UT (Tax & Chancery) UT/2023/000087 - [2025] UKUT 00176 (TCC)

Ground 3 is that the FTT erred in law in failing to direct that on the further review HMRC must treat the 2017 Application consistently with the way it treated other end-use applications in 2017 and deal with it on the basis of guidance as it stood at that time. In particular, the appellant says that the FTT ought to have made the following direction when it directed HMRC to conduct a further review:

The appeal to the FTT against HMRC’s original decision confirmed on review to refuse the 2017 Application for authorisation was brought pursuant to section 16(4) FA 1994 which provides as follows:

We are concerned with the FTT’s powers pursuant to section 16(4)(b). The FTT was satisfied that HMRC could not reasonably have arrived at the Decision because it failed to take into account the appellant’s proposal that authorisation should be subject to a condition that it would not apply to civil aircraft parts retrospectively or for a period of 12 months from the date it was granted.

Mr Leigh dealt with the appellant’s submissions on Ground 3. He described what we accept is a 3-stage approach required by section 16(4) FA 1994, namely:

The FTT was satisfied as to stages (1) and (2). For the purposes of Ground 3 we are concerned with the directions which the FTT gave for the purposes of the further review. Mr Leigh submitted that the only limit on the FTT was that its directions must relate to the subject matter of the further review and must reflect the fact that it is a further review and not a fresh decision. We did not hear argument as to the general scope of the FTT’s jurisdiction as to the directions it can give for the purposes of a further review. We were however referred to a number of authorities as to the nature of the FTT’s jurisdiction pursuant to section 16(4). The jurisdiction was considered by the Court of Appeal in HM Revenue and Customs v Smart Price Midlands Ltd [2019] EWCA Civ 841 where Rose LJ, as she then was, described the supervisory nature of the test under section 16(4) and went on to consider how that jurisdiction was to be exercised:

In Gora v HM Customs & Excise[2003] EWCA Civ 525, the Court of Appeal also considered the FTT’s jurisdiction in relation to the policy applied by HM Customs & Excise in making the contested decision and endorsed the following submission of counsel for HM Customs & Excise:

In Behzad Fuels (UK) Ltd v HM Revenue and Customs [2019] EWCA Civ 319 the Upper Tribunal had directed a further review to be carried out on the basis of published guidance and policy in force at the date of the original decision. The Court of Appeal rejected HMRC’s submission that the Upper Tribunal ought to have directed a further review on the basis of its guidance and policy at the time of the further review. Henderson LJ stated as follows at [66] and [67]:

It is clear from these authorities that the FTT can direct a further review to be carried out on the basis of the FTT’s findings of fact and its findings as to the reasonableness of a policy being applied by HMRC. In considering the reasonableness of a policy being applied by HMRC, the FTT can apply judicial review principles. Where the decision depends on the application of a policy, it is the policy applicable at the time of the original decision which should be applied and the FTT should direct accordingly. The further review should also be conducted in accordance with the law as it stood at the time of the original decision.

Mr Leigh submitted that the further review decision in this case would only be reasonable if it complied with public law requirements of rationality. He referred us to R (oao Gallaher Group Ltd) v Competition and Markets Authority [2018] UKSC 25, in which the Supreme Court stated that where issues of consistency in decision-making arise, they do so generally as aspects of rationality and legitimate expectation rather than under a general principle of equal treatment. There is also the EU law principle of equal treatment which would apply in the context of customs duties (see Marks & Spencer plc v Revenue and Customs Commissioners Case C-309/06).

We are satisfied that the FTT made no error of law in not directing HMRC to treat the appellant in the same way as other operators in 2017 or to determine the 2017 Application in accordance with policy and guidance as it stood in 2017. We have reached that conclusion for two reasons.

Firstly, the FTT made a finding at [101] that the appellant had not shown that HMRC had treated it differently to other operators in applying the customs legislation. The appellant says that there was no burden on it to establish that other operators were treated differently. It had not asserted that the original decision was unreasonable because of inconsistent treatment. However, having found that the decision was unreasonable and having directed a further review it was open to the FTT to make the direction sought. HMRC’s argument that the 2017 Application could not be treated as the renewal of a CCC authorisation and their reliance on Commission guidance were raised for the first time in HMRC’s skeleton argument shortly before the FTT hearing. The appellant had raised the question of unequal treatment in response to that argument. That may be the case, but in our view it does not remove the burden on the appellant of establishing at least some real possibility of HMRC breaching its obligation to treat the appellant consistently with other operators. In our view there was nothing in the FTT’s findings that required the FTT to make the direction sought.

Secondly, the guidance which the appellant says the FTT ought to have referred to in its directions for the further review was that in existence in 2017. As we have found, the note referred to in that guidance does not say that a CCC authorisation could be renewed under the UCC regime. In any event, the FTT correctly found as a matter of law that a CCC authorisation could not be renewed under the UCC regime. As the Court of Appeal stated in Behzad, the further review must be conducted by reference to the law as it stood at the time of the original decision. That was a matter of law, and not a matter of policy or guidance.

The FTT was entitled not to make the direction sought. If it had done, it would simply have been directing HMRC to comply with their existing public law obligations in circumstances where there was no evidence that they would fail to comply with those obligations. In the circumstances, it is not necessary for us to consider on this appeal how HMRC should approach its further review in order to comply with domestic law requirements of rationality or the EU law principle of equal treatment. Any challenge to the approach of HMRC on the further review can only be made on the appeal against the further review decision. We make no observations as to whether any such challenge would have merit.