TC09680 - [2025] UKFTT 01332 (TC)

It is common ground that, notwithstanding the UK’s departure from the EU, s 28 Finance Act 2024 preserved the obligation under Marleasing to interpret VAT legislation in conformity with EU law so far as possible.

As was explained in Vodafone 2 at [37] “the obligation on the English courts to construe domestic legislation consistently with Community law obligations is both broad and far-reaching”, and in particular, (a) it is not constrained by conventional rules of construction; (b) it does not require ambiguity in the legislative language; (c) it is not an exercise in semantics or linguistics; (d) it permits departure from the strict and literal application of the words which the legislature has elected to use; (e) it permits the implication of words necessary to comply with Community law obligations; and (f) the precise form of the words to be implied does not matter. The limits on a conforming interpretation are that (a) the meaning should go with the grain of the legislation and be compatible with the underlying thrust of the legislation being construed; and (b) not require the courts or tribunals to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate: Vodafone 2 at [38]. A conforming interpretation in accordance with Marleasing therefore allows a “highly muscular approach to the construction of national legislation”: Test Claimants in the FII Group Litigation v IRC [2012] UKSC 19; [2012] STC 1362.

Here I consider a conforming interpretation is possible, by reading in “(h) an Act or Measure of the National Assembly for Wales” to Note 8. Whilst this is a departure from the strict and literal application of the words, such a highly muscular approach is allowed under a conforming interpretation. It clearly goes with the grain of the legislation, as it is adding an item of the same genus to the list already in Note 8. It is not contra legem, in the sense of contradicting and being irreconcilable with the very wording of the national provision at issue: HMRC v Ampleaward Ltd [2021] EWCA Civ 1459; [2021] STC 2260 at [95]. I note that this is also consistent with the approach of Judge Beare in JD Wetherspoon PLC v HMRC [2025] UKFTT 658 (TC), where he found a conforming interpretation capable of adding the word “cider” to a prescriptive list of other alcoholic beverages.

Cascade say a conforming interpretation would be too far reaching:

“Further, the effect of adding a new type of Act would be potentially far-reaching. The definition of ‘state-regulated’ in Note (8) is used by Item 4 (care or medical or surgical treatment and certain goods) as well as Item 9. If Acts of the Welsh Assembly were added to Note (8), the Welsh Assembly could extend the exemptions simply by choosing to regulate additional services. Whether the Welsh Assembly is to have that power (in the same way as the Scottish Parliament or the Northern Ireland Assembly) is [a] matter of political choice.”

However Parliament chose to give the National Assembly for Wales the power to make such regulation. In those circumstances extending the exemptions to include goods and services so regulated, in the same way that it extends to regulation by the Scottish Parliament or the Northern Ireland Assembly, is not too far reaching.

Accordingly if I had not found for HMRC on the basis of correcting a drafting error, applying Inco Europe, I would have found in favour of HMRC on the basis of a conforming interpretation.