[2025] UKUT 00315 (TCC)

A drawback decision is defined as a ‘relevant decision’ in s13A(2)(e) of the Finance Act 1994 (“FA 94”). Section 13A(2)(e) FA 94 provides that a relevant decision includes “(e) any decision by HMRC as to whether or not any person is entitled to any drawback of excise duty by virtue of regulations under section 2 of the Finance (No 2) Act 1992, or the amount of the drawback to which any person is so entitled”.

Section 15C FA 94 then provides the power for HMRC to review a relevant decision, such as the drawback decision in this case, and uphold or vary their decision.

Section 16(1B) FA 94 provides the jurisdiction for an appellant to appeal a relevant decision to refuse an excise duty drawback claim directly to the FTT. Section 16(1C) provides the further jurisdiction for an appellant to appeal to the FTT against HMRC’s decision on review under section 15C and provides the time limit in which the appeal should be brought as 30 days from the conclusion of the review (“the conclusion date”).

Section 16(4) & (5) distinguish the powers available to the FTT on an appeal in respect of different types of decision: s.16(4) for decisions on ancillary matters (as defined in s.16(8) and Schedule 5 to FA 94) and s.16(5) for “other decisions”. The subsections provide:

“(4)

In relation to any decision as to an ancillary matter, or any decision on the review of such a decision, the powers of an appeal tribunal on an appeal under this section shall be confined to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say—

(a)

to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;

(b)

to require the Commissioners to conduct, in accordance with the directions of the tribunal, a review or further review as appropriate of the original decision; and

(c)

in the case of a decision which has already been acted on or taken effect and cannot be remedied by a review or further review as appropriate, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future.”

(5)

In relation to other decisions, the powers of an appeal tribunal on an appeal under this section shall also include power to quash or vary any decision and power to substitute their own decision for any decision quashed on appeal.”

There is evidently an express statutory jurisdiction in relation to ancillary decisions, by virtue of section 16(4) FA 94, for the FTT to determine whether such a decision of HMRC could not reasonably have been arrived at and, if so, to exercise the powers in s.16(4)(a)-(c).

Ancillary decisions are defined in s.16(8) & (9) FA 94 and in Schedule 5, FA 94. Ancillary decisions include those involving the exercise of a statutory discretion by HMRC, for instance the granting or revocation of certain types of excise approval. This will be addressed in further detail below.

There is no dispute that the drawback decision under s.13A(2)(e) FA 94, as subject to this appeal, is an “other decision”, in contrast to an “ancillary decision”. This is made clear by virtue of section 16(8) FA94:

“(8)

Subject to subsection (9) below references in this section to a decision as to an ancillary matter are references to any decision of a description specified in Schedule 5 to this Act which is not comprised in a decision falling within section 13A(2)(a) to (h) above.”

The UT in Butlers Ship Stores Ltd v HMRC [2018] UKUT 58 (TCC) (“Butlers Ship”) decided that in relation to ‘other decisions’ the FTT’s full appellate jurisdiction under section 16(5) FA 94 does not include the power to determine the reasonableness of HMRC’s decision to make an assessment to excise duty in an appeal.

The UT in Butlers Ship began its discussion of the jurisdiction ground at [145] by stating it had been rendered academic by the determination on the other grounds of appeal. The UT then went on to conclude in relation to subsections 16(4) & (5) FA 94 at [150]-[151]:

“150.

In relation to the interpretation of subsections 16(4) and (5) and the cases cited, the appellants' submissions had the effect of conflating the two separate provisions. These subsections identify different types of decisions to which they apply: subsection 16(4) governs "any decision as to an ancillary matter" (there is no need to track through the statutory definition of "ancillary matter"); whereas subsection 16(5) governs "other decisions". The basis of review in section 16(4), that the decision-taker could not have reasonably arrived at the decision, is not repeated in subsection 16(5), in respect of "other decisions". That must be seen as reflecting a deliberate choice by the legislature. Had it been intended that the basis of review in section 16(4) be available in respect of "other decisions" under section 16(5), this could have readily been provided for. It wasn't. The appellants' interpretation impermissibly conflates the two subsections. The same cases as were cited by the appellants to the FTT were referred to before me. Judge Reid QC considered these. As I accept the correctness of Judge Reid's reasoning, and his treatment of the authorities cited to him, I need not rehearse these. The cases under section 16(4) of FA 1994, or under other taxing regimes, are of no relevance. Nothing in the appellants' submissions persuades me that these words, or a like test, fall to be imported into section 16(5) or applied to decisions reviewable thereunder.

151.

It follows that I accept the respondents' submissions regarding the distinct jurisdictions of the FTT under subsections 16(4) and (5) and as regards its power to assess, as correct in law and are to be preferred. I am particularly persuaded by the observations of Lord Lane in J H Corbitt (Numismatics) Ltd (anent an absence of a general supervisory power residing in the tribunal) and Underhill LJ in CC&C Ltd (anent the careful calibration of the remedies and powers as between subsections 16(4) and (5)). While technically not binding on me, I find the reasoning in these authorities cogent and persuasive…”

It is not in dispute that the FTT properly summarised Butlers Ship at [140]-[141] of the Decision:

“140.

In Butlers Ship the taxpayer had sought to challenge the FTT’s conclusion that its powers under section 16(5) FA94 included the powers identified in section 16(4) FA94. The argument advanced was, as here, that the language of section 16(4) FA94 confined the powers of the Tribunal to those identified in that section, giving the Tribunal only a supervisory jurisdiction in relation to ancillary matters but that for other decisions the Tribunal also had a full appellate jurisdiction. HMRC contended, as here, that the decisions to which section 16(4) FA94 relate are management decisions involving some element of subjective assessment appropriately reviewed by the Tribunal pursuant to a limited supervisory jurisdiction. It was therefore inappropriate to extend such supervisory jurisdiction to other decisions which did not involve the exercise of a discretion. HMRC therefore contended that the provisions of section 16(4) FA could not be used in the context of a challenge to a decision that the person was liable to excise duty once a duty point had arisen; it was contended that to do so was, in effect, to judicially review the assessment by the back door.

141.

The Upper Tribunal had determined the appeal against the taxpayer on other grounds but proceeded to consider the jurisdiction question. It concluded that there was no error of law in the analysis of the FTT as set out in paragraphs 123 – 139 of the FTT judgment ([2016] UKFTT 501 (TC)). In those paragraphs the FTT had narrated that it is a creature of statute with no inherent judicial review jurisdiction and thus no inherent power to review alleged procedural unfairness. It concluded that the full appellate jurisdiction under section 16(5) FA94 did not provide for an assessment of the reasonableness of HMRC’s decision to assess. The FTT also went on to indicate that, on the evidence, there was nothing to justify a conclusion that HMRC had failed to assess to the best of their judgment or acted unreasonably or irrationally.”