[2025] UKUT 00315 (TCC)

For the reasons set out below, we are satisfied that the FTT did not err in law in deciding that the jurisdiction of the tribunal in appeal under s. 16(5) FA 94 consists of: a) a full appellate jurisdiction to determine as a matter of fact and law whether HMRC’s decision under s.13A(2)(e) FA 94 (that a person is not entitled to excise duty drawback because their claim does not comply with conditions imposed by the EGDR or HMRC) is correct; and b) a supervisory jurisdiction to determine whether HMRC’s discretion not to otherwise allow or waive any conditions is one that could reasonably have been arrived at. In short, the jurisdiction of the FTT in determining an appeal pursuant to s. 16(5) FA 94 in relation to an ‘other decision’ includes the jurisdiction to consider the reasonableness of any discretionary element of the decision challenged, as it would for an ancillary decision appealed pursuant to s. 16(4) FA 94.

Therefore, the FTT was right to conclude at [152] that it had jurisdiction to determine whether HMRC’s decision not to exercise its discretion to waive compliance with conditions or otherwise allow claims pursuant to Reg. 7(1)(a) EGDR was reasonable. This jurisdiction is additional to the tribunal’s ‘full merits’ jurisdiction to determine whether the EGDR conditions for drawback had been satisfied.

Deciding whether the FTT has any ‘public law’, ‘reasonableness’ or ‘supervisory’ jurisdiction in relation to HMRC’s decisions in appeals pursuant to s.16(5) FA 94 is a matter of statutory construction. It does not require any extensive consideration of the tribunal’s general jurisdiction to consider public law arguments. We explain this in more detail below.

Construing s.16(5) requires setting it in the context of the scheme of appeal provisions within the FA 94. The relevant parts of the review and appeals provisions in sections 13-16 FA 94 are as follows:

We next consider s.16(5) FA 94, headed ‘appeals to a tribunal’, within the context of the section as a whole. The structure of s.16 is as follows:

In general terms, the sequence of subsections within section 16 addresses matters before, during and after the bringing of an appeal. The exceptions to that sequence are the burden of proof provisions in s16(6) and the definitions of ancillary matters in s16(8) and (9) each following after s16(4).

There are two elements to subsection 16(4) which are important not to conflate.

First, there is the scope of the jurisdiction – namely what decisions, or what elements of decisions are appealable to the tribunal and on what basis. Second, there is the question of remedy – what powers the tribunal holds in relation to those decisions or elements of them that are within its jurisdiction to adjudicate upon. Subsection 16(4) provides for: the scope of the FTT’s jurisdiction – appeals regarding decisions on ancillary matters in which the tribunal is to determine whether the decision is reasonably arrived at; and the powers or remedies – the tribunal’s powers on allowing an appeal are confined to the specific subset of remedies in subsections 16(4)(a)-(c), such as remittal to the decision-maker with directions.

Subsection 16(4) is a provision which expresses the powers contained in it in terms which are undoubtedly limited. When adjudicating on ancillary decisions the FTT’s powers are explicitly “confined to” the specified subset of remedies which are only to be exercised where the FTT considers HMRC’s decisions to have been unreasonably arrived at.

It is worth noting that in circumstances where powers are “confined to” a limited subset of powers, there is an inference that there exists a larger pool of powers which includes that subset. That larger pool of powers, including to set aside or quash, remake or vary or substitute the tribunal’s own decision is set out in subsection 16(5). Thus the two provisions are related – the extent or ‘pool’ of remedies available to the FTT in FA 94 appeals are set out in subsections s16(4)(a)-(c) and (5).

The proper interpretation of the FTT’s jurisdiction in s.16(5) begins with the plain language that the powers in relation to other decisions ‘shall also include’ the wider powers. The phrase naturally refers directly back to the previous and immediately preceding subsection, s.16(4) which provides for the powers in relation to ancillary decisions as set out in 16(4)(a)-(c) – which powers are only engaged if the unreasonableness threshold is met. As set out above, subsection 16(5) provides for the jurisdiction – full merits appeals in relation to all “other decisions” i.e. not ancillary decisions – and provides for the remedies where the full range of powers is available.

The words used by Parliament must mean something. Ms McArdle argued that the inclusive term “shall also include” in subsection 16(5) is simply a reference to the wide range of additional case management powers the FTT enjoys. Paying due respect to the submission, such a construction is highly unlikely. Such an interpretation would mean that the tribunal did not have those case management powers when dealing with appeals on ancillary decisions under subsection 16(4) because it was confined to only the listed powers in 16(4)(a)-(c). That would be absurd. It also involves guessing what other or additional powers subsection 16(5) is referring to if not those in the preceding subsection, namely s.16(4).

Subsection 16(5) explicitly contains the reference that the powers “shall also include” the additional remedies such as the tribunal substituting its own decision for that of HMRC by confirming or varying the decision. The powers given to the FTT in s.16(5) are greater on allowing an appeal - to vary or quash or substitute the tribunal’s own decision. As a matter of logic, it is consistent that s.16(5) would subsume the lesser powers available to the FTT under s.16(4)(a)-(c) of remittal to the decision maker – and the threshold / jurisdiction of reasonableness that engage them. The two subsections complement each other.

Parliament has confirmed that in relation to all non-ancillary, or ‘other’ decisions the powers of the tribunal also include the power to quash or vary the decisions under appeal or substitute its own decision. Read together, the meaning of the two subsections is clear. Subsection 16(4) provides for only a part of the FTT’s jurisdiction and powers in relation to relevant decisions whilst s16(5) provides for the full range of jurisdiction and powers.

Thus subsection 16(5) imports both all the powers of the FTT in s.16(4)(a)-(c) and the threshold for exercising those powers, namely a ‘reasonableness’ jurisdiction.

We note of course that there is authority that supports Ms McArdle’s construction of s.16(5). She submits that the FTT ought to have followed the UT in Butlers Ship at [145]-[151]. We naturally pay respect to the decision in Butlers Ship. It is a decision of the UT, a superior court of record and a judgment of a tribunal of coordinate jurisdiction. The starting point is that it is persuasive. We would not depart from it unless it was obiter, plainly wrong, per incuriam or it could be distinguished.

Nonetheless, we are satisfied that the FTT did not err at [142]-[143] in deciding that the decision of the UT on jurisdiction in Butlers Ship at [150]-[151] was obiter, had not been fully argued and ought not to be followed. Likewise, we are not required to follow the UT’s decision on jurisdiction in Butlers Ship when it was obiter. We bear in mind that the UT did not record that it had received the benefit of argument on the meaning of the phrase ‘shall also include’ in section 16(5) and did not address it in its reasoning. While the decision is carefully reasoned, we are not persuaded that the UT came to the right conclusion. We have decided to depart from it based on the statutory construction we have set out above.

Ms McArdle also relied on the decision of the Court of Appeal in CC&C Ltd v HMRC [2014] EWCA Civ 1653, but this is of no assistance. The underlying appeal in that case concerned an ancillary decision and the reference at [16] to careful calibration does not consider any limitation of powers under s16(5), it was about the careful limitation of power under s16(4). There is no dispute that those powers are properly limited.

Ms McArdle further relied on the terms of Reg. 7(3) EGDR. Regulation 7(3) provides that where HMRC notify additional conditions pursuant to Reg. 7(2) to be complied with on making a drawback claim, that is to be considered an ancillary decision for the purposes of s.16 FA 1994. Regulation 7(3) therefore stipulates the powers on appeal against HMRC’s discretion to be those under s.16(4)(a)-(c) FA 94.

She submitted that Reg. 7(3) demonstrates that Parliament did not intend the FTT to have jurisdiction to decide whether the discretion to waive compliance with conditions under Reg. 7(1)(a) was reasonably arrived at because Reg. 7(3) specifically excludes the latter discretion from being an ancillary matter.

We consider that, if anything, Reg. 7(3) EGDR supports the FTT’s and our construction of s.16(5) FA 94. While little assistance can necessarily be gained in interpreting s.16(5) FA 94 by reference to a different provision in a different set of regulations, Reg. 7(3) EGDR specifically anticipates that discretionary decisions of HMRC in relation to a drawback claim will be subject to the reasonableness jurisdiction under s.16(4).

Regulation 7(3) provides a standalone right of appeal against the imposition of an additional condition on a drawback claim by HMRC. In promulgating the regulation, the executive has decided that in determining an appeal against an additional condition, the FTT should exercise the jurisdiction and powers under s16(4)(a)-(c) FA 94. These are limited: the tribunal cannot substitute its own view but only consider the reasonableness of HMRC’s decision.

The decisions by HMRC to use their discretion to impose an additional condition under Reg. 7(2) or to waive a condition imposed by the EGDR or public notice and otherwise allow a claim under Reg. 7(1)(a) are related. The exercise of HMRC’s discretion in each situation may be considered on appeal on a supervisory (reasonableness) basis but there is also a full merits appeal as to whether conditions have been complied with. There is a consistent implication that the FTT has jurisdiction to consider the reasonableness of HMRC’s discretion but not to remake their discretionary decisions.

Furthermore, to exclude the reasonableness of HMRC’s discretion to waive a condition under Reg. 7(1)(a) from the scope or jurisdiction of an appeal under section 16(5) FA 94, which provides for a full merits appeal, would be unlikely. It would allow the FTT to assess as a matter of fact and law whether some elements of HMRC decision under appeal were lawful (whether a condition under the regulations had been complied with) but not whether the discretion to waive conditions was reasonable (and therefore lawful). This would be even more remarkable where the FTT would have the power to consider the reasonableness of conditions if imposed specifically on the taxpayer by HMRC by virtue of Regs. 7(2)-(3).

We also bear in mind that HMRC’s interpretation of s.16(5) would also give rise to impractical results. HMRC’s interpretation of s.16(5) FA 94 would create two different routes of challenge to the related parts of any decision by HMRC to refuse drawback under Regulation 7(1)(a) for non-compliance with a condition that they had decided not to waive. If there were no jurisdiction to consider HMRC’s exercise of discretion to waive compliance with a condition under Reg 7(1)(a), a taxpayer would be required to judicially review the discretionary part of any decision made. Yet the taxpayer would be permitted to appeal to the tribunal any related part of HMRC’s decision that a condition for drawback had not been complied with.

Ms McArdle made two more persuasive submissions on this ground.

The first was that the FTT’s jurisdiction is limited because a taxpayer’s appeal is against HMRC’s decision as to whether they are ‘entitled’ to drawback of excise duty under section 13A(2)(e) FA 94 rather than any discretionary waiver of the conditions of entitlement.

However, we are not satisfied that the wording of s.13A(2)(e) FA 94, focusing on the entitlement to drawback, requires us to construe section 16(5) FA 94 as prohibiting the tribunal from examining the reasonableness of HMRC’s discretionary decision to waive conditions.

An appeal is brought against any decision as to whether a person is entitled to any drawback at all, or as to what proportion of their claim they are entitled to receive. It is axiomatic that if a person complies with all conditions, they are entitled to the whole of their claim. In this regime, HMRC has the discretion to waive all conditions imposed by the EGDR by virtue of Reg. 7(1)(a), so long as the person making the claim is an eligible claimant. If any condition has been waived, and all other conditions which have not been waived have been met, a claimant is then entitled to drawback. Likewise, if HMRC have unlawfully, i.e. unreasonably, refused to waive a condition, the claimant might still be entitled to drawback.

Therefore, a person’s entitlement to the drawback of excise duty, as decided by HMRC, includes a decision whether a person is entitled to drawback because the requirement for compliance with a condition imposed by the EGDR or public notice is waived under Reg 7(1)(a). If compliance with all conditions is waived by HMRC then a person is so entitled to drawback (subject to the proviso in Reg. 7(1)(a) that they are an eligible claimant pursuant to Reg. 6). In this case there is no doubt that the Appellant was eligible and so were the goods. The decision by HMRC not to waive compliance with conditions was nonetheless a decision as to the Appellant’s entitlement to the drawback of excise duty and not a separate question falling outside of the tribunal’s jurisdiction under section 13A(2)(e) FA 94.

The second point made by Ms McArdle was that Parliament had provided two very different schemes for different types of decisions under subsections 16(4) & (5) FA 94 and there is good reason that they should remain distinct such that the latter should not incorporate the former. She submitted that decisions on ancillary matters concern discretionary decisions of HMRC such that only s.16(4) permits the reasonableness to be considered by the FTT. In contrast, other decisions appealable under s. 16(5) concern the binary question of satisfaction of identifiable or strict conditions or criteria - such as entitlement to drawback in this case. These admit of only a yes or no answer. These types of decisions may be examined by the FTT on appeal on a full merits basis - determining whether HMRC’s decision was correct in fact or law - but because they do not involve the exercise of HMRC’s discretion do not require a review of the reasonableness of the decision.

She supplied a schedule of sample ‘ancillary’ and ‘other’ decisions in post hearing submissions dated 9 July 2025. Mr Thornton provided annotations in an additional column on 21 July 2025. The schedule is based upon extracts from Schedule 5 FA 94 which specifies the types of HMRC’s decisions which are decisions on ‘ancillary matters’.

Subsection 16(4) is designed to convey the appropriate jurisdiction and powers for appeals against decisions on ancillary matters - there being around a hundred different decisions which HMRC may make as specified in Schedule 5 FA 94 (which largely defines ancillary decisions). Most ancillary decisions involve or require the use of HMRC’s discretion and all of which deal with matters which HMRC are normally considered uniquely qualified to address.

We accept the general point that the schedule of ancillary decisions provides a sample of decisions which can be made by HMRC which are largely, although not exclusively, discretionary. From a purposive perspective, ancillary decisions will ordinarily be discretionary matters or matters of judgement that Parliament has directed the Commissioners to decide upon. Therefore, the powers of the FTT ought ordinarily to be limited to supervising those decisions to ensure they were taken reasonably – and hence lawfully.

In contrast the sample of ‘other’ decisions largely, but not exclusively, includes binary decisions HMRC may make as to whether statutory provisions are satisfied. Most ‘other’ decisions which are made by HMRC are binary and involve no discretion being exercised – and over which the FTT has a full merits appeal of fact and law under section 16(5) in contrast to ancillary decisions where HMRC are only exercising a discretion.

Nonetheless, having perused the sample schedule, including comments of the Appellant, we are not satisfied that it provides convincing support for Ms McArdle’s interpretation of s.16(5) FA 94. There are a number of exceptions to the general rule that ancillary decisions are discretionary in nature and other decisions are binary within the sample provided. For example, decisions under paragraph 3(1)(f) of Schedule 5 FA 94 relating to the approval requirements for producers of alcohol products under s.82 Finance (No.2) Act 2023 are defined to be ancillary decisions but include questions which are binary as to whether the producer has fulfilled statutory criteria. Decisions as to the amount of a person’s liability to a penalty under s.13A(2)(gb) FA 94 and s.8P Tobacco Product Duty Act 1979 are defined to be other decisions but include questions which are discretionary, such as the application of special circumstances. This somewhat undermines the argument that two different powers are available to the FTT in relation to two different types of decisions. It is not clear from this sample schedule of decisions that such a bright line distinction can be drawn between the two types of decisions and appeal jurisdictions.

Therefore, we do not find the purposive argument so convincing as to require us to depart from our construction of the plain language of s.16(5) FA 94.

Further and in any event, even if the appeal gateway is nominally binary such as in this appeal under s.13A(2)(e) FA 94 – whether a claimant is entitled to drawback - it may not be in reality. For the reasons we have explained, in this appeal, entitlement to excise duty drawback relies not just upon the terms of the statutory appeal gateway in section 13A alone but consideration of the EGDR - the underlying regulations. Regulation 7 (1)(a) and (2) EGDR import HMRC’s discretions into decisions on entitlement consistent with s.16(5) FA 94 importing a reasonableness / supervisory jurisdiction from s.16(4). One must look beyond the plain definitions of ‘ancillary’ and ‘other’ decisions to understand what type of decision HMRC may be making.

Therefore the FTT did not err at [150]-[152] of the Decision in concluding: a) that it had the jurisdiction and powers under s.16(5) FA 94 to consider whether, on a full merits basis, the Appellant had complied with the conditions for drawback as a matter of fact and law; but also b) whether, on a supervisory basis, HMRC had acted reasonably in deciding that it would not otherwise allow the claim when the conditions under the EGDR and public notice EN207 had not been complied with.

We are satisfied that the FTT did not err in its construction of s.16(5) FA 94 at [148]-[152] of the Decision for the reasons it gave. It went on to correctly summarise the FTT’s reasonableness jurisdiction in the appeal at [153]:

“153.

When undertaking the latter exercise, and following the guidance of the Court of Appeal in GB Housley Limited v HMRC [2016] EWCA Civ 1299, we consider that the approach we should adopt is as follows:

(1)

Evaluate the evidence and material available at the time of the Review (whether it had been provided to HMRC or not) and determine whether HMRC have reasonably concluded that the drawback claim should be refused.

(2)

If we conclude that no reasonable body of commissioners could have come to any conclusion other than to allow the drawback claim (or a relevant part of it) we may allow the appeal in that regard.

(3)

If we conclude that HMRC have acted unreasonably we may still refuse the Appellant’s appeal if we are satisfied that HMRC would inevitably have rejected the claim (or part of it) had they not acted unreasonably.

(4)

When considering whether HMRC have acted unreasonably we must consider whether they have taken account of all relevant factors and no irrelevant factors. If they have considered all relevant factors it is a matter for them how those factors are weighed in reaching their decision. We may disagree with the decision, but disagreeing with the decision does not mean that it was an unreasonable decision.

(5)

If HMRC have acted unreasonably and neither (2) nor (3) above applies we do not have the power to retake HMRC’s decision and should allow the appeal exercising our power under section 16(4)(b) FA94 to require HMRC to re-review the decision to refuse the claim with such directions as we consider appropriate.”