[2025] UKUT 00315 (TCC)

Ms McArdle noted that by virtue of s15 of the Tribunals, Courts and Enforcement Act 2007 (“the 2007 Act”), unlike the FTT, the Upper Tribunal (“UT”) was expressly granted a judicial review jurisdiction by Parliament. There is no legislation which grants the FTT a similar jurisdiction to consider judicial review matters in an appeal.

She relied on two key cases emphasising the limits of the FTT’s jurisdiction: HMRC v Hok [2013] STC 225 (‘Hok’); and HMRC v Noor [2013] STC 998 (‘Noor’).

In Hok the UT decided that the FTT had no judicial review jurisdiction:

“41.

There is in our judgment no room for doubt that the First-tier Tribunal does not have any judicial review jurisdiction. That was made abundantly clear by the House of Lords in Customs and Excise Commissioners v J H Corbitt (Numismatists) Ltd [1981] AC 22. That case related to the Value Added Tax Tribunals rather than the First-tier Tribunal, but they too were a creature of statute with no inherent jurisdiction, and the relevant principles are identical. Lord Lane (with whom the majority agreed) said, in what remains the classic statement on the point:

“Assume for the moment that the tribunal has the power to review the commissioners’ discretion. It could only properly do so if it were shown the commissioners had acted in a way which no reasonable panel of commissioners could have acted; if they had taken into account some irrelevant matter or had disregarded something to which they should have given weight. If it had been intended to give a supervisory jurisdiction of that nature to the tribunal one would have expected clear words to that effect in the [Finance Act 1972]. But there are no such words to be found. Section 40(1) sets out nine specific headings under which an appeal may be brought and seems by inference to negative the existence of any general supervisory jurisdiction.”

Ms McArdle contended that the First-tier Tribunal having no judicial review function is, in addition, the only conclusion which can be drawn from the structure of the legislation which brought both that Tribunal and this into being. The 2007 Act conferred a judicial review function on the UT, a function it would not have had (since it, too, is a creature of statute without any inherent jurisdiction) had the Act not done so; and it hedged the jurisdiction it did confer with some restrictions. It is plain, from perusal of the 2007 Act itself, that Parliament did not intend to, and did not, confer a judicial review jurisdiction on the First-tier Tribunal, and there is nothing in the more detailed legislation relating to tax appeals, the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI 2009/56), which points to a contrary conclusion.

She further relied on Noor which concerned an appeal pursuant to VATA section 83(1)(c) (concerning recoverability of input tax). Consistently with Hok, the UT concluded that the FTT had no judicial review jurisdiction. The absence of clear legislation giving the FTT such jurisdiction and the absence of procedural safeguards such as a permission stage, found in the High Court judicial review procedure were important reasons why (see e.g. Noor at [74]-[78]).

Notably she submitted that there is Court of Appeal authority in relation to public law arguments not being within the jurisdiction of the FTT: Trustees of the BT Pension Scheme v HMRC [2016] STC 66. The case concerned, among other issues, a legitimate expectation argument in the context of an extra-statutory concession relating to time limits. The Court of Appeal decided at [129] to [143]:

“ 129. Our own view is that HMRC's construction of ESC B41 is almost certainly correct and is conclusive of this issue. But the Upper Tribunal did not decide the point on this basis. It held that it had no jurisdiction to decide what amounted to a challenge to the lawfulness of the Revenue's refusal to extend to the Trustees the benefit of the extra-statutory concession because it amounted to a public law challenge which should be brought by way of an application for judicial review in the Administrative Court. In so doing, the Upper Tribunal refused to follow the decision of Sales J in Oxfam v. HMRC stating:

‘401. Our reasons for saying that the Tribunal has no jurisdiction to give effect to the Extra-Statutory Concessions stems from the recent decision of the Upper Tribunal in HMRC v Hok Ltd [2012] UK Upper Tribunal 363 (TCC) (“Hok ”) a decision of Warren J and Judge Bishopp. Mr Vajda has relied on the decision of Sales J in Oxfam v. HMRC [2009] EWHC 3078 (Ch), [2010] STC 686 (“Oxfam”), paragraphs 61 to 79 to demonstrate that the Tribunal does have jurisdiction. However, that decision turned on a construction of 83(1)(c) of the Value Added Tax Act 1994 which Sales J held gave jurisdiction to the VAT Tribunal to deal with legitimate expectation in the context of an appeal as to the amount of input tax. It lends no support at all to the view that the Tribunal has a general jurisdiction to deal with public law matters, whether in the context of direct tax or indirect tax, in particular to require, in the exercise of some sort of supervisory jurisdiction, HMRC to give effect to a concession. The suggestion that there is a jurisdiction in the context of direct tax is refuted by the decision in Hok .’

…

141.

We have heard no argument about s.83(1) VATA and therefore express no view about the correctness or otherwise of the judge's interpretation of that section. But, in agreement with the Upper Tribunal, we do not consider that the decision in Oxfam v HMRC should be treated as authority for any wider proposition and we reject the suggestion that the reasoning of Sales J can or should be applied to the jurisdiction of the FTT and the Upper Tribunal to determine the appeals in this case.

142.

The statutory jurisdiction conferred upon the FTT by s.3 TCEA 2007 is in our view to be read as exclusive and the closure notice appeals under Schedule 1A TMA do not extend to what are essentially parallel common law challenges to the fairness of the treatment afforded to the taxpayer. The extra-statutory concession is, by definition, a statement as to how HMRC will operate in the circumstances there specified and its failure to do so denies the legitimate expectation of taxpayers who had been led to expect that they would be treated in accordance with it. We are not concerned as in these statutory appeals with the direct application of the taxing instrument modified, or otherwise, by any relevant principles of EU law. The sole issue in relation to ESC B41 is whether it was fairly operated in accordance with its terms.

143.

We therefore consider that the reasoning of Sales J in Oxfam v HMRC has no application to the statutory jurisdiction under s.3 TCEA 2007 in the sense of giving to the FtT and the Upper Tribunal jurisdiction to decide the common law question of whether HMRC has properly operated the extra-statutory concession. The appeals are concerned with whether the Trustees are entitled under s.231 to claim the benefit of the credits on FIDs and foreign dividends. Not with what is their entitlement under ESC B41. This reading of TCEA 2007 is strengthened by s.15 TCEA 2007 which gives the Upper Tribunal jurisdiction to decide applications for judicial review when transferred from the Administrative Court. It indicates that when one of the tax tribunals was intended to be able to determine public law claims Parliament made that expressly clear. There are no similar provisions in the case of the FtT.”

Ms McArdle argued that the FTT in the present case concluded, in stark contrast to the approach of the Court of Appeal, that a “reasonableness” jurisdiction could be imported into s16(5), despite the absence of clear wording to that effect.

She also relied on the more recent case of Metropolitan International Schools Ltd v HMRC [2019] 1 WLR 5473 (“Metropolitan Schools”) where the Court of Appeal considered whether s.84(10) VATA permitted the taxpayer to argue a legitimate expectation claim in the Tribunal. The Court rejected the FTT holding a judicial review function, deciding:

“20…In the UT's view, a number of features "point strongly to the conclusion that Parliament did not intend to confer a judicial review function on the VAT Tribunal or the FTT in relation to appeals under s 83 of the VATA 1994"(paragraph 78). The UT noted that the Tribunals, Courts and Enforcement Act 2007 conferred a judicial review function on the UT but not the FTT (paragraph 29) and that the approach Sales J had favoured would have conferred a very extensive judicial review jurisdiction on the FTT "without any of the procedural safeguards, in particular the filter of permission to bring judicial review, and time-limits to which ordinary applications for judicial review in the Administrative Court are subject" (paragraph 76). The UT also cited this passage from the judgment of Nicholls LJ in an income tax case, Aspin v Estill [1987] STC 723 (at 727):

"The taxpayer is saying that an assessment ought not to have been made. But in saying that, he is not, under this head of complaint, saying that in this case there do not exist in relation to him all the facts which are prescribed by the legislation as facts which give rise to a liability to tax. What he is saying is that, because of some further facts, it would be oppressive to enforce that liability. In my view that is a matter in respect of which, if the facts are as alleged by the taxpayer, the remedy provided is by way of judicial review."”

She sought to distinguish the UT’s decision in KSM Henryk Zeman Sp. z.o.o v HMRC [2021] STC 1706 (“Zeman”) in which the UT concluded that the FTT did have jurisdiction to consider a legitimate expectation argument. This was in relation to an appeal against a best judgment assessment under s.83(1)(p) VATA. Its reasoning for doing so included “good policy reasons” (see [82]), such as avoiding the risks of duplication, delay and disputes as to which forum is appropriate.

Ms McArdle contended that the UT’s view on jurisdiction in Zeman was (i) obiter dicta, (ii) per incuriam and (iii) that Zeman was wrongly decided in any event.

First, Ms McArdle submitted that [5] of Zeman is telling: the UT explicitly considered whether a legitimate expectation existed on the assumption it had jurisdiction. That claim failed on the facts (see [20]) so the jurisdiction question was necessarily obiter and thus not binding on this Tribunal. She argued that various tribunals had decided that the comments in Zeman were obiter in nature, as was (in her submission correctly) found by the FTT in Caerdav Ltd (formerly Cardiff Aviation Ltd) v HMRC [2022] UKFTT 00105 (TC) at [182], Queenscourt Ltd v HMRC [2024] UKFTT 460 (TC) at [142] and Houldsworth v HMRC [2024] UKFTT 224 (TC) at [68].

Second, she contended that Zeman was decided per incuriam because the Metropolitan Schools decision was not considered, including the following passage of it:

“20…Were, however, his contentions as to the ambit of section 84(10) of the VATA well founded, it would seem that the FTT had, after all, a wide jurisdiction to rule on public law issues and, in particular, legitimate expectation claims. The jurisdiction would, moreover, have been conferred through a provision introduced in response to the Corbitt decision (viz section 84(10)) (“by the back door”, as Miss Mitrophanous would say), rather than under section 83, the main appeals section. Further, legitimate expectation (and, seemingly, other public law) arguments could be raised in the FTT without any need to satisfy the requirements as to obtaining permission and time limits that govern applications for judicial review: see CPR rr 54.4 and 54.5. It is highly improbable that Parliament intended this when it enacted what has now become section 84(10).”

Further, she submitted that the Zeman decision was per incuriam because it was reached without considering Hok or BT Pension Scheme, both being highly relevant. The following relevant passages at [76]-[77] of Noor on Sales, J.’s approach in Oxfam v HMRC [2010] STC 686 were similarly not considered:

“76.

That approach, in effect if not name, would have been to give to the VAT Tribunal a power of judicial review in relation to the matters covered by section 83(1). Although not exhaustive of all areas in which HMRC is amenable to judicial review in relation to VAT, it would have conferred a very extensive judicial review jurisdiction. It would have done so, moreover, without any of the procedural safeguards, in particular the filter of permission to bring judicial review, and time-limits to which ordinary applications for judicial review in the Administrative Court are subject.

77.

In any case, we disagree with the suggestion concerning the plausibility of what Parliament can be supposed to have had in mind. There are several reasons for this, including these:

a.

If Parliament had intended to confer this jurisdiction on the VAT Tribunal, we would have expected it to say so clearly. Even as late as the passing of VATA 1994, a fortiori when the VAT Tribunal was first set up and given a statutory appellate jurisdiction, it would have been exceptional for an inferior tribunal to have a judicial review jurisdiction or an appellate jurisdiction allowing it to adjudicate on public law issues other than in the course of its statutory jurisdiction. VATA 1994 does not use words which clearly confer such a jurisdiction, reliance instead having to be placed on the words “with respect to”.

b.

In cases where an inferior tribunal is intended to have a judicial review function, express provision has been made. See, for instance, the powers given to the newly-created (and now abolished) Charity Tribunal under section 8 Charities Act 2006.

c.

We have referred to the structure of the tribunal system put in place by TCEA 2007 at paragraph 29 above. Parliament decided that the F-tT should not have a judicial review function; and although the Upper Tribunal does have a judicial review function, its jurisdiction usually comes into play on the transfer of a case commenced in the Administrative Court. It is only in a very limited class of case that a judicial review application can properly be commenced in and heard by the Upper Tribunal. It is well known that there was significant opposition even to these powers being conferred on the Upper Tribunal. It is simply inconceivable that Parliament would have contemplated conferring a similar power on the F-tT notwithstanding the two factors which Sales J identified and of which legislators were well aware.

d.

Just as it was inconceivable that the F-tT should be given a judicial review jurisdiction, so to it was not plausible, in our view, that Parliament, when enacting section 83 VATA 1994, intended to confer a judicial review function on the VAT Tribunal.

e.

We are bound to say that, if it was plausible in the way which Sales J suggests, it is very surprising that the point was not raised in litigation or otherwise many years before Oxfam came before the court. In fact, it was not raised as a plausible result before the VAT Tribunal even in Oxfam itself. As Sales J acknowledged, he was departing from a widely held view, a view which, on his approach, was entirely at odds with what Parliament is to be supposed to have wished to achieve. Although Sales J describes the view as widely held (and we do not know on what he based that description) we ourselves know of no contrary view being promoted as a correct view prior to the decision of Sales J himself.

f.

Further, if Parliament’s intention had been as Sales J suggests, we would have expected the same Parliament to have introduced secondary legislation in the form of suitable tribunal rules to govern the procedure (and in particular rules concerning permission to bring judicial review and time-limits) applicable to public law claims.”

Ms McArdle submitted that for the purposes of this case, a s16(5) appeal against a refusal of a drawback claim, as addressed below, cannot properly be regarded as enforcement action, thus there must be express language importing a public law jurisdiction, rather than language excluding it: see the discussion of the exclusivity principle in the Court of Appeal’s decision in Beadle v HMRC [2020] 1 WLR 3028 at §44 and similar commentary in The Executors ofDavid Harrison (Deceased) and others v HMRC [2021] UKUT 273 (TCC) at [34]-[36]. No such importing language exists in s16(5).

Thus, drawing together the threads thus far on jurisdiction, she argued that the FTT ought to have found that it had no jurisdiction to consider a reasonableness (or any other public law) challenge under s16(5) FA 94:

The obiter jurisdiction position in Zeman is wrong in law.