[2025] UKUT 00315 (TCC)

The FTT concluded at [152] that it had a full appellate jurisdiction on an appeal under section 16(5) Finance Act 1994 not only to evaluate whether the claim complied with the conditions of the EGDR or a public notice but also a supervisory jurisdiction to determine the reasonableness of HMRC’s refusal to exercise its discretion under Regulation 7(1)(a) EGDR to “otherwise allow” or waive any of the conditions imposed by the Regulations.

It gave its reasons at [133]-[152]. These included at [137]-[139] and [142]-[145] distinguishing authorities relied upon by HMRC as follows:

“137.

The first step in determining our jurisdiction is to interpret section 16(5) FA94. That section provides that in respect of an appeal such as this our powers “shall also include power to quash or vary any decision and power to substitute [our] own decision for any decision quashed on appeal”.

138.

The Appellant contends that the words “shall also include” are a reference to the powers granted to the Tribunal on an appeal in relation to an ancillary matter under section 16(4) FA94 which include the power to require HMRC to conduct a further review.

139.

HMRC contend, by reference to the Upper Tribunal in Butlers Ship Stores v HMRC [2018] UKUT 58 (TCC) (Butlers Ship), that the powers under section 16(5) FA94 are standalone powers; the powers under section 16(4) FA94 providing a supervisory jurisdiction in respect of ancillary matters and an appellate jurisdiction as provided under16(5) FA94 in relation to other decisions.

…

142.

Contrary to the submissions made by HMRC we do not consider that Butlers Ship determines the jurisdiction in this appeal.

143.

In the first instance the comments of the Upper Tribunal are obiter dicta and not binding on us. Further, there is no evaluation of the statutory language adopted in sections 16(4) and (5) FA94. Finally, and in light of the Court of Appeal decision in David Beadle v HMRC [2020] EWCA Civ 562, (Beadle) and subsequent decisions of the Upper Tribunal, it is not clear that the decision is soundly reached.

144.

In Beadle the Court of Appeal confirmed that the tax tribunals have no inherent judicial review jurisdiction but concluded that in the context of an enforcement decision (i.e. a decision to assess for tax or penalty) there is a presumption that a taxpayer will be able to challenge the decision on public law grounds save where the scope for challenging alleged unlawful conduct has been circumscribed by the relevant statutory scheme. In the context of enforcement action the question will be whether the statutory scheme in question excludes the ability to raise a public law defence in proceedings which are dependent on the validity of the underlying administrative act (see paragraph 44 in particular).

145.

In the case of The Executors of David Harrison (Deceased) and others v HMRC [2021] UKUT 273 (TCC) (Harrison) the Upper Tribunal confirmed that in the context of an enforcement decision a challenge on public law grounds was permissible unless the statutory scheme precluded such a challenge. However, in the context of other (non-enforcement) decisions of HMRC clear words are required within the statutory language to permit the taxpayer to challenge the reasonableness of HMRC’s decision on appeal. The UT considered that there was no strong presumption against the FTT having power to consider public law arguments in a non-enforcement appeal; rather it was a question of statutory construction (see paragraphs 34 – 36).”

The FTT came to its conclusion on its jurisdiction under s.16(5) FA 94 at [148]-[152]:

“148…we have determined to approach the question of statutory construction of sections 16(4) and (5) FA94 on the basis that a drawback claim is not an enforcement decision.

149.

We note, in accordance with regulation 7(1) EGDR, drawback claims are subject to conditions imposed by EGDR and by notice published by HMRC but in each and every case those conditions apply “unless [HMRC] otherwise allow”. There is therefore an inherent discretion as to the circumstances in which drawback will be permitted so as to achieve the collection of excise duty by reference to where excise goods are consumed.

150.

We then turn to consider the provisions of section 16(5) FA94. It is a trite tenet of statutory construction that the language adopted by Parliament has been chosen for a reason and should be given meaning. The powers in section 16(5) FA94 “shall also include” the powers so stated. In our view it is plain that the provisions of section 16(5) FA94 are not standalone provisions, they are accretive or additional to something. It is, in our view, plain that they are additional to the powers in section 16(4) FA04. Those are the only powers mentioned in section 16. The provisions of section 16(4)(a) – (c) FA94 are expressed to be powers granted to the Tribunal in the context of management decisions requiring HMRC to exercise their discretion. The Tribunal’s jurisdiction in respect of administrative/management decisions is confined to the supervisory powers identified in section 16(4) FA94 and the Tribunal “also” has a full appellate jurisdiction in respect of other decisions.

151.

Of course, it will not always be necessary or appropriate to exercise a supervisory jurisdiction on an appeal against an “other decision”. Where there is no discretion exercised by HMRC and/or no management decision there is unlikely to a basis for reviewing the process and basis on which HMRC have reached a decision. But, as here, where the source of HMRC’s power to determine whether a claim is payable is subject to conditions “save as [HMRC] may otherwise allow” we consider that the statutory framework is clear. We have a jurisdiction to consider the reasonableness of HMRC’s decision and, where unreasonable, to require them to re-review the original decision with directions on that re-review.

152.

In our view, properly interpreted section 16(5) FA94 permits us to evaluate not only whether the Appellant has met the conditions imposed by EGDR and/or the additional conditions imposed in EN 207 by way of our appellate jurisdiction, we are also entitled to evaluate whether the decision whether or not to exercise their discretion to “otherwise allow” claims which do not meet the prescribed conditions has been exercised reasonably.”