Commissioners for His Majesty's Revenue and Customs v Arrbab, [2024] EWCA Civ 16

Section 124 of the Finance Act 2008 ("FA 2008") provided inter alia that Treasury could by statutory instrument make an order in connection with appeals against HMRC decisions which amended the provisions of any Act, provided that a draft of the order had been laid before and approved by resolution of the House of Commons. Treasury made such an order, amending the Tax Credits Act 2002 ("the 2002 Act"), whose effect was to inter alia exclude the possibility of a challenge to an HMRC refusal to consider a late request to reconsider its denial of working tax credits (i.e., to exclude the jurisdiction of the First-tier Tribunal (“FTT”) to determine whether to entertain a late appeal. Before concluding that such amendment was ultra vires, Falk LJ stated (at paras. 38-39, 71):

Section 124 FA 2008 is an example of what has come to be referred to as a "Henry VIII power", meaning a provision of primary legislation which permits subordinate legislation to be used to amend primary legislation.

It is now well established that any genuine doubt about the scope of the power conferred by such a provision should be resolved in favour of a restrictive approach. …

The facts of Mr Arrbab's case are an unfortunate illustration of the reality that only a right of recourse to an independent tribunal may provide effective protection against failures of administration, including a failure to recognise that time ought to be extended. This reinforces the need for a clear indication that Parliament intended to remove that right, leaving only the possibility of a judicial review of HMRC's decision-making. Section 124 FA 2008 does not provide such an indication.

A few days before the taxpayer’s appeal was heard before the Court of Appeal, HMRC realized that its denial of the taxpayer’s credits was mistaken, and reversed such denial, so that the appeal was rendered “academic.” Before nonetheless going on to find that the provision at issue, had the appeal not been rendered academic, was ultra vires, Falk LJ stated (at paras. 29-30):

The conditions that will generally need to be met before this court may exercise its discretion to entertain an academic appeal were summarised by Lord Neuberger MR in Hutcheson v Popdog Ltd (News Group Newspapers Ltd, third party) [2011] EWCA Civ 1580, [2012] 1 WLR 782 at [15]:

"(i) the court is satisfied that the appeal would raise a point of some general importance; (ii) the respondent to the appeal agrees to it proceeding, or is at least completely indemnified on costs and is not otherwise inappropriately prejudiced; (iii) the court is satisfied that both sides of the argument will be fully and properly ventilated." …

HMRC's position is that the appeal raises a point of law that has implications for other cases, such that if it is not resolved now it is likely that they would seek to raise it in another case. Further, Mr Arrbab's legal team were content on his behalf for the appeal to proceed, subject to an undertaking as to costs which was provided … . We were also satisfied that both sides of the argument would be (and indeed were) fully ventilated. In the circumstances, we concluded that this is a case where the court should exercise its exceptional discretion to hear an academic appeal.