The Commissioners for HMRC v Abubaker Arrbab

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 leading authority is R (on the application of Public Law Project) v Secretary of State for Justice [2016] UKSC 39, [2016] AC 1531 (“Public Law Project”), where the Supreme Court decided that a proposed order amending the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) to restrict legal aid by reference to a residence requirement was ultra vires the power accorded to the Lord Chancellor by that Act.

After referring to the distinction between primary and subordinate legislation, including the lower level of Parliamentary scrutiny accorded to the latter, Lord Neuberger (with whom other members of the court agreed) described the ultra vires principle as follows:

“23.

Subordinate legislation will be held by a court to be invalid if it has an effect, or is made for a purpose, which is ultra vires, that is, outside the scope of the statutory power pursuant to which it was purportedly made. In declaring subordinate legislation to be invalid in such a case, the court is upholding the supremacy of Parliament over the Executive. That is because the court is preventing a member of the Executive from making an order which is outside the scope of the power which Parliament has given him or her by means of the statute concerned. Accordingly, when, as in this case, it is contended that actual or intended subordinate legislation is ultra vires, it is necessary for a court to determine the scope of the statutorily conferred power to make that legislation.

24.

Normally, statutory provisions which provide for subordinate legislation are concerned with subsidiary issues such as procedural rules, practice directions, and forms of notice; hence statutory instruments are frequently referred to as Regulations. However, such statutory provisions sometimes permit more substantive issues to be covered by subordinate legislation, and, as is the case with section 9(2)(b) of LASPO, they sometimes permit subordinate legislation which actually amends the statute concerned (or even another statute), by addition, deletion or variation.

25.

As explained in Craies on Legislation, 10th ed (2012), ed Daniel Greenberg, para 1.3.9: “The term ‘Henry VIII power’ is commonly used to describe a delegated power under which subordinate legislation is enabled to amend primary legislation.” When a court is considering the validity of a statutory instrument made under a Henry VIII power, its role in upholding Parliamentary supremacy is particularly striking, as the statutory instrument will be purporting to vary primary legislation passed into law by Parliament.

26.

The interpretation of the statutory provision conferring a power to make secondary legislation is, of course, to be effected in accordance with normal principles of statutory construction. However, in the case of an “amendment that is permitted under a Henry VIII power”, to quote again from Craies, para 1.3.11:

“as with all delegated powers the only rule for construction is to test each proposed exercise by reference to whether or not it is within the class of action that Parliament must have contemplated when delegating. Although Henry VIII powers are often cast in very wide terms, the more general the words used by Parliament to delegate a power, the more likely it is that an exercise within the literal meaning of the words will nevertheless be outside the legislature’s contemplation.”

27.

In two cases, R v Secretary of State for Social Security, Ex p Britnell [1991] 1 WLR 198, 204 and R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 382, the House of Lords has cited with approval the following observation of Lord Donaldson of Lymington MR in McKiernon v Secretary of State for Social Security (1989) 2 Admin LR 133, 140, which is to much the same effect:

“Whether subject to the negative or affirmative resolution procedure, [subordinate legislation] is subject to much briefer, if any, examination by Parliament and cannot be amended. The duty of the courts being to give effect to the will of Parliament, it is, in my judgment, legitimate to take account of the fact that a delegation to the Executive of power to modify primary legislation must be an exceptional course and that, if there is any doubt about the scope of the power conferred upon the Executive or upon whether it has been exercised, it should be resolved by a restrictive approach.”

28.

Immediately after quoting this passage in the Spath Holme case, Lord Bingham of Cornhill went on to say “Recognition of Parliament's primary law-making role in my view requires such an approach”. He went on to add that, where there is “little room for doubt about the scope of the power” in the statute concerned, it is not for the courts to cut down that scope by some artificial reading of the power.”

Mr Burton also relied on the existence of a presumption that rights of appeal will not be excluded where they would be otherwise available. In R v Emmett [1998] AC 773, 781-782 the House of Lords had to consider whether a reference to an acceptance of an allegation as “conclusive” in s.3(1) of the Drug Trafficking Offences Act 1986 meant for all purposes, including an appeal against a confiscation order. Lord Steyn said:

“There is a strong presumption that except by specific provision the legislature will not exclude a right of appeal as of right or with leave where such a right is ordinarily available: Reg. v Cain [1985] A.C. 46, 55G-56D, per Lord Scarman. The starting point is that, unless section 3(1) expressly or by necessary implication excludes a right of appeal, there is as a matter of jurisdiction a right of appeal against a confiscation order in all cases.”

It was held that a right of appeal to the Court of Appeal was excluded neither expressly nor by necessary implication.

The context there was a criminal appeal. However, similar principles have been applied elsewhere. For example, in the earlier case of R v Secretary of State for the Home Department Ex p. Leech (No.2) [1994] QB 198, a provision in the prison rules was held to be ultra vires so far as it impeded correspondence with legal advisers about contemplated proceedings.

R v Secretary of State for Home Department, Ex parte Saleem [2001] 1 WLR 443 (“Saleem”) concerned rights to asylum, and specifically provisions of the procedural rules which purported conclusively to deem notice of an adjudicator’s determination to be received on the second day after posting, so triggering a strict five day time limit for an appeal to be made to the Immigration Appeal Tribunal.

Roch LJ, with whom Mummery LJ agreed, described the right of appeal from an adjudicator to the tribunal at p.449 as “a basic or fundamental right” which was “akin to the right of unimpeded access to a court”, such that “infringement of such a right must be either expressly authorised by Act of Parliament or arise by necessary implication from an Act of Parliament”, citing the speech of Lord Wilberforce in Raymond v Honey [1983] 1 AC 1, 12-13. Roch LJ went on to say at p.450 that even if the need for infringement does arise by necessary implication, the rule will still be ultra vires if it is unreasonable, in the sense of being “wider than is necessary; if it infringes the fundamental right to a greater extent than is required”. Although certain alternative remedies were available in that case they were not as effective as an appeal. The rule in issue went beyond regulating the exercise of rights of appeal (which is what the primary legislation authorised) and was not reasonable.

In her judgment Hale LJ expressly rejected an argument that a right of access to a tribunal was not in the same category as a right of access to the court, saying at p.458:

“In this day and age a right of access to a tribunal or other adjudicative mechanism established by the state is just as important and fundamental as a right of access to the ordinary courts.”

Hale LJ added that:

“… the more fundamental the right interfered with, and the more drastic the interference, the more difficult it is to read a general rule or regulation making power as authorising that interference.”

Further, it may not matter whether the analysis proceeds in terms of necessary implication or the “reasonable contemplation of Parliament”. Hale LJ went on to draw an analogy with the principles established under Article 6 of the Convention.

The significance of rights of access to the courts was considered in depth in R(UNISON) v Lord Chancellor [2017] UKSC 51, [2020] AC 869 (“UNISON”), which concerned a purported exercise of powers under the Tribunals, Courts and Enforcement Act 2007 to levy fees on appeals to the Employment Tribunals. The Supreme Court concluded that the relevant order effectively prevented access to justice and was unlawful at common law. This was despite the fact that the primary legislation permitted fees to be prescribed.

Lord Reed stressed at [66] that:

“The constitutional right of access to the courts is inherent in the rule of law.”

Lord Reed went on to explain the significance of the rule of law and the role of unimpeded access to the courts to ensure that laws do not become a “dead letter” (para [68]). He gave a number of examples of:

“… judicial recognition of the constitutional right of unimpeded access to the courts… which can only be curtailed by clear statutory enactment.” (para. [76])

He described the court’s approach as:

“… to ask itself whether the impediment or hindrance in question had been clearly authorised by primary legislation.” (para [79])

Further, citing among other cases ex p Leech:

“Even where a statutory power authorises an intrusion upon the right of access to the courts, it is interpreted as authorising only such a degree of intrusion as is reasonably necessary to fulfil the objective of the provision in question.” (para. [80])

Lord Reed referred at [88] to an implied limitation on primary legislation authorising an intrusion on rights of access to justice, such that “the degree of intrusion must not be greater than is justified by the objectives which the measure is intended to serve”. At [89] he drew an analogy with the principle of proportionality as developed in the case law of the European Court of Human Rights, and stated that the position at common law was that:

“… even an interference with access to the courts which is not insurmountable will be unlawful unless it can be justified as reasonably necessary to meet a legitimate objective.”

It is common ground that the internal review procedure introduced by the 2014 Order had as its aim a reduction in the need for appeals, by providing an opportunity for the claimant to provide further information and for HMRC to correct mistakes. That is of course an entirely legitimate aim. Indeed, Parliament had already approved the adoption of a similar procedure in a social security context. An extension to tax credits was no doubt considered to be logical.

The aim is evident from the Explanatory Memorandum to the 2014 Order, which was laid before the House of Commons. The purpose is described as follows:

“This instrument amends legislation so that a person will need to ask HMRC to reconsider its decisions on tax credits, child benefit or guardian’s allowance awards before making an appeal to the tribunal, similar to the process for universal credit. It also repeals and revokes legislation setting time limits for making an appeal, and requiring notices starting an appeal to be sent to HMRC.”

Under the heading “Policy background”:

“7.1

The changes being made are primarily the introduction of a new stage in the decision making process called Mandatory Reconsideration before Appeal. This new process will apply to child benefit and guardian’s allowance decisions, and align the tax credits process to that already introduced by the Department for Work and Pensions (DWP) for universal credit.

7.2

The changes made in this Order introduce a reconsideration process which requires a person to first ask HMRC to reconsider its decision before making an appeal directly to the First-tier Tribunal.

7.3

This change aims to give a person a more independent opinion of the original decision with a different officer taking a fresh look at the decision, as well as a clear justification for the original decision. Also, that having followed the reconsideration process, a person will either decide that their disagreement has been satisfactorily resolved, or if not, that it will be for them to make a positive choice to appeal directly to the tribunal. This new system improves the decision making process, limits the number of appeals going forward to the tribunal and brings consistency in the handling of appeals across HMRC and DWP.

7.4

Associated changes remove the rules in Great Britain about time limits and the process for starting an appeal with the First-tier Tribunal. These rules will be replaced by Tribunal Procedure Rules.”

The memorandum also referred to a public consultation, which had resulted in feedback that was “mainly positive” but had led to the introduction of mandatory reconsideration being postponed until 2014 to allow an HMRC backlog to be addressed.

While the aim of the 2014 Order was legitimate, and indeed followed a public consultation, there is a difficulty. Unlike the changes made to the social security regime made pursuant to the 2012 Act, Parliament did not pass primary legislation to enable the new procedure to be adopted for tax credits. Rather, the enabling legislation that the Treasury sought to use was s.124 FA 2008, which had been enacted some four years before Parliament even considered the topic of mandatory reconsideration in the different context of social security reforms.

On a literal interpretation of s.124, it might be read as permitting the introduction of a mandatory review process in the manner provided for by s.38(1A) of the 2002 Act. This is because it permits provision to be made “for and in connection with reviews” and “in connection with appeals” (sub-section (1)). Further, sub-section (2)(a)(ii) expressly permits “provision about the circumstances in which, or the time within which … an appeal may be made”. However, I am persuaded that such an interpretation would not be correct.

As Lord Neuberger explained in Public Law Project, the delegation of power to modify primary legislation is an exceptional course. Any real doubt about the scope of the power must be resolved by a restrictive approach. Lord Neuberger also approved a statement in Craies on Legislation that the more general the words used “the more likely it is that an exercise within the literal meaning of the words will nevertheless be outside the legislature’s contemplation”. It is undeniable that the words used in s.124 are general in nature.

The Explanatory Notes to what became s.124 FA 2008 say nothing either about mandatory reviews, or about the potential for a right of appeal to be lost if a review is not sought on a timely basis. The stated aim was to “streamline appeals administrative processes” in readiness for the introduction of the new tribunal system, including aligning differences of approach by “giving taxpayers the right to a formal review of appealable HMRC decisions” (see [‎21] above, emphasis supplied).

It is well-established that Explanatory Notes may be used “to ascertain the context of the provision and the mischief which it addresses as aids to purposive interpretation”: McDonald v Newton [2017] UKSC 52 per Lord Hodge at [30]; see also Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed. at 24.14. In R (Project for the Registration of Children as British Citizens) v Secretary of State for the Home Department [2022] UKSC 3, [2022] 2 WLR 343 at [29]-[30], Lord Hodge emphasised the primacy of the statutory language, read in its context, but added that Explanatory Notes “may cast light on the meaning of particular statutory provisions”. Indeed, in R (on the application of PACCAR Inc & others) v Competition Appeal Tribunal and others [2023] UKSC 28 at [42], Lord Sales went further and referred to the potential use of an Explanatory Note to resolve a specific ambiguity.

In this case the relevant Explanatory Notes refer only to a right of review: see paragraphs 1 and 15. There is no suggestion that such a review might be mandatory, and certainly no hint that a right of appeal might be lost if the time limit for such a review was missed. This is reflected in s.124 itself. Both s.124(2)(a)(i) and (3)(a) refer expressly to “a right to a review”. This is suggestive only of a new right being conferred, not of curbs on existing rights.

Reflecting its intended scope, s.124 FA 2008 was used to introduce changes to Part V of the Taxes Management Act 1970 (“TMA”) which gave appellants who wished to bring appeals under the Taxes Acts the right, but not the obligation, to require a prior review by HMRC: see ss.49A-49I TMA, introduced by the Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009, SI 2009/56. This review mechanism was however not incorporated into the tax credit system. Instead, appeals continued to be made direct to the FTT pursuant to s.63(2) of the 2002 Act.

The effect (or purported effect) of the introduction of s.38(1A) by the 2014 Order is radical. It not only requires a review to be conducted but does so in a manner which excludes the right of recourse to the FTT that previously existed in circumstances where a decision is challenged late and HMRC refuse an extension of time. Before the 2014 Order was made the FTT had the power to extend time for an appeal by up to 12 months where a late appeal was made, pursuant to the FTT rules. Although that power remains, s.38(1A) precludes an appeal altogether unless a review has been carried out and its outcome has been notified. In contrast, ss.21A and 21B, which were also introduced by the 2014 Order, present no difficulty by themselves. Their effect, read without s.38(1A), is simply to confer a time-limited right to require HMRC to review a decision of a kind falling within s.38(1).

Saleem and UNISON both emphasise the importance of unimpeded access to courts and tribunals and the need to adopt a strict approach in determining whether a restriction on access has been authorised by Parliament. As Lord Reed explained in UNISON, the right of access may only be curtailed if it is clearly authorised by primary legislation, and only to the extent that is “reasonably necessary to fulfil the objective of the provision in question”.

I accept that Saleem was an extreme case, in that it was apparent that Parliament intended there to be a right of appeal if the individual was dissatisfied with the determination, but the effect of the rule in issue was that that right could not be exercised if the relevant notice was not received, such that dissatisfaction was impossible. Its effect was to remove the possibility of appeal altogether rather than simply regulate its exercise via a strict time limit. Nonetheless, the principles discussed in that case and in UNISON – where the facts were less extreme – apply equally in this case. They add further weight to the requirement that would in any event exist to adopt a restrictive approach to interpreting the power conferred by s.124 FA 2008 to amend primary legislation.

The purpose of s.124 FA 2008, as is clear from the Explanatory Notes to the Bill, was to facilitate the transition to the new tribunal system and allow the introduction of a right to a formal review. That is very different from a mandatory review on terms that excludes the FTT’s ability to determine whether to entertain a late challenge. There is nothing in s.124 FA 2008 that makes clear that it authorises a provision which has the effect of making the decision maker the effective gatekeeper of appeals to the FTT in the event of a late challenge, subject only to the possibility of judicial review. Although s.124(2)(a)(ii) permits provision about the “circumstances in which” an appeal may be made, that is insufficiently clear to permit HMRC to become the gatekeeper. While I understand HMRC’s argument that s.38(1A) simply regulates the exercise of a right of appeal rather than excluding it as in Saleem, I cannot accept it. In substance and in reality, the effect of s.38(1A) is to remove a right of appeal where time is not extended by HMRC under s.21B.

ToTel concerned the use of s.124 to amend VAT legislation to exclude a right of appeal to the Upper Tribunal from a decision of the FTT on a hardship application, namely an application that a VAT appeal should be heard without the prior payment of tax that is usually required, on grounds of hardship. This court decided that the relevant provision was ultra vires s.124 because the phrase “in connection with appeals” presupposed that a right of appeal existed. Moses LJ applied the strict approach mandated by the Spath Holme case referred to by Lord Neuberger in Public Law Project (see [‎40] above). He observed at [22] that:

“…a provision which revokes or removes a right of appeal does not seem to me properly to be described as a provision about the circumstances in which an appeal may be made… A provision in relation to the circumstances in which an appeal may be made pre-supposes the existence of a right of appeal not its abolition.”

Moses LJ supported his conclusion by contrasting the reference in s.124(1)(a) to “for and in connection with” reviews with the omission of the word “for” in s.124(1)(b) (at [23]) and explained at [26] that the need for clear words precluded a benevolent construction.

This was sufficient to conclude that the relevant provision was ultra vires. On the facts of that case Moses LJ rejected an alternative argument for the taxpayer that the effect of the provision was to deprive it of a fundamental right of appeal. This was because what was excluded was a right of appeal from the FTT only with permission and only on a point of law. In circumstances where judicial review was available ToTel was “not deprived of a very great deal” (paragraph [32]).

Ms Smyth relied on Moses LJ’s reference at [21] of ToTel to a provision requiring payment of tax in dispute before an appeal may be entertained as an example of a provision governing the “circumstances in which … an appeal may be made”, within s.124(2). She submitted that there was no material difference between that and requiring a review to have been conducted. Both were simply conditions that needed to be met before a right to appeal could be exercised, rather than provisions which removed a right of appeal.

There are two responses to that. First, and in contrast to s.38(1A), the example given by Moses LJ is explicitly recognised in s.124(3). Secondly, and more fundamentally, the effect of s.38(1A) is not simply to mandate a review to be conducted first as a condition of bringing an appeal. Rather, its effect is to exclude the possibility of a late challenge where HMRC do not agree to extend time. In essence, it excludes the jurisdiction of the FTT to determine whether to entertain a late appeal.

Further, that is not analogous to excluding the limited right of appeal considered in ToTel. That was a right of appeal only on a point of law and with permission, in circumstances where the taxpayer had already had recourse to the FTT to determine whether the requirement to pay tax would cause hardship. As Moses LJ explained at [22], the FTT’s decision in ToTel was not itself a decision on an appeal. It determined on a de novo basis whether the hardship condition was met, rather than merely reviewing HMRC’s earlier conclusion that it was not. In contrast, s.38(1A) entirely excludes the right that Parliament contemplated and that existed before the 2014 Order took effect, namely a right of recourse to an independent and impartial tribunal which could consider the facts and decide whether, in all the circumstances of the claimant’s case, to allow an extension of time. That is different in nature to a judicial review of a decision taken under s.21B as to whether “special circumstances” made it not practicable to seek a review on a timely basis.

Ms Smyth also submitted that striking down s.38(1A) would undermine the legitimate aim of the 2014 Order, because it would remove any sanction from a failure to apply for a review before an appeal was lodged. That is so, but the submission misses the point. The question is not whether the 2014 Order had a legitimate aim, but whether Parliament had passed the necessary enabling legislation. I should add that I do not understand HMRC’s further submission that the ultra vires challenge was really an attack on ss.21A and 21B. As already noted, those provisions confer a right of review which can operate independently of s38(1A). The time limits set by those provisions are inoffensive in themselves, when divorced from the right to appeal to the FTT. What is problematic is the terms of s.38(1A).

HMRC’s further written submissions also maintained that the decision in Connor supported their case. I disagree. The context there was employment support allowance, where the decision in CJ had already determined that a right of appeal to the FTT was not precluded by a refusal to extend time for a review: see [‎34] and [‎35] above. The actual decision in Connor addressed a different aspect of the reconsideration process, namely its impact on the payment of benefits while a review was being undertaken. The relevant regulation was found to be unlawful insofar as it applied to claimants who would otherwise be entitled to receive payment pending appeal.

HMRC further relied on the fact that the 2014 Order was approved by the House of Commons under the affirmative procedure required by s.124(8) FA 2008. However, as is clear from the citation by Lord Neuberger in Public Law Project at [27] (set out above), approval whether by negative or affirmative resolution does not immunise secondary legislation from an ultra vires challenge. I would further observe that there is no indication that the impact of the 2014 Order on claimants in Mr Arrbab’s position was considered.

Finally, it is not irrelevant to consider the reality that many tax credit claimants will be vulnerable in some respect. They may also, like Mr Arrbab, not be native English speakers. Official documents may not readily be comprehended and the importance of acting quickly may not be appreciated. Further, HMRC’s continued reliance on Mr Arrbab’s failure to respond to the s.17 notice as causative of the problems in his case suggests that the difficulties that many claimants have may be insufficiently appreciated by HMRC decision makers.

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.

One of the areas on which we invited further written submissions was the appropriate course of action should we determine that s.38(1A) is ultra vires. There are two aspects to this. The first relates to the substantive impact of that conclusion on the operation of the legislation. The second relates to the nature of our jurisdiction and the appropriate course of action in this particular case.

As to the substantive impact, Mr Arrbab’s primary case is that s.38(1A) should be treated as struck out on the basis that it is ultra vires. The logical effect of this would be to leave in place the review procedure in s.21A, including HMRC’s ability to extend time for that purpose under s.21B, but to remove any compulsion on the part of the claimant either to seek or obtain a review before appealing to the FTT. As a result claimants would be able to insist on a review if they made an in-time application under s.21A, because s.21A would impose an obligation on HMRC to undertake it, but HMRC could not require a review to be undertaken and a claimant could simply appeal to the FTT without seeking a review or, if a review was sought, waiting for its outcome.

This is somewhat different from the effect of the UT’s decision. The effect of the UT’s decision would be to recognise that s.38(1A) requires a prior application for a review, but to treat a refusal by HMRC to extend time as sufficient to permit an appeal to the FTT to proceed on the merits if the FTT was prepared to extend time.

Both parties made further written submissions about whether there was any alternative to treating s.38(1A) as wholly invalid, by some form of severance of its text. In DPP v Hutchinson [1990] 2 AC 783, 804 Lord Bridge explained that a court has no power to modify or adapt an invalid provision to bring it within the law-maker’s power, and described the power to sever in the following terms:

“What is involved is in truth a double test. I shall refer to the two aspects of the test as textual severability and substantial severability. A legislative instrument is textually severable if a clause, a sentence, a phrase or a single word may be disregarded, as exceeding the law-maker’s power, and what remains of the text is still grammatical and coherent. A legislative instrument is substantially severable if the substance of what remains after severance is essentially unchanged in its legislative purpose, operation and effect.”

After reviewing the authorities Lord Bridge then said this at p.811:

“The test of textual severability has the great merit of simplicity and certainty. When it is satisfied the court can readily see whether the omission from the legislative text of so much as exceeds the law-maker’s power leaves in place a valid text which is capable of operating and was evidently intended to operate independently of the invalid text. But I have reached the conclusion, though not without hesitation, that a rigid insistence that the test of textual severability must always be satisfied if a provision is to be upheld and enforced as partially valid will in some cases, of which Dunkley v. Evans (Footnote: ¹) and Daymond v. Plymouth City Council (Footnote: ²) are good examples, have the unreasonable consequence of defeating subordinate legislation of which the substantial purpose and effect was clearly within the law-maker’s power when, by some oversight or misapprehension of the scope of that power, the text, as written, had a range of application which exceeds that scope. It is important, however, that in all cases an appropriate test of substantial severability should be applied. When textual severance is possible, the test of substantial severability will be satisfied when the valid text is unaffected by, and independent of, the invalid. The law which the court may then uphold and enforce is the very law which the legislator has enacted, not a different law. But when the court must modify the text in order to achieve severance, this can only be done when the court is satisfied that it is effecting no change in the substantial purpose and effect of the impugned provision.”

At p.813 Lord Bridge approved the approach taken by Australian authorities of asking, when textual severance is impossible, whether the provision:

“… with the invalid portions omitted would be substantially a different law as to the subject matter dealt with by what remains from what it would be with the omitted portions forming part of it…”

While I am satisfied that the challenge to the invalidity of s.38(1A) has no impact on the validity of the review mechanism contained in ss.21A and 21B, I do not consider that any form of severance can be applied within s.38(1A) in a way that could satisfy this test. Section 38(1A) can neither be textually severed, nor can it be modified without changing its “substantial purpose and effect”. The sole purpose of s.38(1A) is to ensure that a review must be carried out under s.21A before an appeal can be brought. But that is the very thing that, when read with HMRC’s role as arbiter of time limits under ss.21A and 21B, falls outside the enabling power.

I would therefore accept Mr Arrbab’s primary case, namely that s.38(1A) (and the cross-reference to it in s.38(1)) should be treated as struck out as ultra vires.

An issue was also raised about the effect of our decision on the time limits for appeal in the FTT rules, which refer to mandatory reconsideration (see [‎18] above). The existence or otherwise of a problem under those rules could not affect the issue of whether s.38(1A) was intra vires or not, but in any event I do not perceive a real difficulty. First, “mandatory reconsideration” is defined by rule 22(9) in a way that encompasses any appeal against a “decision made by” HMRC (that is, not limited to a decision following a review). Secondly, if that was not correct the default time limit in paragraph 5 of Schedule 1 would in any event allow an appeal within one month of a notice of decision being sent, subject to an extension of time of up to 12 months.

Turning to this case and the nature of our jurisdiction, this is a statutory appeal against the UT’s decision. Having determined that the UT made an error of law, this court has power to set aside that decision. If it does so it must either remake the decision or remit the case: s.14(2)(b) Tribunal, Courts and Enforcement Act 2007. If a decision is re-made, this court has power to make any decision which the UT or FTT could make if it were re-making the decision: s.14(4)(a). Neither party suggested that we had any broader jurisdiction, for example to make a declaration of invalidity.

We clearly have jurisdiction to determine that the UT made an error of law in deciding that the legislation could be construed in the same manner as the legislation considered in CJ, and to set its decision aside for that reason. The conclusion that s.38(1A) is ultra vires is strictly relevant to the next step, remittal or re-making.

Given that the appeal is academic, nothing is to be gained from remitting the appeal. In my view the proper course is to re-make the decision by allowing the appeal against the FTT’s decision, reflecting the fact that the appeal should not have been struck out for want of jurisdiction, but without the remittal to the FTT on the terms ordered by the UT. It will however obviously be open to the parties to agree that the appeal will not be pursued and to inform the FTT accordingly, or alternatively Mr Arrbab may simply discontinue his appeal.

In conclusion, therefore, HMRC succeed on the construction issue but fail on the ultra vires issue. Section 38(1A) of the 2002 Act is ultra vires the enabling legislation. The FTT should not have struck out Mr Arrbab’s appeal.