[2025] UKUT 00315 (TCC)

As we have explained above, the FTT was entitled to consider the reasonableness of HMRC’s original and review decisions that the drawback claim should be refused.

The Appellant’s drawback claim was made in 2021, seven years after it had paid the excise duty on the goods in 2014 and four years after the three-year time limit in Reg. 7(6) EGDR expired. In both decisions, HMRC’s primary basis for refusal was that the claim was made outside the three-year time limit which it would not waive. In their original and review decisions HMRC relied upon the Appellant’s lack of good explanation for its late drawback claim in exercising the discretion not ‘to otherwise allow’ the claim. The lateness of the claim was an independent ground for refusal additional to reliance on the Appellant’s non-compliance with other EGDR conditions.

The FTT decided that HMRC had agreed to waive the three-year time limit by virtue of the contents of Officer McKirdy’s email of 27 December 2019 - see [30]: “that HMRC would not refuse an otherwise compliant claim solely on the basis that it had been made outside the three-year time limit”. In respect of that part of its claim where the other EGDR conditions had been satisfied, the FTT decided that the Appellant was entitled to the drawback of excise duty (see [71]-[74]).

Further, the FTT decided HMRC had acted unreasonably in relying upon the time limit in isolation or as an additional ground on which to refuse the total claim in its original and review decisions (see [155]-[158]).

We agree with Mr Thornton, for DFUK, that the FTT did not err in finding or construing the terms of the 2019 correspondence to constitute a waiver by HMRC of the three-year time limit for making a claim. It was both within the range of findings open to the FTT to make and a proper interpretation of the correspondence in context. The FTT was not required to apply the test pertaining to legitimate expectation nor find that the email made a clear and unambiguous statement or promise. The FTT was simply required to find or construe the ordinary and natural meaning of the email and then determine if HMRC’s decision to refuse the claim was unreasonable in light of this meaning.

When construing the meaning of HMRC’s email, the FTT rightly took into account the whole context of the correspondence, including the findings of fact it laid out from [23] to [26] of the Decision. The parties’ competing views were set out at [27] and the lack of any evidence from the author of the email as to its meaning was acknowledged at [29]. The FTT confirmed at [29] that it considered the email of 27 December 2019 in its context. The FTT found at [30] that the email from HMRC’s officer confirmed that an otherwise compliant claim would not be rejected solely on the basis of the failure to satisfy the Reg. 7(6) time limit condition i.e. that the time limit condition had been waived.

Ms McArdle’s best point is that the email only states that HMRC ‘can consider the Drawback claim in this situation’ rather than ‘will grant’ or ‘allow’ the claim. However, the proper interpretation cannot hang on the choice of the word ‘consider’ alone. The email should not be read as if it were a statute. We are satisfied that the word ‘consider’ had the natural meaning the FTT found in the context. The use of the word ‘consider’ did not mean that HMRC would only consider whether to waive the time limit, it meant it would consider the claim notwithstanding it being made out of time. HMRC could not promise to ‘grant’ or ‘allow’ the claim in advance because it would not know if the other conditions had been met until it had been submitted, together with any supporting evidence.

The words “can consider” must be read in the context of the whole sentence, complete email and correspondence as a whole. First, the whole sentence accepted the premise that the time limit had not been complied with but HMRC had considered the specific facts of the case, “this situation”, and were prepared to consider it: “… the Drawback Centre can consider a Drawback claim in this situation even though the condition stated in [EGDR] regulation [7](6) … has not been met.”

Second, the later paragraphs of the email went on to specify that other conditions needed to be met, “However the claimant would have to show…”. This reasonably implied that HMRC was promising to waive the time limit even though the claim was made late.

Third, the correspondence as a whole was premised on the basis that the Appellant was requesting that the time limit be waived so as to avoid any more work being done on the claim it would fall at the first hurdle. That was the very question Mr Thornton had asked of HMRC in his covering email and letter. An assurance that HMRC could consider the out of time claim but nothing more would do no more than restate the discretion afforded to HMRC by virtue of Regulation 7(1)(a), be of no value and not answer the question posed.

In light of the correspondence read as a whole, we find no error in the FTT’s interpretation of the email dated 27 December 2019: that HMRC did waive the time limit. HMRC said they could “consider the claim…in this situation”, even though the three year time limit was not met. HMRC could not say they would accept or grant the claim, as the claim had not yet been submitted and had to be made good; hence the use of the word “consider”. This does not mean that HMRC would “consider whether to waive the three year time limit”. Instead, the preferable interpretation is that HMRC were stating that they would consider the claim notwithstanding the fact it was made outside the three-year time limit provided by Reg. 7(6).

Furthermore, the reference in the email to the other conditions for drawback needing to be met was not placing any condition upon the waiver of the time limit that meant the time limit would only be waived if the other drawback conditions were satisfied. Interpreting the email as a conditional waiver would result in the fettering of HMRC’s discretion: only to waive the time limit based on the satisfaction of other conditions. It would not accord with the law - HMRC always retain a general discretion to waive the time limit independently of other conditions by virtue of Reg. 7(1)(a) - just as HMRC have the power to waive each of the other conditions upon independent consideration. Purporting only to grant a conditional waiver would have bound the hands of a future decision maker who would have been in receipt of the full claim and evidence in support. For HMRC to state that they would only ‘consider’ as opposed to ‘grant’ the claim made outside of the time limit only so long as the other conditions were met might have restricted the wide or general discretion given to HMRC in Reg. 7(1)(a) which would permit HMRC to waive any and all conditions.

The preferable interpretation of the statement in the email that other conditions needed to be met is simply that HMRC were acknowledging the fact that the Appellant had specifically not asked HMRC to waive any of the other conditions. HMRC were not being asked to ‘otherwise allow’ the claim despite those conditions not being met. Mr Thornton had said that the Appellant would be able to comply with the other conditions. Thus, HMRC were simply reminding the Appellant that other conditions needed to be met, no waiver having been sought.

HMRC would have had the power to impose other conditions in writing directly to DFUK or to all taxpayers by way of public notice under Regs. 7(1)(b) or 7(2). However, these would not enable a conditional waiver: the power to impose conditions as to when a waiver would be exercised. These regulations would enable a power to impose new standalone conditions that would also have to be met in order for a claim to be allowed. However, the powers could not be exercised to define the circumstances which must be met in order to waive a different condition or that would likewise fetter HMRC’s discretion.

The FTT gave good reasons in support of its interpretation of the correspondence at sub-paragraphs to [30]. Each of these recognised the central importance of the time limit condition imposed by Reg. 7(6) EGDR:

Taken together in the context of the whole correspondence, the FTT was right to form the view set out at [31], which is the one that the Appellant had understood from the correspondence. The email of 27 December 2019 was a statement or promise that the Appellant’s non-compliance with the time limit would not form the basis on which the claim would be refused. This was the rational and preferable interpretation. Without it, HMRC’s response might have been considered to be misleading or unclear. DFUK already knew that the time limit could be waived. That much is apparent from the Reg. 7(1)(a) EGDR. DFUK needed to know that its further work in preparing the claim could be justified and accordingly needed to know that the time limit was waived.

We therefore reject HMRC’s potential interpretations of the email as either being no waiver of the time limit condition or only a conditional waiver.

We also note that in HMRC’s original and review decisions both Officers refused to waive the time limit because the Appellant had not established exceptional circumstances or reasons for the late claim. Mr Thornton objected to this. The test of exceptionality before a condition for drawback might be waived is not to be found in statute nor the EGDR nor any public notice nor HMRC’s guidance. However, nothing turns on it in this case, because the decision-making officers considered the explanation given by the Appellant for the delay and gave full reasons for deciding that the explanation was not good. Therefore, the full facts were considered and HMRC did not unnecessarily restrict the exercise of its discretion to a case where exceptional circumstances were established. Nonetheless, the FTT was entitled to find that reliance on the claim being made out of time was unreasonable in light of the email of 27 December 2019 whereby it had given advance indication that it would consider the claim even though it was late.

We agree with Mr Thornton that the FTT correctly interpreted the email according to its proper meaning in context, and that the conclusion reached is one that the FTT was open to find on the evidence. We recognise that the FTT did not have the benefit of any evidence from the author of the email, Officer McKirdy. HMRC chose not to call her on the basis that the challenge was to the original and review decisions refusing the claim which were made respectively by Officers O’Rourke and Ramsay.

We also recognise that HMRC’s decision-making officers appear to have interpreted the email differently when addressing it in their decision letters. Officers O’Rourke and Ramsay do not appear to have considered the email to prevent them from relying on the time limit as a basis on which to refuse the claim. However, the decision letters do imply that the officer accepted there that there was such a waiver but it was conditional on the Appellant satisfying the other conditions for drawback. For instance, the review decision states relevantly:

“…However, the reply [email of 27 December 2019] went on to say, if Drinks and Food UK Ltd were able to show that the goods detailed in the drawback claim were the same goods as those listed in the assessment and all other conditions were met to HMRC's satisfaction, then a claim can be considered. …For HMRC to exercise their discretion, they must be satisfied that all the remaining drawback conditions have been met…”

In the event, in the appeal before the FTT HMRC relied on a statement from Officer O’Rourke, which was read as agreed, but not Officer Ramsay who made the review decision. Further, it is recorded by the FTT that, for the purposes of the appeal, HMRC had accepted there was a waiver of the time limit but argued it was conditional on the Appellant satisfying the other conditions for drawback.

However, evidence as to how the email was meant or understood by the officers is not determinative in any way because the meaning of the correspondence is to be interpreted on an objective basis rather than by reference to the subjective understanding of either party.

The FTT made no error of law in deciding that HMRC had given an assurance that they would not rely on the non-compliance with the time limit as a reason to refuse the claim. The FTT therefore made no error in finding that the HMRC acted unreasonably in relying on the lateness of the claim, and lack of good reason for the delay, as a material ground on which to refuse it.

This ground of the cross-appeal is dismissed.