now prevail in the UK.

Further, the subject matter is not penal, it is concerned with the appropriate charging of VAT in a consistent and comprehensive manner (as envisaged by the explanatory note to the 2002 Order) across the nations of the UK.

HMRC suggest since the 2002 Order was made by negative resolution, being laid before Parliament on 20 March 2002 and coming into force the following day, such a correcting interpretation is particularly apt. In support of this they rely on the speech of Lord Mance in R (Noone) v Governor of Drake Hall Prison [2010] UKSC 30; [2010] 1 WLR 1743 at [75].