Wilkinson, R (on the application of) v Inland Revenue

This is an appeal against the second judgment delivered by Moses J on 14 February 2002 [2002] EWHC Admin. 182; [2002] STC 347. The issues raised are, to a degree, similar to some of the issues that we have addressed in the appeal of Hooper and Others. They arise in the context of taxation. They concern a legislative provision that granted to widows a tax allowance that was not granted to widowers. The respondents, the Commissioners of Inland Revenue, now concede and contend that this provision infringed Article 14, when read in conjunction with Article 1 of the First Protocol of the Human Rights Convention. Moses J so found and made a ‘declaration of incompatibility’ pursuant to section 4 of the Human Rights Act 1998 (‘the HRA’). Mr Wilkinson, who is supported in this litigation by Liberty, contends that the legislation was not incompatible with Convention rights inasmuch as it lay within the statutory powers of the Commissioners to apply the legislation in a manner which would not involve any discrimination. He claims that the Commissioners are obliged by section 6(1) of the HRA to exercise those powers in his favour by making a money payment to him which will place him in the same position as if he had been granted the tax allowance made to widows.

Mr Wilkinson has been represented by Miss Dinah Rose. Her skeleton argument sets out the background facts and the legislative framework with admirable lucidity and we shall draw upon it in our judgment.

By section 262 of the Income and Corporation Taxes Act 1988 (‘ICTA’) an income tax reduction known as widow’s bereavement allowance (‘WBA’) was available to a widow for the year of assessment in which her husband died and the following year. ICTA makes no express provision for any equivalent income tax reduction for widowers. By section 34 of the Finance Act 1999, WBA has been abolished in relation to deaths occurring on or after 6 April 2000.

In 1997, Christopher Crossland, a widower who had been refused an allowance equivalent to WBA on the grounds of his sex, brought a complaint before the European Commission of Human Rights, alleging that the lack of any provision for a bereavement tax allowance for widowers under United Kingdom law discriminated against him on the grounds of his sex, in breach of Article 14 read with Article 8 and Article 1 of the First Protocol of the Convention.

In September 1999, the Government, having never at any stage contested the merits of Mr Crossland’s claim, reached a friendly settlement with him. Under the settlement, the Respondents paid to Mr Crossland the sum of £575, representing the full amount that he would have been paid had WBA been available to men at the date of his wife’s death, and the sum of £3,962.48, representing his reasonable legal costs. As a result, Mr Crossland’s case was struck out of the Court’s list on 9 November 1999.

A similar sequence of events occurred in the case of Fielding v UK 29 January 2002 (unreported), The Times 25 February 2002.

Mr Wilkinson, the Claimant in these proceedings, is a widower whose wife died on 23 June 1999. After his wife’s death, Mr Wilkinson became aware of Mr Crossland’s case, and the settlement that the Respondents had reached with him. By a letter dated 13 November 2000, Mr Wilkinson claimed from the Inland Revenue the equivalent of WBA (he requested a “widower’s bereavement payment”), referring to Mr Crossland’s case.

By a letter dated 11 December 2000 (the decision challenged in these proceedings), the Respondents replied as follows:

“You have made a claim for a Widow’s Bereavement payment for the year ended 5 April 2000. This was on the basis of the Crossland case which our Head Office have considered carefully. I can confirm that the allowance was challenged by Mr Crossland under the European Convention on Human Rights (ECHR) because it was only available to Women, and that the challenge was resolved through a friendly settlement.

However, there is still no basis in UK law for allowing Widowers to claim the Widow’s Bereavement Allowance, I am therefore unable to accept your claim for the year in question.”

On 27 February 2001, Liberty wrote to the Respondents on Mr Wilkinson’s behalf, inviting them to allow his claim for WBA, or an extra-statutory equivalent. By a letter dated 5 March 2001, the Respondents denied that they had any power to grant an allowance to Mr Wilkinson, stating:

“The Board’s care and management powers allow us to make relaxations which give taxpayers a reduction in liability to which they are not entitled under the strict letter of the law. Most concessions are made to deal with what are, on the whole, minor or transitory anomalies under the legislation and to meet cases of hardship at the margins of the code where a statutory remedy would be difficult to devise or would run to a length out of proportion to the intrinsic importance of the matter.

…

The care and management powers do not allow the Inland Revenue to contradict unambiguous, primary legislation such as the provisions that govern entitlement to WBA. The Human Rights Act makes it unlawful for a public authority to act in a way that is incompatible with a Convention right unless it is required to do so by primary legislation. In applying the rules of the WBA legislation, the Inland Revenue was applying a provision of primary legislation, Section 262 Income and Corporation Taxes Act 1988. The intention of the legislation was clear: to help widows, not widowers. If the effect of the Human Rights Act was to require us to grant WBA to widowers under our care and management powers, notwithstanding the clear terms of the legislation, that would effectively undermine Parliamentary sovereignty which the Human Rights Act was careful to preserve.”

An application for judicial review was lodged on 9 March 2001. On 14 February 2002, Moses J granted a declaration that section 262 of ICTA was incompatible with the Convention, but otherwise dismissed the application.

Section 262(1) of ICTA (as amended) provided as follows:

“Where a married man whose wife is living with him dies, his widow shall be entitled -

(a)

for the year of assessment in which the death occurs, to an income tax reduction calculated by reference to an amount equal to the amount specified in section 257A(1) for that year; and

(b)

(unless she married again before the beginning of it) for the next following year of assessment, to an income tax reduction calculated by reference to an amount equal to the amount specified in section 257A(1) for that year.”

The amount specified for the tax year 1999-2000 was £1,970, restricted to a 10% reduction of tax liability. The amount specified for the tax year 2000-2001 was £2,000, restricted to a 10% reduction of tax liability. Mr Wilkinson restricts his claim to the tax year 1999-2000

By section 34 of the Finance Act 1999, section 262 of ICTA ceased to have effect in relation to deaths occurring on or after 6 April 2000.

By section 1(1) of the Inland Revenue Regulation Act 1890 (‘the 1890 Act’), it is lawful for the Crown to appoint persons to be Commissioners for the collection and management of inland revenue.

Section 13(1) of the 1890 Act provides:

“The Commissioners shall collect and cause to be collected every part of inland revenue, and all money under their care and management, and shall keep distinct accounts thereof at their chief office.”

Section 1(1) of the Taxes Management Act 1970 (‘the TMA’) provides (as far as material):

“Income tax, corporation tax and capital gains tax shall be under the care and management of the Commissioners of Inland Revenue …”

By section 6(1) of the HRA, it is unlawful for a public authority to act in a way which is incompatible with a Convention right. It is not disputed that the Commissioners are a public authority within the meaning of this provision.

Section 6(2) of the HRA provides:

“Subsection (1) does not apply to an act if -

(a)

as a result of one or more provisions of primary legislation, the authority could not have acted differently; or

(b)

in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.”

By section 3(1) of the HRA, primary legislation and subordinate legislation much be read and given effect in a way which is compatible with the Convention rights, so far as it is possible to do so. By section 3(2)(a), this provision applies to legislation whenever enacted.

Article 14 of the Convention provides:

“The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

Article 1 of Protocol No. 1 provides:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

Article 14 has no independent existence, but complements the other substantive provisions of the Convention and its Protocols. Although the application of Article 14 does not presuppose a breach of those provisions, in order for it to be applied, the facts of the case must come within the ambit of one or more of them: Abdulaziz, Cabales and Balkandali v UK (1985) EHRR 471, paragraphs 71 and 82.

In our judgment in Hooper we have explained how Article 14 of the Convention will be infringed where there is discrimination that falls ‘within the ambit’ of one of the other Convention rights. In the present case it is common ground that section 262 of ICTA was discriminatory in that it treated widows more favourably than widowers. Moses J held, and the Commissioners now concede, that this discrimination fell within the ambit of Article 1 of the First Protocol to the Convention and thus infringed Article 14 – see Darby v Sweden 13 EHRR 774.

Mr Wilkinson contends that section 1(1) of the TMA gives to the Commissioners a wide statutory power to grant concessions to taxpayers which derogate from their obligations to pay tax in accordance with the letter of the applicable tax legislation. He contends that this power entitled the Commissioners to grant to widowers an allowance equivalent to the WBA to which widows were entitled. The Commissioners contend that when enacting section 262 of ICTA and, more pertinently, when abolishing that section prospectively by section 34 of the Finance Act 1999, it was Parliament’s clear intention that entitlement to WBA should be restricted to widows. The Commissioners further contend that their powers under section 1(1) of the TMA do not extend to granting concessions that will conflict with the intention of Parliament, as expressed in the relevant legislation.

Moses J ruled in favour of Mr Wilkinson on this issue. The Commissioners cross-appeal against his ruling. If they succeed in their cross-appeal it will follow that section 262 of ICTA obliged them to discriminate in favour of widows in breach of Article 14. Section 6(2)(a) of the HRA will then provide them with a defence to the allegation that they have acted in breach of section 6(1) of that Act. The extent of the Commissioners’ powers under section 1(1) of the TMA is the first issue that we shall address. This issue bears some similarity to the issue in the Hooper appeal of the extent of the Secretary of State’s common law power to make extra statutory payments to widowers to match benefits to which widows were entitled under statute.

The second issue will only arise if the Commissioners’ cross-appeal fails. It is common ground that the tax regime keeps open a taxpayer’s fiscal position for a period of five years from the 31 January following the year of assessment (see section 43 TMA). Mr Wilkinson contends that, when the HRA came into force on 2 October 2000, section 6(1) of that Act imposed on the Commissioners an obligation to exercise the powers that they enjoy under section 1 of the TMA by paying to him an allowance equivalent to the WBA to which he would have been entitled had he been a widow.

Moses J held that section 6(2)(b) of the HRA entitled the Commissioners to decline to exercise their section 1 powers in this way, without committing any breach of section 6(1). Mr Wilkinson challenges this conclusion. Whether Moses J correctly applied section 6(2)(b) of the HRA is the second issue that we shall address. This issue bears some similarity to the issue in the Hooper appeal of the applicability of section 6(2)(b) of the HRA.

The third issue involves a comparison between the treatment of Mr Crossland, whose claim before the Strasbourg Court was the subject of an amicable settlement, and the treatment of Mr Wilkinson, whose claim before the English court the Commissioners have declined to settle. In relation to this issue, and in contrast to the majority of the appellants in the Hooper appeal, Mr Wilkinson does not allege that the difference in treatment of which he complains infringes Article 14. He contends that it constitutes a breach of the Commissioners’ duty, under established principles of public law, to avoid discriminating between taxpayers without justification, and thus an abuse of power. Thus this issue is similar to the issue raised by the contention in the Hooper appeal that the Secretary of State’s treatment of the majority of the appellants was in breach of established principles of public law. Moses J shortly rejected Mr Wilkinson’s contentions in respect of this issue by cross-reference to his decision in Hooper. Whether he was correct in so doing is the third issue that we shall address.

The Commissioners have long proceeded on the basis that the power and duty placed upon them by section 1 of the TMA to take responsibility for the care and management of income tax, corporation tax and capital gains tax vests in them a wide managerial discretion to refrain from recovering taxes which are payable under a strict application of the relevant legislation. Evidence in relation to this practice is given in the witness statement of Sarah Walker. As Assistant Director of Personal Tax she has had responsibility for policy matters concerning the structure of income tax rates and allowances, including Widow’s Bereavement Allowance. The Commissioners publish a list of extra-statutory concessions that they are prepared to make when collecting taxation. By 31 August 1999 this list totalled no less than 294 concessions, not all of which are of current applicability. The list is introduced by the explanation:

“An extra statutory concession is a relaxation which gives taxpayers a reduction in tax liability to which they would not be entitled under the strict letter of the law. Most concessions are made to deal with what are, on the whole, minor or transitory anomalies under the legislation and to meet cases of hardship at the margins of the code where a statutory remedy would be difficult to devise or would run to a length out of proportion to the intrinsic importance of the matter.”

Sarah Walker, in paragraph 41 of her statement, adds the explanation:

“The Board would consider it appropriate to use its power to make ESC’s where the result would be consistent with the intention of Parliament in passing the relevant legislation”.

In the Hooper litigation the Secretary of State was concerned to contend that he enjoyed a wide power to make extra-statutory payments, notwithstanding that this contention was adverse to his position in the particular litigation. Equally, in the present case, Mr Brennan QC for the Commissioners has argued from the premise that their practice of making extra-statutory concessions falls within their powers under section 1(1) of the TMA. Miss Rose has, naturally, been more than happy to accept that premise. It was also accepted by Moses J. In these circumstances the argument in respect of this issue was confined within a narrow compass. What were the limits of the Commissioners' powers to make extra-statutory concessions? Mr Brennan argued that they could not extend to granting concessions which were contrary to the intention of Parliament in passing the relevant legislation. Miss Rose argued, by particular reference to four of the published concessions, that no such restriction existed. Clearly, she submitted, it was open to the Commissioners to make a concession where this was necessary to avoid an infringement of a Convention right. Indeed, section 3 of the HRA required the Court so to interpret section 1(1) of the TMA as to give the Commissioners that power.

Moses J accepted as appropriate the exercise of examining individual published concessions on the premise that they constituted legitimate exercises of the Commissioners’ powers. He accepted that two of the four examples relied upon by Miss Rose evidenced the grant of concessions which were contrary to the intention of Parliament as expressed in the relevant legislation. In paragraph 27 of his judgment he observed:

“The essential quest ought, in my view, to be targeted on finding some principled distinction between extra-statutory concessions and the concession sought in this case. I can find none. Once it is accepted that there are extra-statutory concessions which are not merely temporary, are not merely of minor effect, but directly contradict the intention of Parliament expressed in statutory provisions, it becomes impossible to find any principle according to which in some cases the Revenue will grant a concession and in others they will not.”

Moses J went on to conclude in the following paragraph:

“I conclude that there is no principle which would prevent the Revenue from issuing an extra statutory concession which contradicted the intention of Parliament to restrict the allowances to women.”

Before us Mr Brennan attacked the judge’s approach. He started by conceding that it was common ground:

“that the Revenue, with the duty of care and management of the tax system, has the power to issue and publish Extra Statutory Concessions – relaxations which give the taxpayers a reduction in tax liability to which they would not be entitled under the strict letter of the law.”

He went on, however, to challenge the use of individual published concessions as a touchstone for determining the extent of the Commissioners’ power to make such concessions. Insofar as an individual concession was contrary to the intention of Parliament, as expressed in the relevant legislation, the correct conclusion was that the concession was beyond the Commissioners’ powers, not that the Commissioners had power to disregard Parliament’s expressed intention. He went on, nonetheless, to challenge the judge’s conclusion that two of the published concessions were, in fact, contrary to – at least – the spirit of the relevant legislation.

Both Mr Brennan and Moses J referred to expressions of judicial concern as to the legitimacy of the Commissioners’ practice of making extra-statutory tax concessions, though neither suggested that the legitimacy of the practice was in doubt. It seems to us that, before drawing conclusions from the way in which the Commissioners practice has been exercised, it is pertinent to consider what the courts have had to say about that practice.

Bates v IRC [1968] AC 483 concerned section 408 of the Income Tax Act 1952 which, on its plain meaning, produced results in some cases which were ‘monstrous’ and which Parliament can never have intended - see Lord Reid at p.504. The Commissioners had not sought to amend the legislation. Instead, as Lord Upjohn explained at p.516:

“realising the monstrous result of giving effect to the true construction of the section, have in fact worked out what they consider to be an equitable way of operating it which seems to them to result in a fair system of taxation.”

Lord Upjohn commented:

“I am quite unable to understand upon what principle they can properly do so.”

In Vestey v IRC [1979] Ch.177 Walton J was concerned with another section of the 1952 Act, which had become section 478 of the Income and Corporation Taxes Act 1970, which also had monstrous and unintended results, if applied in accordance with its natural meaning. The Commissioners did not seek to apply the section in a manner which produced such results. Walton J quoted with approval the comment of Lord Upjohn which we have set out above, and added:

“One should be taxed by law, and not be untaxed by concession”

In Vestey v Inland Revenue Commissioners (No.2) [1979] Ch.198 Walton J expanded on this comment in a passage which deserves citation in full:

“It is at this point that there arises what Mr Potter, for the taxpayers, has denominated as a serious constitutional question; namely what rights the Inland Revenue Commissioners have to pick and choose when recovering tax. The Solicitor-General said, and doubtless rightly said, that the commissioners are under no duty to recover every halfpenny of tax which may be due. One may say “Amen” to that very readily, because the costs of recovery of extremely small amounts of tax would far outweigh the tax recovered. One expects the tax authorities to behave sensibly. In this connection I was referred to section 1 of the Inland Revenue Regulation Act 1890 and to section 1 of the Taxes Management Act 1970, but I do not think that either of these provisions has any real bearing on the matter. What the revenue authorities, through the Solicitor-General, are here claiming is a general dispensing power, no more and no less. He submitted that the system of extra-statutory concessions was well known and well recognised, and that what was happening in the present case was no more than the grant of an additional extra-statutory concession.

In the first place, I, in company with many judges before me, am totally unable to understand upon what basis the Inland Revenue Commissioners are entitled to make extra-statutory concessions. To take a very simple example (since example is clearly called for), upon what basis have the commissioners taken it upon themselves to provide that income tax is not to be charged upon a miner’s free coal and allowances in lieu thereof? That this should be the law is doubtless quite correct; I am not arguing the merits, or even suggesting that some other result, as a matter of equity, should be reached. But this, surely, ought to be a matter for Parliament, and not the commissioners. If this kind of concession can be made, where does it stop; and why are some groups favoured as against others?”

The two Vestey decisions were appealed direct to the House of Lords. Lord Wilberforce, at p.1172, had this to say of the Commissioners’ submission that they had a discretion as to how the section in issue should be applied, which enabled them to mitigate the rigours of the section if applied literally:

“Taxes are imposed upon subjects by Parliament. A citizen cannot be taxed unless he is designated in clear terms by a taxing Act as a taxpayer and the amount of his liability is clearly defined.

A proposition that whether a subject is to be taxed or not, or, if he is, the amount of his liability, is to be decided (even though within a limit) by an administrative body represents a radical departure from constitutional principle. It may be that the revenue could persuade Parliament to enact such a proposition in such terms that the courts would have to give effect to it: but, unless it has done so, the courts, acting on constitutional principles, not only should not, but cannot, validate it.

The revenue’s contentions to the contrary, however moderate and persuasive their presentation by Mr Nolan, fail to support the proposition.

They say that the income tax legislation gives them a general administrative discretion as to the execution of the Acts, and they refer to particular instances of which one is section 115(2) of the Act of 1970 (power to decide period of assessment). The judge described the comparison of such limited discretions with that now contended for as ‘laughable.’ Less genially, I agree. More generally, they say that section 412 imposes a liability upon each and every beneficiary for tax in respect of the whole income of the foreign transferees: that there is no duty upon the commissioners to collect the whole of this from any one beneficiary, that they are entitled, so long as they do not exceed the total, to collect from selected beneficiaries an amount decided upon by themselves.

My Lords, I must reject this proposition. When Parliament imposes a tax, it is the duty of the commissioners to assess and levy it upon and from those who are liable by law. Of course they may, indeed should, act with administrative commonsense. To expend a large amount of taxpayer’s money in collecting, or attempting to collect, small sums would be an exercise in futility: and no one is going to complain if they bring humanity to bear in hard cases. I accept also that they cannot, in the absence of clear power, tax any given income more than once. But all of this falls far short of saying that so long as they do not exceed a maximum they can decide that beneficiary A is to bear so much tax and no more, or that beneficiary B is to bear no tax.

This would be taxation by self-asserted administrative discretion and not by law. As the judge well said [1979] Ch. 177, 197: ‘One should be taxed by law, and not be untaxed by concession.’ The fact in the present case is that Parliament has laid down no basis on which tax can be apportioned where there are numerous discretionary beneficiaries.”

Lord Dilhorne, at p.1185, also expressed the view that the Commissioners had no power to mitigate the gross injustice that would result from the strict application of the section, as interpreted by them. Lord Salmon, at p.1190, agreed with everything said by Lord Wilberforce.

Beginning at p.1194 Lord Edmund-Davies carried out a detailed review of the authorities dealing with the practice of the Commissioners of making extra-statutory concessions, in the course of which he referred to the provisions of s.1 of the 1970 Act. He observed that judicial comment was mixed, but aligned himself firmly with those who disapproved of the practice, including Scott LJ, who in Absolom v Talbot [1943] 1 All ER 589 at 598 had stated:

“No judicial countenance can or ought to be given in matters of taxation to any system of extra-legal concessions.”

Lord Edmund-Davies concluded, at p.1196, that the devices resorted to by the Commissioners were unconstitutional.

The extent of the powers of the Commissioners under section 1 of the 1970 Act was directly in issue in R v IRC, ex parte the National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617. The Commissioners had been concerned at tax evasion to the tune of some £1 million a year by casual workers employed in Fleet Street. They made an agreement with the employers and the unions that would enable them to collect tax in the future, but in achieving this agreed that they would not attempt to pursue those who had evaded taxes in the past. The Federation sought to challenge this concession and the principal issue was whether it had standing to do so. It was relevant, however, to consider the strength of the case that the Commissioners were acting beyond their powers. Lord Diplock described their powers at pp.636-7 as follows:

“… the board are charged by statute with the care, management and collection on behalf of the Crown of income tax, corporation tax and capital gains tax. In the exercise of these functions the board have a wide managerial discretion as to the best means of obtaining for the national exchequer from the taxes committed to their charge, the highest net return that is practicable having regard to the staff available to them and the cost of collection. The board and the inspectors and collectors who act under their directions are under a statutory duty of confidentiality with respect to information about individual taxpayers’ affairs that has been obtained in the course of their duties in making assessments and collecting the taxes; and this imposes a limitation on their managerial discretion. I do not doubt, however, and I do not understand any of your Lordships to doubt, that if it were established that the board were proposing to exercise or to refrain from exercising its powers not for reasons of ‘good management’ but for some extraneous or ulterior reason, that action or inaction of the board would be ultra vires and would be a proper matter for judicial review if it were brought to the attention of the court by an applicant with ‘a sufficient interest’ in having the board compelled to observe the law.”

At p.651 Lord Scarman approved the following statement:

“… in the daily discharge of their duties inspectors are constantly required to balance the duty to collect ‘every part’ of due tax against the duty of good management. This conflict of duties can be resolved only by good managerial decisions, some of which will inevitably mean that not all the tax known to be due will be collected.”

It seems to us that the effect of these authorities is plain. One of the primary tasks of the Commissioners is to recover those taxes which Parliament has decreed shall be paid. Section 1 of the 1970 Act permits the Commissioners to set about this task pragmatically and to have regard to principles of good management. Concessions can be made where those will facilitate the overall task of tax collection. We draw attention, however, to Lord Diplock’s statement that the Commissioners’ managerial discretion is as to the best manner of obtaining for the national exchequer the highest net return that is practicable.

No doubt, when interpreting tax legislation, it is open to the Commissioners to be as purposive as the most pro-active judge in attempting to ensure that effect is given to the intention of Parliament and that anomalies and injustices are avoided. But in the light of the authorities that we have cited above and of fundamental constitutional principle we do not see how section 1 of the TMA can authorise the Commissioners to announce that they will deliberately refrain from collecting taxes that Parliament has unequivocally decreed shall be paid, not because this will facilitate the overall task of collecting taxes, but because the Commissioners take the view that it is objectionable that the taxpayer should have to pay the taxes in question.

We do not consider that there is any need to enter into the debate as to whether, as Moses J concluded, two of the published tax concessions contradicted the intention of Parliament. If they did, then it is arguable that the concessions fell outside the authority of the Commissioners. What they could not do was justify Moses J’s conclusion that:

“there is no principle which would prevent the Revenue from issuing an extra statutory concession which contradicted the intention of Parliament to restrict the allowances to women.”

Miss Rose argued that section 3 of the HRA enabled and required the Court to read section 1 of the 1970 Act as permitting the Commissioners to grant concessions to taxpayers if they are necessary in order to prevent discrimination in the imposition of taxes which violates Article 14. We do not accept that it is possible to interpret section 1 in such a way.

We are in no doubt that, when enacting section 262 of ICTA and section 34 of the Finance Act 1999, Parliament intended WBA, for so long as it remained in existence, to be restricted to women. The Commissioners had no power to make similar allowances to men. For this reason, which was not the one that he gave, Moses J was correct to make a declaration of incompatibility,

On the finding that we have made the second issue does not arise. We propose nonetheless to deal with it, albeit briefly.

Moses J held that section 1 of the TMA gave the Commissioners a discretionary power to grant allowances to widowers that matched the WBA. In these circumstances he held that section 6(2)(a) of the HRA provided the Commissioners with no defence to Mr Wilkinson’s claim. He went on to hold, however, that the Commissioners had a defence under section 6(2)(b). As we understand his reasoning, it was as follows:

We are no more able to accept this reasoning than we were the similar reasoning in Hooper. It seems to us that section 6(2)(b) addresses the grant by Parliament of a statutory power which, regardless of the circumstances in which it is exercised, will inevitably be incompatible with Convention rights. In such circumstances the power cannot be given effect to in a way which is compatible with the Convention, and thus s.6(2)(b) enables the exercise of the power without breach of section 6(1).

We appreciate the argument that if a failure to exercise a statutory power will inevitably involve a breach of Convention rights, Section 6(2)(b) is engaged, because implicit in the statutory power is the right to refrain from exercising the power. We make no comment as to whether that argument is sound or unsound. We simply observe that it has no application to the facts of this case. Section 1 of the TMA is a wide general power. In most circumstances exercising that power will involve no incompatibility with the Convention. Equally, in most circumstances failing to exercise the power will involve no incompatibility with the Convention. If circumstances arise under which it is necessary to exercise the power in order to avoid a breach of Convention rights, we can see no basis upon which the Commissioners can rely upon section 6(2)(b) to justify a refusal to exercise the power.

For these reasons we disagree with the conclusion of Moses J on the second issue. Had we held that the Commissioners had power under section 1 of the TMA to grant extra-statutory allowances to widowers to match WBA, we would not have held that section 6(2)(b) of the HRA excused them from failing to exercise that power.

Miss Rose contends that the refusal of the Commissioners to offer Mr Wilkinson a settlement on the same terms as those granted to Mr Crossland and Mr Fielding in their Strasbourg proceedings constitutes an abuse of power. She puts her case in two ways:

Although we have held that section 1 of the TMA did not empower the Commissioners to introduce a scheme of making extra-statutory concessions to all widowers, we are prepared to accept for the purposes of the present issue that their powers extend to settling Mr Wilkinson’s claim and that of any other taxpayer who sets out on the road of litigation that may end in Strasbourg.

Moses J applied to Miss Rose’s arguments the reasoning that he had applied to the same issue in the case of Hooper. He held that the Commissioners were ‘entitled to litigate the issue of reliance on section 6(2)(b) notwithstanding a settlement of Mr Crossland’s application’. The Commissioners have sought to support this reasoning.

In elaboration of the first way Miss Rose puts her case, she submitted in her skeleton argument:

“In accordance with good administration and fairness, having settled a test case in Strasbourg, and elected not to pursue any argument that refusing to grant the Allowance to widowers was compatible with the Convention, the Respondents ought to have treated other similarly-situated taxpayers in the same way: see R v Hertfordshire County Council, ex parte Cheung CA 26March 1986, quoted by Moses J at paragraph 154 of Hooper.”

We see no basis for the contention that Crossland was a test case, nor do we see that the fact that the Commissioners chose to settle the claims made at Strasbourg by Mr Crossland and Mr Fielding precludes them from challenging similar claims in the domestic forum, now that the HRA permits Convention issues to be raised in that forum.

So far as Miss Rose’s argument based on irrationality is concerned, section 6(2) of the HRA provides a defence in respect of acts or omissions that infringe Convention rights where Parliament has required or authorised the acts or omissions in question. Where this occurs the claimant will almost inevitably have a remedy if he pursues his claim to Strasbourg. If Miss Rose’s argument is correct, section 6(2) could almost always be finessed by a contention that it was irrational to compel the claimant to incur the expense of going to Strasbourg for his remedy. Nonetheless, if the Commissioners had conceded that there would be no answer to Mr Wilkinson’s claim for compensation once he got to Strasbourg, we would have some sympathy with her argument. That is not, however, the position.

The considerations in the Hooper appeal that led us to conclude that just satisfaction did not require the payment to Mr Naylor of compensation for failure to receive a Widow’s Pension apply with even greater force in the present context.

The history of the tax regime for married couples is complex. Moses J attempted to summarise it in paragraph 7 of his judgment in order to set the dispute before him in context. In essence WBA was an anachronistic relic of a tax regime abandoned by 1994. Under the new regime there was no legitimate justification for granting a widow this allowance on the death of her husband. The allowance no longer reflected an adverse fiscal consequence of the husband’s death. While WBA discriminated in favour of widows, it seems to us that the discrimination provided widows with an unjustified advantage not merely over widower taxpayers, but over all taxpayers.

Before the HRA had come into force, the Revenue had taken steps to remove this anomaly, by abolishing WBA prospectively, with effect from 6 April 2000. To award Mr Wilkinson, or other taxpayers in his position, an equivalent payment would be to swell the numbers of those who have received tax allowances for which there is no legitimate justification. The principle of just satisfaction does not require any such payment.

The facts of the present case are not to be compared with that of Darby v Sweden (1990) 13 EHRR 774. That case concerned a thoroughly justified exemption from a particular tax, which was not allowed to Mr Darby on the ground that he was resident outside Sweden. The Court held that this fact did not provide legitimate justification for not extending the exemption to him and ordered that he be repaid the tax that had been wrongly exacted.

Miss Rose submitted that it was inconceivable that the Strasbourg Court would not award compensation to Mr Wilkinson, having regard to the decisions in Crossland and Fielding. We do not agree. This is the first occasion upon which the principle of just satisfaction has received judicial consideration in the present context. We consider that the case for not making to widowers payments equivalent to WBA is a cogent one and it is at least possible that the Strasbourg Court will take the same view.

For these reasons the Commissioners cannot be said to have acted unfairly or irrationally in declining to settle Mr Wilkinson’s claim. This appeal is dismissed.