Upper Tribunal Tax and Chancery Chamber

UT/2024/000060 - [2025] UKUT 00143 (TCC)

Fecha: 11-Feb-2025

Correct approach to construction of Statements of Practice

Correct approach to construction of Statements of Practice

45.

A Statement of Practice explains the way HMRC interprets legislation and, as the name suggests, the way HMRC applies the law in practice. As regards the correct approach to construing Statements of Practice, both parties’ skeletons advanced various propositions reflecting guidance provided from the authorities. Although such guidance does not explicitly concern Statements of Practice we do not understand it to be in dispute that the interpretative principles advanced would be equally applicable. As Mr Birdling and Ms Ruxandu explained in HMRC’s skeleton:

(1)

The proper construction of policy guidance such as a Statement of Practice is a matter for “determination by the court, interpreting the document objectively in accordance with the language used, and bearing in mind that a policy document is not to be read as if it were a statute or a contract” (R (Cotter) v NICE (2020) 175 BMLR 89 (CA) at [41].

(2)

Although statements of practice do not change rights, where they set out HMRC’s policy as to how a statutory discretion falls to be exercised, they will be followed unless there is good reason not to do so (R (Hemmati and others) v Secretary of State for the Home Department [2019] UKSC 56 at [69]).

46.

On behalf of the Claimant, Mr Firth referred us to Murphy v HMRC [2023] EWCA Civ 497. The decision is not directly on all fours with the present case, because it was concerned with an extra-statutory concession. That said, there seems no reason (and the parties did not dispute this) why the principles articulated in Murphy (themselves drawn from a number of previous authorities at [30] to [31]) should not apply to an HMRC Statement of Practice. Accordingly:

(1)

The meaning of the Statement of Practice falls to be assessed by reference to how it would reasonably have been understood by those to whom it was directed. The ordinarily sophisticated taxpayer can be taken to be representative of those to whom an extra-statutory concession (or, in our case, a statement of practice) is directed. (see R (Association of British Civilian Internees: Far East Region) v Secretary of State for Defence [2003] EWCA Civ 473 at [56] R v IRC ex p MFK Underwriting Agents Ltd [1989] STC 873at 1569 and R (Davies) v HMRC [2011] UKSC 47 at [69]).

(2)

It would be “inimical to legal certainty (even subject to rationality review) to interpret [the policy] other than in accordance with the objective meaning that a reasonable and literate person would ascribe to it” (R (Ellis) v Secretary of State for the Home Department [2020] UKUT 82 (IAC) at [35]).

47.

Finally it is worth noting that the Court of Appeal’s decision in R (Bampton Property Group Ltd) v King (an officer appointed by Revenue and Customs Commissioners)[2012] EWCA Civ 1744, which we will return to in our discussion under Ground One, concerned the interpretation of the same Statement of Practice we are concerned with here. The Court of Appeal (at [99]) noting the High Court’s conclusion on a particular issue arose from a “sensible construction” agreed that the SP had to be “… interpreted realistically”.