WM Morrison Supermarkets Limited v The Commissioners for HMRC

Except when it comes to our ability (or duty) to have recourse to Hansard, we do not consider that there is much between Mr Watkinson and Ms Sloane on this issue.

Dealing with that issue first, we do not consider that the two passages referred to by Ms Sloane from Kennedy and DA justify us looking at Hansard, or other extraneous materials, in circumstances wider than those already identified, that is to say where the rule in Pepper v Hart is engaged or to supply context or identify the mischief at which legislation is aimed as an aid to interpretation. In both of the cases she referred us to, the Hansard extracts were being looked at for a purpose other than statutory interpretation.

The question of reliance on ministerial statements was addressed by the Supreme Court in Project for the Registration of Children. At [31] Lord Hodge (with whom Lord Briggs, Lord Stephens and Lady Rose agreed) explained that “Statutory interpretation involves an objective assessment of the meaning which a reasonable legislature as a body would be seeking to convey in using the statutory words which are being considered.” He went on to quote what he described as an “important passage” in the judgment of Lord Nicholls in R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] AC 349 (“Spath Holme”) at p396:

““The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the ‘intention of Parliament’ is an objective concept, not subjective. The phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the minister or other persons who promoted the legislation. Nor is it the subjective intention of the draftsman, or of individual members or even of a majority of individual members of either House. … Thus, when courts say that such-and-such a meaning ‘cannot be what Parliament intended’, they are saying only that the words under consideration cannot reasonably be taken as used by Parliament with that meaning.”

At [32] he explained that the appellants in that case had sought to support their contention by referring to statements by a Government minister to the Standing Committee which considered a particular statutory amendment, and then added:

“Such references are not a legitimate aid to statutory interpretation unless the three conditions set out by Lord Browne-Wilkinson in Pepper v Hart [1993] AC 593, 640 are met. The three conditions are (i) that the legislative provision must be ambiguous, obscure or, on a conventional interpretation, lead to absurdity; (ii) that the material must be or include one or more statements by a minister or other promoter of the Bill; and (iii) the statement must be clear and unequivocal on the point of interpretation which the court is considering. It was not argued, and I am not satisfied, that the first and third conditions are met in this case.”

Our task is to “identify the meaning borne by the words in question in the particular context.” (Lord Nicholls in Spath Holme at p396). So, as the Supreme Court explained in Project for the Registration of Children at [29], we must read the words of a particular provision “in the context of the section as a whole and in the wider context of a relevant group of sections. Other provisions in a statute and the statute as a whole may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which meaning is ascertained.”

At [30] the Supreme Court discussed the uses of external aids to interpretation (how particular aids could be used) as well as one very important limitation:

“External aids to interpretation therefore must play a secondary role. Explanatory notes, prepared under the authority of Parliament, may cast light on the meaning of particular statutory provisions. Other sources, such as Law Commission reports, reports of Royal Commissions and advisory committees, and Government White Papers may disclose the background to a statute and assist the court to identify not only the mischief which it addresses but also the purpose of the legislation, thereby assisting a purposive interpretation of a particular statutory provision. The context disclosed by such materials is relevant to assist the court to ascertain the meaning of the statute, whether or not there is ambiguity and uncertainty, and indeed may reveal ambiguity or uncertainty: Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), para 11.2. But none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity.”

In principle, therefore, we should start our interpretation of the provisions we are concerned with by looking at the words of the statute alone, including in that the relevant provisions of the statute as a whole, not just the particular words under consideration, and we should go where those words take us and then stop. But, if the words of the statute are unclear or ambiguous or produce an absurd result (which we take to include one which it is unlikely, in the light of the purpose of the provisions, they were intended to apply to and also, depending on the degree to which a particular construction produces an unreasonable result, to one which has consequences which are objectionable or impracticable or anomalous or illogical or pointless), we should reconsider our interpretation. External aids to interpretation may be helpful at this point, by identifying the purpose of the legislation or the mischief it is aimed at, in coming to a purposive interpretation. However, statements by Government ministers in Parliament are only admissible as an aid to construction (as opposed to a means of identifying the mischief the legislation was aimed at) where the three conditions set out by Lord Browne-Wilkinson in Pepper v Hart are met.

Against that background, we turn now to consider the four questions relevant to liability.

This is the test in the original (pre-FA 2012) legislation, and it is not a test where (subject to one point) there is any real disagreement over its scope.

Before Sub One the old (pre-2012) definition of “hot food” (effectively Note (3B)(a)) had been interpreted in a subjective way following the decision of the Court of Appeal in John Pimblett & Sons Ltd v Customs and Excise Comrs [1988] STC 358 (“Pimblett”). The test (as applied in this way) was challenged in Sub One on the basis that the result of the various VAT liability disputes at the margins of take away food had been to cause a breach of the EU law principle of fiscal neutrality. The Court of Appeal decided that the test could be construed objectively and, when construed objectively, the legislation did not fail properly to implement EU law.

Sub One is important not only because it tells us how to interpret and apply Note (3B)(a), but also because the logic underlying that judgment (that tests of purpose, however drafted, in Note (3B) should be applied in an objective way in conformity with with the principle of fiscal neutrality) should carry through to the tests of purpose we (perhaps slightly surprisingly, given the objectives behind the 2012 changes and the fact that Sub One had not been decided at that time and so any purpose test might be thought to be subjective in line with Pimblett) find in the additional tests introduced in 2012.

As explained by McCombe LJ in Sub One at [49], when applying what is now Note (3B)(a), we are looking to find “the assumed common intention of the supplier and the consumer as to whether it is a term of the bargain that the product be supplied in order to be eaten hot”. This is an entirely objective enquiry, and we find the terms of the bargain from what each party to the contract says and does (including the presentation of the supply and any advertising). In so doing, McCombe LJ suggested that we may be aided by Briggs LJ’s “pithy question”, which is recorded at [45]:

“My Lord, Briggs LJ, in argument invited Mrs Hall to comment on whether the distinction was to be found in the objective assessment of whether the temperature of the food, enabling consumption of it ‘hot’, was or was not the essential nature of the ‘deal’ between supplier and customer. In other words, was the deal that the supplier was selling and the customer was buying a sandwich which could be eaten ‘hot’.”

There is a difference between these two articulations of the test. McCombe LJ’s test asks whether it is a term of the hypothetical bargain that “the product be supplied in order to be eaten hot”, whereas Briggs LJ’s question is whether the essential nature of the hypothetical deal was that the temperature of the product was such that it “could be eaten ‘hot’”. Briggs and Rimer LJJ both agreed with McCombe LJ without adding any further comments of their own, so the test we should apply is that articulated by McCombe LJ.

The point of divergence between Mr Watkinson and Ms Sloane is that Mr Watkinson suggested that we could take into account the possibility that purchasers may take CDRCs home and reheat them, so that they were “consumed hot” albeit after fully cooling down and then being reheated by the purchaser. Ms Sloane said that the legislation is clearly asking whether the supplier heated the product so that it could be consumed hot.

We are with Ms Sloane on this point. The natural reading of the phrase “has been heated for the purpose of enabling it to be consumed hot” is that it is asking whether the supplier has heated the product so that (as a result of the supplier’s heating) the product can be consumed hot. In Sub One the articulation of the test is whether the temperature of the food (such that it could be consumed hot) was an essential part of the bargain. If I need to reheat a product before I can eat it hot, it is less likely (although not impossible – it may take less time to reheat a CDRC than to cook a raw chicken; we had no evidence about this, so we should not ascribe any great weight to this possibility) that its being hot at the point of sale would be an important part of my bargain with the supplier.

The recent customer survey is the only evidence about actual customer behaviour in relation to CDRCs we have. We take on board Mr Watkinson‘s comments about the relatively small number of customers surveyed and the fact that no one has analysed whether the order in which questions were asked might have conditioned particular responses. It is also important that we do not allow use of the customer survey to turn this into a subjective test (answered by reference to what Morrisons’ customers say they wanted). Nevertheless, it is the only evidence of customer behaviour we have, and we should not ignore it.

That survey indicates that nearly all customers (95%) consume CDRCs at home. That is such a very high proportion of purchasers that we suspect a larger sample would be unlikely to produce a materially different result. This result is also broadly consistent with what Morrisons told the government in 2012 (that 83% of their customers purchased hot whole chickens to consume later in the day by which time they had cooled down) and the summary of the 2012 market research (set out at [42]), which indicated that hot chickens were bought as part of a family shop for later consumption as part of a meal. It is also entirely to be expected, given the observations in Lewis’s Group, which are equally applicable here, about how difficult it would be to eat hot whole chickens immediately after purchase and how unlikely it is that people would be buying whole hot chickens for immediate consumption.

The instructions on the CDRC packaging indicate that they should be eaten within two hours or refrigerated. Given the earlier evidence that customers tend to purchase whole chickens as part of a larger shop to take home and eat later as part of a meal, that would suggest to us that, unless they happened to purchase a CDRC within two hours of a meal, customers are going to take their CDRC home and refrigerate it, or at least that this is what they should be doing, and either eat it cold or reheat it themselves.

Although CDRCs are hot when sold and will stay that way for at least two hours after purchase, Morrisons’ marketing focuses on CDRCs being fresh rather than hot.

Putting all this together, we do not consider that it is an important, or essential, term of the objectively found bargain between Morrisons and a purchaser of a CDRC that the CDRC has been heated for the purpose of enabling it to be consumed hot.  

Note (3C)(b) tells us that “something is “kept hot” after being heated if the supplier stores it in an environment which provides, applies or retains heat, or takes other steps to ensure it remains hot or to slow down the natural cooling process”.

The question here is whether the product “has been kept hot after being heated”. The test is applied at the time of supply (to determine the VAT status of the supply) and looks back from that time to the time when the product was heated and asks whether the product has been “kept hot” during that period, so that it is above the ambient temperature at the time of supply.

This answers Ms Sloane’s point that this test and test (d) (to which we will come in due course, but which deals with the packaging (if any) in which the product is supplied) overlap and duplicate each other. Mr Watkinson says that it does not matter if they do, but the reality is that the two tests are looking at completely different things. This test is looking at what the supplier did in the time between heating the product and supplying it, whereas test (d) is looking at what the supplier does at the time of supply. As it happens, HMRC have latched onto the way CDRCs are packaged and say that this means that tests (c) and (d) are both failed for essentially the same reason, but it does not follow from this that the tests themselves overlap or that one of them is redundant. Far from it, they are separate tests looking at things the supplier did (or did not do) at different times.

The first way in which something is kept hot is “if the supplier stores it in an environment which provides, applies or retains heat”. That, it seems to us, is a straightforward factual question. If the supplier stored the cooked product in an environment which provided, applied or retained heat and the product was hot at the time of supply, then it has been “kept hot” for these purposes.

There is no suggestion that CDRCs were stored in an environment which provides or applies heat. We saw that Officer Dean was briefly concerned by the possibility that CDRCs being displayed in cabinets next to heated cabinets had this effect, but that concern was soon allayed.

“Environment” is a word with a wide meaning; so far as relevant, the Oxford English Dictionary defines it as “The physical surroundings or conditions in which … a thing exists; the external conditions in general affecting the life, existence, or properties of an organism or object.”

We consider that an environment “retains heat” if it causes less heat to be lost than would be lost during the natural cooling process (which we discuss at [220] below); that is the obvious meaning of the phrase (a process can be described as “retaining” heat even if it does not retain all heat) and is suggested by the words of the second limb of Note (3B)(c), even though that limb provides a separate test. So, for an environment to retain heat, it is not necessary that it retains all heat and keeps the product at the same temperature it was at as at the end of the cooking process, although clearly it must retain enough heat to keep it above the ambient temperature at the time of supply; if it did not, the product would not be hot and this test would be irrelevant.

We next need to ask what the “environment” was in which Morrisons stored CDRCs after cooking and prior to sale. They were stored in chicken paper bags (sealed on three sides with one end folded over and held down by a sticker) and then left in the open on tables/rotundas or placed on unheated serveover counters from which the fronts had been removed.

The expert evidence is that, after two hours (the latest point at which a CDRC could lawfully be sold), a CDRC in a chicken paper bag would be at a temperature between 42℃ (if loosely wrapped) and 45℃ (if tightly wrapped), whereas a naturally cooling chicken would be at 31.8℃. Put another way, the temperature of a naturally cooling CDRC would have fallen by 62.59% over that two-hour period, whereas the temperature of a CDRC in a chicken paper bag would have fallen by 47.06% (if tightly wrapped) or 50.59% (if loosely wrapped).

A sealed chicken paper bag created a condition (external to the CDRC) which affected the state of the CDRC inside it; it slowed down the natural process of cooling and kept the CDRC warmer than it otherwise would have been had it been left to cool naturally.

For these reasons, we consider that CDRCs were stored in an environment (the interior of the chicken paper bags) which retained heat.

The second way in which something is kept hot is “if the supplier … takes other steps to ensure it remains hot or to slow down the natural cooling process”. This is a more nuanced test since it is asking not only what the supplier did (Did they take steps which ensured the product remained hot or slowed down the cooling process?) but also whether they took those steps (whatever they might be) “to ensure [that the product] remains hot or to slow down the natural cooling process”. In other words, the second limb of the test is also asking why the steps/s were taken. As we have already explained (at [197] above), given the government’s stated objective of introducing straightforward, objective tests, we were surprised to see these words used; we would have expected the test simply to ask whether the supplier took other steps which kept the product hot or slowed down the natural cooling process.

We agree with Ms Sloane that this limb of Note (3B)(c) requires an objective view of purpose. Clearly, taking an objective approach to the question why the supplier took particular steps in this limb of Note (3B) (c) would be entirely consistent with the approach taken in Sub One to what is now Note (3B)(a). An objective approach would also be more consistent with the government’s aim, when making the FA 2012 changes, of using straightforward, objective tests to avoid random, anomalous outcomes in individual cases. We will discuss the government’s objectives behind the FA 2012 in more detail later, but that was demonstrably one of their goals. For now, it is sufficient to say that we agree with Ms Sloane that, when looking at the second way in which a product is kept hot, we should ask ourselves the question whether, looked at objectively, the steps Morrisons took were taken to ensure that CDRCs remained hot or to slow down the natural cooling process.

Ms Sloane says that the correct way of looking at the natural cooling process of a CDRC is to look at what happens to a CDRC when it is packaged in a hygienic manner in line with food safety standards, i.e. within the bags that Morrisons uses. We do not agree with her on this. A natural cooling process is one where no steps have been taken beyond removing the product from the source of heat and leaving it uncovered in an open environment at the ambient temperature. The Oxford English Dictionary defines “natural” in a range of ways (depending on how/where the word is being used), but one important meaning is “unaltered, not enhanced”. Another is “Formed by nature; not subject to human intervention, not artificial” A natural cooling process is, in our opinion, one which has not been interfered with, where the product has been “left to its own devices” to cool down and there has been no human intervention to accelerate or slow down that process. As well as that being the most natural meaning of the word, it seems to us that any other interpretation would be difficult to operate, as it would involve looking at steps a supplier took and making a value judgement as to whether they were natural things to do. That would complicate an otherwise straightforward test.

The opening words (“…or takes other steps …”) of the second limb of Note (3C)(b) make it clear that it is only relevant if we conclude that Morrisons did not store CDRCs in an environment that provided, applied or retained heat. We have concluded that this is exactly what Morrisons did, but we will deal with the second half of Note (3C)(b) in case we are wrong in taking that view.

The second limb of Note (3C)(b) asks whether the step Morrisons took, (putting CDRCs into chicken paper bags and storing/displaying them in the way it did) was taken to ensure that the CDRCs remained hot or to slow down the natural cooling process. So, at least one of those aims must be one of the (objectively determined) reasons for Morrisons taking the step/s in question, but the words do not require it to be the only or the main reason for the Morrisons doing what it did. To conclude, we need to ask ourselves whether making sure the CDRCs remained hot or slowing down the natural cooling process was one of the reasons why Morrisons might reasonably be expected to put CDRCs into chicken paper bags.

The evidence from Mrs Whittle and the manufacturer of the chicken paper bags would suggest that heat retention or slowing down the cooling process was not part of Morrisons’ (subjectively determined) thinking in using or designing these bags. However, as this is an objective test, we need to look at whether it would be reasonable to conclude that heat retention or slowing down the cooling process was a reason for putting CDRCs into bags, not at what Morrisons was actually thinking.

Clearly, the chicken paper bags perform several roles. Except possibly for the bags used in Scotland, the chicken paper bags are bright and cheerful with a Union Jack design and a large film window through which the chickens can be seen. In Scotland, the bags are dour, but they still have the large film window through which the chickens can be seen. The evidence is that customers need to be able to see what they are buying, and we think that it would be fair to conclude that one of the reasons for putting CDRCs into these bags is an advertising or marketing one. They draw customers’ eyes to them and customers can easily see the CDRCs through the film window.

Secondly, although we had no evidence about relevant food hygiene rules (apart from the temperature rules), we accept that putting CDRCs into bags would be important from a food hygiene point of view. No one would want to buy a cooked chicken sitting unwrapped on a table that other people could have breathed all over or poked and prodded. We also know that using these bags stops grease leaking and more generally helps with customer handling (being able to pick up a CDRC and put it in a basket). We accept that food hygiene and facilitating customer handling (including grease retention) would be important objective reasons for using these bags.

As far as heat retention/cooling is concerned, we have seen that the chicken paper bags have a significant effect on the cooling process for CDRCs. It seems to us to be highly unlikely that a supermarket selling chickens which it marketed as fresh would not see clear advantages in the product being hot at the time of sale. Mr Gauke noted this possibility in his comments in Parliament. Although not marketed as hot, for obvious reasons to which we will come in due course, CDRCs being hot underlines their freshness and other supposed attributes. We have seen CDRC marketing material which uses straplines such as “Roasted right here in store”, “Oven Fresh Chicken”, “tasty, juicy, fresh” and “roasted right here”. All that marketing messaging is supported by the chickens being warm to touch at the time of purchase, very different from the refrigerated cooked chicken Mrs Whittle favourably compared a CDRC to.

Although customer research indicated that most customers take CDRCs home to consume later, responses indicated that this was not always the case, and a significant minority of respondents indicated that they expected their CDRC still to be warm when they got round to eating it. Slowing down cooling would make sure that sales are not lost where temperature is an important factor in potential purchasers’ reasons for buying a CDRC.

Looked at objectively, in the light of the obvious marketing advantages of a chicken being sold as fresh, juicy, tasty and roasted right here also being hot, and the obvious desirability of not losing sales to customers for whom temperature was an important consideration, viewed objectively one of the purposes of packing the CDRCs in chicken paper bags was to retain heat and slow down the natural cooling process.

We have also considered whether Morrisons taking CDRCs off sale after two hours amounts to a step to ensure that a CDRC remains hot. Although, clearly, the effect of this policy, which is dictated by food hygiene requirements, is that CDRCs are always hot at the point of sale, we do not consider that it is realistic to describe taking a hot CDRC off sale and throwing it away as a step which ensures that the CDRC “remains hot”.

Note (3C) asks, in relation to a particular product (technically, each CDRC at the time of its supply to a customer), whether steps have been taken to keep it hot or slow down its natural cooling process. We can see from Mr Gauke’s comments (extracted at [21] above), that “if food that would be zero-rated when cold is bought when it happens to be cooling down, but is not yet cold, it will still be zero-rated provided that it does not meet any of the criteria that I set out” (our underlining), that a reasonable view of the government’s policy might be that zero-rating should be restricted to hot food products which were on a natural cooling trajectory that could lead to them being below the ambient temperature at the time of sale and which just happen to be hot at that point in time, but we do not consider that such a policy is fully reflected in terms in the legislation. We do not consider that the words of Note (3C) will bear a meaning along the lines of “if the supplier took steps to ensure that it would only be supplied if it was still hot or cooler than it otherwise would have been”, which is what they would need to do to give effect to Mr Gauke’s words.  

This would be an appropriate point at which to pause and consider the mischief at which this legislation is aimed, as that will help us to work out whether our interpretation is absurd, in the sense of whether it stands at odds to the purpose of the legislation or is otherwise impractical or unworkable.

In identifying the mischief at which the legislation is aimed, we have confined ourselves to reading official publications and comments made in parliament and comparing the original legislation with the current legislation in its final form. We have seen that in 2012 there was a significant amount of public comment and campaigning, in newspapers and elsewhere, and private correspondence, such as that between Morrisons and the government. We do not consider that such unofficial materials are particularly helpful in trying to work out objectively what mischief parliament thought it was addressing, as they are not materials which parliament would have access to or might be expected to place a great deal of store by.

The government’s original proposal was to remove the purpose test (which determined whether hot takeaway food was standard or zero rated) and replace it with a simple, straightforward rule, that food (other than bread) which was hot at the time of supply would be standard rated. Subject to resolving some very peripheral questions around exactly what bread is, that would have been a very straightforward and no doubt very effective approach.

The government moved away from that proposal, although (as we can see from Mr Gauke’s comments in Parliament and the Consultation Response) it remained the case that the government was still looking to address the same mischief, that the definition of hot takeaway food had become unclear, prone to legal challenge and resulted in similar products receiving different tax treatments.

As described in the Consultation Response, the government had moved from a product-based approach, under which all hot food other than bread would be subject to VAT at the standard rate, to a characteristics-based approach, under which hot food would be subject to VAT at the standard rate if it also possessed one or more of five identified characteristics. The first was essentially the existing test, which was retained to make sure that nothing which was then standard rated would become zero rated. In addition, something which would have been zero-rated before the 2012 changes now had to jump four further hurdles. The most obvious point to draw from this is that the scope of zero rating was quite deliberately narrowed.

The four additional hurdles were designed to be objective, to be easy for business to operate and to keep to a minimum the need for businesses to test the temperature of their products. In addition, the Consultation Response made it clear that a product that is taken out of the oven after cooking and allowed to cool naturally would be zero rated, whereas products, including bread, that are kept hot in any way would be standard rated. Mr Gauke’s comments (quoted at [21] above, and on which we have already commented) underline that.

In short, the mischief the 2012 changes were designed to address was the anomalous and distortive results flowing from the ability of businesses to avoid charging VAT on hot food just by arguing that the reason they heated food was for a purpose other than enabling it to be consumed hot. This was to be curbed by requiring hot food which would have been zero-rated under the old rules to pass four additional objective, easy to operate tests, which (leaving aside the marketing and cooked-to-order tests) were designed to give effect to the idea that a product that is allowed to cool naturally and just happens to be hot when sold would be zero rated, whereas products that are kept hot in any way would be standard rated.

Ms Sloane said that, if HMRC are right on Note (3B)(c), all freshly baked bread put into packaging, so that customers can take it from the bakery shelves or baskets, would be standard rated. This is because, as we will shortly see, all packaging retains heat. We do not agree that this is the inevitable outcome of our conclusion on this point. So far as the first limb of Note (3B)(c) is concerned, the packaging would need to comprise an “environment”; if the packaging was open at one end (which, in our experience, is often the case with large baguettes), it may well not constitute a distinct environment. So far as the second limb of Note (3B)(c) is concerned, pre-sale packaging is only an issue if, viewed objectively, heat retention/slowing cooling is a purpose of putting the bread in the packaging. If (viewed objectively) heat retention/slowing cooling was an incidental side effect of the packaging and not important enough to be a purpose of putting the bread in the packaging, the supplier will have no problem with this test even if the product is still hot at the time of sale.

The important point to keep in mind here is that, as we have seen from the way the legislation developed, underscored by the Consultation Response, bread no longer occupies a privileged position. Bread, along with all other cooked products, will only be zero rated if it is no longer hot at the point of sale or, if it is, if it does not possess any of the five specified characteristics. It is, therefore, quite wrong of Ms Sloane to assert that a particular interpretation is problematic because it might pose a problem for some loaves of bread in certain circumstances. The base case is clear: freshly cooked bread left uncovered to cool on open racks will be zero-rated even if it is still hot at the point of sale. If anything is done in relation to freshly cooked bread which would be problematic for a different product, it will (and quite deliberately so) be a problem for bread if it is still hot at the time of sale.

Returning to our question, we do not consider that our interpretation of Note (3B)(c) is absurd. It is entirely consistent with a central plank of Parliament’s approach to the mischief it aimed these rules at. This can be seen from the distinction drawn in the Consultation Response between a product that is allowed to cool naturally on the one hand and products that are kept hot in any way on the other, which Mr Gauke picked up on in Parliament, including when he observed that, “In most people’s experience, pasties and suchlike are generally left on shelves rather than contained within bags while in the shop.”

There are two parts to this test too, and we consider them in turn.

The short and simple answer to this question is “yes”. We know from Mr Whittaker‘s research that the chicken paper bags in which CDRCs are stored and then sold retain heat very effectively.

However, Mr Whittaker also found that all three packaging types he tested demonstrated, to varying degrees, a heat retaining effect in relation to both chickens and pasties, and he said that these results align with his experience. He says that it is to be expected that packaging placed around hot food would reduce the cooling rate to at least some degree, and in some cases to a significant degree.

The point that Ms Sloane makes, of course, is that, if it is right that all packaging retains heat at least to some extent, which no one seriously questioned, then this test has been drafted in a very strange way. In effect, any food above the ambient temperature which is provided in some form of packing will be standard rated, because ex hypothesi it is provided in packaging that retains heat (and the legislation makes it abundantly clear that it does not matter whether the packaging was primarily designed for that purpose or not). The second limb of Note (3B)(d) would also be redundant, because there is no form of “other” (i.e. non-heat retentive) packaging”. If all Parliament had meant to ask is “Is the product supplied in packaging?” that would have been a much simpler way of putting the point.

Just as Ms Sloane is right that it is very strange to ask a question which isn’t really a question at all, because the answer is always “yes”, Mr Watkinson is also correct when he says that the language of Note (3B)(d) is simple, straightforward and abundantly clear.

We have discussed at some length the authorities dealing with the correct approach to statutory interpretation, which is (as the CA put it in Innovative Bites) that “absent absurdity or the like” the language of the statute will provide the answer.

However, that is exactly where we find ourselves. We are confronted with what appears to be a consequence which parliament, despite the clarity of the language it has used, cannot sensibly be regarded as intending. So, we can and should consider appropriate extraneous materials to see if they can help us to interpret this legislation in a way which avoids that outcome.

We have already explained the conclusion we draw, from looking at the way the government first sought to amend Group 1, how the draft legislation designed to achieve this changed until it assumed its final form and the extraneous HMRC commentary that surrounded this process, that the legislation is trying to eliminate or reduce the uncertainty and risk of anomalous outcomes the original legislation, essentially the current Note (3B) (a), presented and also to restrict, quite considerably, the circumstances in which hot food remains zero-rated. However, the extraneous materials and the drafting of Note (3B)(c) and (3C) also make it clear that there are certain naturally cooling products, such as bread, Cornish pasties and sausage rolls (at least), which ought to be able to pass the new tests and remain zero rated. As we have seen, there is no special exception for those products, but any interpretation which leads to a cumulative set of tests which such products are bound to fail would be out of line with the mischief Parliament was trying to address. So, given that Cornish pasties and sausage rolls will almost inevitably be handed over in a paper bag, an analysis of Note (3B) (d) which results in all forms of hot food handed over in packaging being standard rated would not seem to be in line with Parliament’s clear intentions. That is in addition to the obvious absurdity of asking whether particular packaging retains heat when we already know that all packaging does just that.

We have deduced this from the way the legislation, including the draft legislation, changed and the official commentary around that. That brings us to the exchanges in Parliament and the question whether we can use Mr Gauke’s observations to help us to an interpretation of Note (3B)(d) which reflects Parliament’s intentions. To be able to take Mr Gauke’s comments into account for this purpose, rather than just identifying the mischief the legislation is aimed at, they need to meet the three conditions set out in Pepper v Hart. These are that the legislative provision is ambiguous, obscure, or leads on a conventional interpretation to an absurdity, that the material we are looking at must include a statement by a minister or other promoter of the bill and that the statement must be clear and unequivocal on the point of interpretation.

It may be helpful to set out the exchange which Ms Sloane says we can use for this purpose:

“Stephen Gilbert (St Austell and Newquay) (LD): …. On packaging, new schedule 1 uses the wording: “whether or not the packaging was primarily designed for that purpose”.

There is some ambiguity as to whether a simple paper bag might be caught by that definition. Can the Minister assure us that people will be able to get their pies and pasties in a paper bag from the bakery without their being standard-rated?

Mr Gauke: The purpose of that wording relates to packaging that is specifically designed for the retention of heat. For example, hon. Members will all have experience of a paper bag with a foil interior that is used for such purposes. I do not think that a simple paper bag would fall into that category. In most people’s experience, pasties and suchlike are generally left on shelves rather than contained within bags while in the shop. I hope that that provides some clarification.”

As far as the Pepper v Hart criteria are concerned, the second is clearly met. We agree with Ms Sloane that the first criterion is also met. On its face the legislation is clearly difficult to interpret. It appears to be asking whether the packaging being used retains heat, but (as we have already seen) that is a non-question. Mr Watkinson suggests that the legislation is perfectly clear as long as we read it subject to a de minimis disregard, but there is nothing before us to suggest that that is Parliament’s chosen route out of this impasse or, as Ms Sloane pointed out, to show that there is such a thing as packaging with a de minimis effect on heat retention. We consider that it would be perfectly proper for us to take Mr Gauke’s comments into account as an aid to interpreting these provisions if they are clear and unequivocal on the point of interpretation.

In the exchange we are considering, Mr. Gilbert quotes the words in parentheses in Note (3B)(d), “(whether or not the packaging was primarily designed for that purpose)”, and then asks Mr Gauke whether a simple paper bag might be caught by “that definition”. For his question to make sense, he must also be referring to the immediately preceding words “packaging that retains heat” as well. A phrase beginning “whether or not” is clearly not the complete question.

Mr Gauke replies that “The purpose of that wording” relates to packaging that is specifically designed for the retention of heat. That is quite a puzzling comment. If by “that wording” Mr Gauke meant the words that Mr Gilbert had just quoted, it is hard to see what Mr Gauke meant as the words Mr Gilbert quoted very clearly do not relate to “packaging that is specifically designed for the retention of heat”; quite the opposite, they refer to packaging whether or not it is “primarily designed” for heat retention.

The same is true if Mr Gauke was referring to the whole question, not just the words Mr Gilbert quoted. The whole question refers to “packaging that retains heat (whether or not the packaging was primarily designed for that purpose)”. It is hard to see how those words “relate[..] to packaging that is specifically designed for the retention of heat”. On their face those words relate to all heat retentive packaging “whether or not the packaging was primarily designed for that purpose”. Unless Mr Gauke was drawing a sophisticated distinction between packaging “specifically designed” for heat retention and packaging “primarily designed” for that purpose, so that packaging could be specifically designed for heat retention without being primarily designed for that purpose (which is clearly a linguistic possibility, albeit one we find hard to come to terms with), it is hard to square his comments with the words of the provision.

It is, of course, possible that Mr Gauke was saying that the whole phrase “packaging that retains heat (whether or not the packaging was primarily designed for that purpose)” should be interpreted as “packaging that is specifically designed for the retention of heat” and no more, but that is so far removed from the words used that we would have expected him to be much clearer and more unequivocal about the point and to say more than just “The purpose of that wording relates to packaging that is specifically designed for the retention of heat.” This reading (if it is what he meant) is so far at odds with the words in the Bill that we would have expected Mr Gauke to move an amendment, or at least be more considered in his explanation, rather than address the issue in this rather Delphic way.

With respect, we struggle to describe Mr Gauke’s answer to Mr Gilbert’s question as a clear and unequivocal confirmation on a point of interpretation.

For essentially the same reason, that it appears to contradict the words of the legislation, we cannot accept Ms Sloane’s submission that the first limb of Note (3B)(d) is asking no more than whether the packaging was specifically designed for the retention of heat. Given that the legislation says that it applies to packaging which retains heat, whether or not it was primarily designed for that purpose, we cannot see how her interpretation can be reconciled with the clear words of the statute.

We cannot stop here, however. We have identified various meanings that the first limb of Note (3B)(d) cannot bear, or at least that we would be most surprised if it bore. But we still need to decide what it does mean.

Looking at the words parliament has chosen to employ, it seems to us that, when the legislation asks whether the packaging was “primarily designed” for the purposes of heat retention, it must be asking that against an assumption that the packaging has been the subject of a design exercise (that it has been “designed” in a meaningful way in the first place) and so is more than just a common or garden paper bag. If the packaging has been the subject of a meaningful design exercise and the packaging retains heat, which of course it will, then it is a problem as far as the first limb of Note (3B)(d) is concerned, even if the design process was primarily focused on a different problem. This interpretation gets us to an outcome which is consistent with Mr Gauke’s analysis, that common or garden paper bags are not a problem, and avoid the obvious absurdity in taking the first limb of Note (3B)(d) too literally. We accept that someone must have designed a common or garden paper bag, but in the context of this provision we do not consider that packaging that results from a relatively rudimentary, non-specialised design exercise will engage Note (3B)(d). We also accept that this reading of the first limb of Note (3B)(d) still leaves the second limb rather redundant, but we take Mr Watkinson’s point that in legislation like this (which is looking to prevent anomalous outcomes) overlap is to be expected.

There is further support for this approach in a comment Mr Gauke made shortly before his exchange with Mr Gilbert. He described the four additional criteria being introduced by the Finance Bill as being “that the food is either heated to order, kept hot after being heated, sold in special heat-retaining packaging or other packaging specifically designed for hot food, or advertised or marketed as hot” (our emphasis). He clearly thought that heat retentive packaging had to have something “special” about it to be problematic.

Similarly, in Test 4 paragraph 4.3 of VAT Notice 709/1 HMRC are clearly suggesting that the legislation is looking at “specialised packaging” in contrast to “ordinary paper bags or similar packaging”. They are also clear that the focus is on packaging which provides a “clear indicator that food is being kept hot” and specifically point to “cooked chickens that are sold in heat retentive packaging or packaging designed to prevent leakage of hot fluids or grease”.

If we turn to apply this test here, the chicken paper bags have clearly had considerable thought applied to them. They have foil windows and a polypropylene lining. They are designed prevent the escape of grease and similar fluids. They are bags which have been designed, as opposed to being a straightforward paper bag or similar product, and (as we have already seen) they are heat retentive and customers can feel the warmth of the CDRCs and realise that they are being kept hot.

It may be that, against the general acceptance that all packaging is heat retentive, the reference to heat retention in the statute and the Consultation Document would support an interpretation that even specialised packaging is not problematic if it retains heat but only to a de minimis level. However, no one has suggested that the chicken paper bags only retain heat to a de minimis level, and the expert evidence rather suggests the opposite.

There is clearly a range of interpretations of the first limb of Note (3B)(d) and we summarise briefly below how CDRCs supplied in chicken paper bags would fare under the possible interpretations we have identified:

So, on all interpretations of the first limb of Note (3B)(d), other than the interpretation in [264](5), which we consider to be untenable, we would hold that CDRCs have been provided to customers in packaging that retains heat (whether or not the packaging was primarily designed for that purpose) within the meaning of the first limb of Note (3B)(d).

This question only arises if CDRCs are provided in packaging which is not caught by the first half of Note (3B)(d). We derive this from the two limbs of Note (3B) (d) being joined by the words “or in any other packaging”. This part of the test is, therefore, only relevant if our conclusion on the first limb of Note (3B)(d) is wrong.

Ms Sloane considers that this test, along with the other tests in Note (3B) looking at purpose and similar concepts, is an objective one. The legislation asks whether this packaging has been “specifically designed” for hot food, and that might appear to be asking a subjective question, why this particular packaging was designed in the way it was, what was the designer thinking about when they drew up the specifications for the packaging. On balance, however, and bearing in mind the obvious (and clearly articulated) purpose of the 2012 changes (to introduce a straightforward, objective way of determining when hot takeaway food was standard rated which avoided different outcomes in similar cases) and the decision of the Court of Appeal in Sub One, we agree with Ms Sloane that the test here is an objective one. So, we need to consider, based on all the evidence, whether a reasonable person would consider that these bags have been specifically designed for hot food.

We know from the evidence that on occasion cold food has been put in chicken paper bags and we also know that on occasion HRCs have been put into these bags.

Mrs Whittle’s evidence is that different packaging is needed for different types of food. In the case of a CDRC, she told us, the important point is to make sure that none of the chicken juices produced by the cooking process can leak; there have been customer complaints about this happening. For that reason, she says it has always been important to have a plastic lining to the bags and to make sure that colleagues are trained to seal them properly.

The question asked is whether the chicken paper bags were “specifically designed” for hot food. “Specifically” is defined in the Oxford English Dictionary as meaning, among other things, “particularly; with a particular or clearly defined purpose, meaning etc”. Whilst “specifically” requires a particular purpose, it does not carry any connotation of exclusivity. We consider that, if, looking at the characteristics of the chicken paper bags objectively, it would be reasonable to conclude that the packaging has been designed with hot food in mind, to address particular problems presented by hot food, then they can be said to have been specifically, albeit not exclusively, designed for hot food.

Because this bag has been designed with a plastic lining and sealed on three sides, it has been designed to address one of the problems of freshly cooked (and therefore hot) chicken, that hot juices are likely to leak. So, a reasonable person would consider that these bags have been specifically designed for hot food.  If the test were a subjective one, Mr Maestri’s letter makes it quite clear that chicken paper bags were designed to address the issues of grease/liquid leakage presented by hot cooked chickens.

We agree that the fact that HRCs have been put into chicken paper bags does not prove that they were specifically designed for hot food. All we learn from that is that they can cope with hot food, which we already know because CDRCs are hot. Similarly, the fact that cold food has occasionally been put into chicken paper bags does not mean that, looked at objectively, they have not been specifically designed for hot food. It just means that they can cope with cold food as well as hot food, which is hardly surprising. A bag that can cope with hot fluids leaking from a hot, recently cooked chicken will very easily be able to accommodate cold chicken, cheese or ham. Similarly, the fact that cold food can be greasy and its packaging needs to address this issue (where it is relevant) does not mean that chicken paper bags have not been designed with the particular problems of hot, cooked chickens (which clearly present issues of juice/grease leakage of a different nature and scale to those presented by (say) pork pies, which (as everyone knows) tend to be wrapped in a particular type of paper, no doubt to address the (different) issues they present) in mind.

For these reasons we consider that the CDRCs were provided to customers in packaging that was specifically designed for hot food within the meaning of the second limb of Note (3B)(d).

We agree with Mr Watkinson when he says that there is more to advertising and marketing than just words. We all know the phrase “A picture paints a thousand words” and VAT/Notice 709/1 picks this up when it talks about marketing using a picture of a steaming product. As long ago as the Thirteenth Century St Francis is said to have told his followers to preach the gospel “and if necessary use words”.

Although the words used (or not used) to describe a product may not be determinative, we cannot ignore them, and we should start by looking at the words Morrisons used to describe CDRCs.

In Mucho Mas Ltd v HMRC, [2016] UKFTT 0302 (TC), the FTT had to consider whether certain products were heated for the purposes of enabling them to be consumed at a temperature above the ambient air temperature. The products being considered were advertised as ‘fresh’ and the taxpayer referred to its meat products (depending on cooking method) as ‘braised’ or ‘grilled’. At [75]-[7] the FTT commented:

“HMRC’s case is that these words implied the food was hot and customers would understand that that was what those words implied. I am unable to agree. Braising and grilling are cooking processes and I do not accept that a customer ought to or would understand the words to mean anything other than that the meat had been cooked by those processes. The words did not imply that the meat would still be hot when eaten. Similarly the word ‘fresh’ would import that the food was recently prepared from raw ingredients, which would imply recently cooked, but again would not necessarily imply the cooked food was still hot.

There was in my view nothing in the use of these words that would contribute to any common understanding that the food was intended to be consumed hot.”

We respectfully agree with those comments. Food can be “fresh” without being hot; fruit and vegetables are an obvious example of this. “Roasting” is just as much a description of a cooking process as “Braised” or “grilled”. The fact that a CDRC is “oven fresh…roasted right here in store” tells a customer that the CDRC has been roasted quite recently and is fresh but without more does not indicate that it is being supplied hot. The words Morrisons used to advertise CDRCs included “fresh” and “roasted” and similar expressions, but not (except occasionally by mistake, as to which see below) the word “hot”. Following their discussions with Officer Dean they eschewed expressions like “There’s nothing like hot fresh food from the oven”. The only use of the word “hot” is in the warning on the rear of chicken paper bags. The word appears in capitals (as part of the phrase “CAUTION: HOT PRODUCT”) but not in particularly large type – on our measurement, no larger than 0.25cm – and on the underside of the bag. Once a CDRC was inside the bag and the bag was placed with the window on the topside, this warning would not be visible to customers until they picked the bag up, and so we do not consider that it contributes to the advertising or marketing of CDRCs.

Displaying a CDRC near a toblerone or poster with a picture of a cooked chicken does not mean that the CDRC is being marketed as being hot. Particularly so when the picture is of rotisserie chickens glistening on a spit or a little girl eating a chicken with salad and potatoes. CDRCs are displayed for sale in packaging (the chicken paper bags), having been taken off the spit, so the first picture is of how a CDRC was some time ago. The second image is of what might happen to the CDRC in the future; the little girl is clearly not going to sit down and have her dinner there and then in the store. The pictures are (no doubt) designed to create an attractive image of CDRCs, but they tell us nothing about the temperature of the CDRCs at the point of sale.

We have seen pictures of the Morrisons oven fresh counter, which displays a wide range of products. There is a large bulkhead with the words “Oven Fresh” running across the top of the Oven Fresh serveover section. Then, below the bulkhead, are hanging signs. Some oven fresh products are very clearly sold under a sign saying “hot food to go” or similar, but the pictures we have seen all show CDRCs in their own cabinet to one side and without such signage behind or above them. Ovens may be visible behind the Oven Fresh serveover, including the part where the CDRCs are, but that does not tell us anything about the temperature of the CDRCs at the time they are sold; the ovens may reinforce the idea that CDRCs have been “roasted here in store”, but no more than that. None of the signage meant to be used above or around the CDRCs that we have seen uses the word “hot food” or other terms which would indicate that the products in question are hot.

We have referred to occasions on which Morrisons displayed CDRCs under signs advertising hot food by mistake and noted that none of the signage meant to be used above or around CDRCs was meant to use the word hot or a similar term. Clearly, there were occasions when CDRCs were displayed under or adjacent to non-compliant advertising material, which used the word hot. Where these were identified, Ms Sloane says, Morrisons made a voluntary disclosure to HMRC. We saw errors being disclosed in 2015 and again in the Autumn of 2020, before and after the assessment period.

Mr. Watkinson did not suggest that, because Morrisons could not assure us that all CDRCs had been sold only under compliant signage throughout the assessment period, we should assume that they never did this or that zero rating should be confined to cases where they could prove this. Clearly, it would be impossible for Morrisons to prove that every single (or indeed any particular) CDRC sold during the assessment period (on our calculation some 20.3 million CDRCs were sold during this period) was only sold beneath compliant signage. We have approached this issue on the basis that, as the evidence suggests was generally the case, CDRCs were only sold beneath or adjacent to compliant signage and, in the situations where this was not the case, that was identified to HMRC. This assumption may be rather favourable to Morrisons. We saw from Mr Marshall’s letter to HMRC of 29 January 2021(see [64] above) that not all errors were picked up by Morrisons and the errors that were disclosed in 2015 were down to computer coding rather than physical display, which does not lead us to think that the Morrisons system could easily pick up display errors. Mr Nichols suggested that the Morrisons tax team checked how CDRCs were being sold, but there was no evidence of rigorous, regular spot checks on stores of all types throughout the relevant period and across all parts of the country. Mr Marshall’s letter to HMRC gives a small number of examples of visits and the stores visited all seem to be around Leeds/Bradford in West Yorkshire. If this issue mattered to the outcome of this appeal, we would have asked Mr Watkinson and Ms Sloane for further submissions on the extent to which we should assume that Morrisons had complied with the requirement not to sell CDRCs beneath “hot” signage.

Next, we turn to the issue of advertising/marketing by ambience, by which we mean selling CDRCs from the Oven Fresh counter, rather than from standalone tables. Although it is not an issue which we see being completely closed off, except for the question of indirect heat sourcing, this was at the root of Officer Dean’s concerns following his visit to the Rothwell store in the Autumn of 2013. Officer Dean‘s perception of what he saw in the autumn of 2012 involved a very clear distinction between HRCs, which were served from a hot counter, and CDRCs, which were sold from plain, unheated tables at some distance from HRCs. That obviously created a very clear, bright line between the two products. When Mr Dean visited the Rothwell store in 2013, he saw CDRCs being sold from a serveover next to hot food. The bright line had started to dim.

Whilst we can appreciate this concern, to fall foul of Note (3B)(e) it must be the case that a particular product is advertised or marketed as hot. Whilst CDRCs were close to HRCs and other hot food products sold as such, there were clear demarcations. CDRCs were in a separate section of the counter, which had had its front removed and was not heated. From looking at the pictures of the Oven Fresh counter, whilst the CDRC section is physically joined to the rest of the counter, it is very distinct in appearance. Secondly, there were no hanging signs over the CDRC section, or at least there should not have been any. Not only did that make the CDRC cabinet/section look distinct, it also meant that there was nothing above the CDRCs that indicated they were hot products.

Mr Watkinson painted a very graphic word picture of what a customer might experience in front of the Oven Fresh counter in Morrisons. Ms Sloane also told us about her trips to small branches of Greggs. In our judgment the point is the same in both cases: a customer may be surrounded by enticing aromas (for example, of fresh bread or pasties or hot meals to go) and this may be quite a deliberate ploy to draw them towards a shop/counter and to encourage them to buy things once there, but it does not follow that every product available for purchase is (or is being marketed as being) hot just because it is in a shop or a display alongside products which are. As Ms Sloane put it, not everything next to a display of eggs is an egg and customers are perfectly capable of realising that.

We do not consider that selling CDRCs from part of the oven fresh counter close to hot food deliberately sold as hot snacks or similar indicates that CDRCs were being advertised or marketed as hot. There was no explicit statement that they were hot, unlike other nearby products, and the part of the counters they were displayed in looked different and were unheated. It may well be that Morrisons perceived a commercial advantage in moving CDRCs closer to other hot food products, perhaps thereby dimming the bright line separating them from HRCs, but it does not follow from this that CDRCs were themselves being advertised or marketed as hot.

For these reasons we have concluded that the CDRCs were not advertised or marketed in a way that indicates that they were supplied hot.

It is common ground that CDRCs were hot at the time of supply within the meaning of Note (3B) and were not cooked to order (Note (3B)(b)). For the reasons set out above, we have decided that:

It follows that supplies of CDRCs were supplies in the course of catering, and so were excluded from zero-rating under Item 1, Group 1 of Schedule 8 to VATA, and that the appeal on the Liability Ground fails.

We have organised our approach to this issue as follows. First, because it is a point to which the authorities frequently return (as we will do ourselves), we will briefly outline the relevant features of the tribunal structure. Then we will run through, in chronological order, the principal authorities where this issue has been discussed. It would be fair to say that, at least as regards the earlier authorities (up to Beadle), there is broad agreement between Ms Sloane and Mr Watkinson as to what those cases tell us. Then we will outline the different positions taken by HMRC and Morrisons on this question. By way of introduction and in extremely broad terms, HMRC’s position is that the older cases (which almost universally conclude that the tribunal does not have a public law jurisdiction) are very clear and correct, and, to the extent the more recent cases point in a different direction, we can (and should) follow the earlier cases. Morrisons say that the earlier cases may be correct as a broad question of principle, but we are bound by the more recent authorities and must follow them and hold that we have a public law jurisdiction.

The tribunal system was established by the Tribunals Courts and Enforcement Act 2007 (“TCEA”). So far as relevant for us, section 3 of TCEA provides as follows:

“(1)

There is to be a tribunal, known as the First-tier Tribunal, for the purpose of exercising the functions conferred on it under or by virtue of this Act or any other Act.

(2)

There is to be a tribunal, known as the Upper Tribunal, for the purpose of exercising the functions conferred on it under or by virtue of this Act or any other Act.”

Section 15 confers a “judicial review” function on the Upper Tribunal, which can be exercised if certain conditions are met (see section 18) or if the tribunal is authorised to proceed even though not all those conditions are met (see section 19(3) and (4)).

An application to the UT for “judicial review” relief can only be made if permission to make it has been obtained from the tribunal, and the tribunal may not grant permission (or leave) to make the application unless it considers that the applicant has a sufficient interest in the matter to which the application relates.

Section 18 sets out the conditions to be met before the UT can decide the application. These include that the application falls within a class specified for these purposes in a direction given in accordance with Part 1 of Schedule 2 to the Constitutional Reform Act 2005 and that the judge presiding at the hearing of the application is a judge of the High Court or the Court of Appeal in England and Wales or Northern Ireland, or a judge of the Court of Session.

Section 19 provides for the transfer to the UT of applications for judicial review made in the High Court.

In CCE v JH Corbitt (Numismatists) Ltd, [1980] STC 231 (“Corbitt”) , the taxpayer had been assessed under section 31(1) Finance Act 1972 (“FA 1972”) (what is now s73(1) VATA). Section 40(1) FA 1972 provided for appeals to the VAT Tribunal “against the decision of the Commissioners with respect to any of the following matters … (b) an assessment under section 31 of this Act or the amount of such an assessment”. The question was whether the VAT Tribunal could review all the matters leading up to the assessment, including the Commissioners’ decision as to the sufficiency of records for the margin scheme (where the Commissioners had an element of discretion – a taxpayer could use the margin scheme if they kept “such records and accounts as the Commissioners may specify in a notice published by them for the purposes of this Order or may recognise as sufficient for those purposes”). The House of Lords held that the tribunal had no such jurisdiction. As Lord Lane put the question (at p237c):

“We are concerned to determine what powers a value added tax tribunal has to review the exercise of the commissioners' discretion under the value added tax legislation contained in the Finance Act 1972 and the regulations and notices made and issued thereunder.”

His answer (at pp239-240) was:

“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 Act. 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.”

What is now section 84(10) VATA was introduced to reverse the effect of the Corbitt decision, but it did not do that by expanding the Tribunal’s jurisdiction to include a general power of judicial review; instead, it permitted a discrete review of an antecedent decision by HMRC on which a later appealed decision depended.

Aspin v Estill [1987] STC 723 (“Aspin”), was an appeal against a direct tax assessment. The CA considered whether the Special Commissioners could consider what was essentially a legitimate expectation argument on an appeal to them concerning assessments to income tax. Sir John Donaldson MR described (at p726b) the idea that they could as “a somewhat surprising submission bearing in mind that judicial review is a remedy which is only available in the High Court” and he “greeted [the one authority suggesting otherwise – Preston v IRC, [1985] AC 835] with surprise bordering on horror, because I did not believe that it was the intention of Parliament that the General Commissioners of income tax, worthy body though they are, should exercise a judicial review jurisdiction.” Nicholls LJ observed (at p727c) that:

“…The substantial complaint made by Mr Aspin in this case is founded on the wrong advice it is said was given to him by the inspector. Under this head Mr Aspin is saying that an assessment ought not to have been made. In saying that, he is not, under this head, 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. That is a matter in respect of which, if the facts are as alleged by Mr Aspin, the remedy provided is by way of judicial review.”

In Dollar Land (Feltham) Ltd & Ors v CCE, [1995] STC 414 (“Dollar Land”), Judge J considered whether the then VAT Tribunal had jurisdiction to review the exercise of the Commissioners’ discretion in an appeal against VAT default surcharges. If there is a liability to a penalty under section 19 of the Finance Act 1985, section 21(1)(c) provided that the Commissioners “may” assess the amount of the penalty. Section 40(1) of the Value Added Tax Act 1983 provided that:

“An appeal shall lie to a value added tax tribunal … against the decision of the Commissioners with respect to any of the following matters –

(o)

any liability to a penalty or surcharge by virtue of any of sections 13 to 17 and 19 of the Finance Act 1985;

(p)

the amount of any penalty or surcharge specified in an assessment under section 21 of that Act …”

Judge J held (at p420g) that neither of these appeal provisions related referred to an appeal against the decision of the commissioners to assess to surcharge, referring only to liability and amount. He contrasted the language of paragraphs (o) and (p) with paragraph (m) which expressly permitted an appeal against the commissioners’ decision to make an assessment. These and other contrasts led him to hold that “section 40(1) is meticulous and precise about the decisions which may be appealed”. At p421c he said that he had considered the opening words of section 40(1) (“with respect to any of the following matters”) but held that they referred “to the specific topics which expressly appear in the ‘following’ paragraphs, not to general questions which could loosely be said to come within the overall ambit of each of them”. Neither those words, nor anything else in section 40, provided any basis for concluding that there is a right of appeal against the decision to assess the penalty or surcharge and “Any other conclusion would involve reading words into a statute which are absent, when they could easily have been included, and would be contrary to the principles established in the House of Lords in Corbitt.” At p421e he concluded that, if liability to surcharge is established, the decision whether to impose a surcharge is left to the commissioners and the remedy for any improper exercise of that discretion is an application for judicial review in the High Court.

In CCE v National Westminster Bank plc, [2003] STC 1072 (“NatWest”), the taxpayer complained of unfair treatment (not being treated in the same way as other comparable car leasing companies) in the context of an appeal under section 83(t) VATA and section 84(10) VATA against a decision of the commissioners not to repay overpaid VAT. Jacob J held that the tribunal did not have jurisdiction to determine the unfair treatment point. Section 83(t) provides that “… an appeal shall lie to a tribunal with respect to any of the following matters … (t) a claim for the repayment of an amount under section 80”. HMRC had argued that the complaint about unfair treatment was essentially a complaint about their conduct and the proper remedy for unfair treatment is judicial review. Referring to Corbitt, Judge J said (at [49]) that “There is authority which supports the conclusion that general conduct towards taxpayers is outwith the Tribunal's jurisdiction”. Moses J had reached the same conclusion in Marks & Spencer plc v CCE, [1999] STC 205 (“Marks & Spencer”), when he observed (at p246):

“However in so far as the complaint is not focused upon the consequences of the statute but rather upon the conduct of the Commissioners then it is clear that it has no jurisdiction. Its jurisdiction is limited to decisions of the Commissioners and it has no jurisdiction in relation to supervision of their conduct."

Jacob J said that he agreed with Moses J’s conclusion that the tribunal had no jurisdiction in relation to a complaint that the commissioners had treated other people differently.

In Oxfam v Revenue and Customs Commissioners, [2010] STC 686 (“Oxfam”), the principal issue was the extent to which Oxfam was able to recover input tax in accordance with an agreed method for apportioning business and non-business expenditure. The subsidiary issues were whether the FTT could enforce an agreement between the taxpayer and HMRC, and whether it could give effect to a taxpayer’s legitimate expectation. Those issues were of academic interest only as it was decided that, as a matter of fact, there was neither a binding contract nor a legitimate expectation, but the judge went on nevertheless to consider the extent of the tribunal’s jurisdiction.

At [62] Sales J identified the legislative provision which conferred jurisdiction on the Tribunal, in that case section 83 of VATA:

“(1)

… an appeal shall lie to the tribunal with respect to any of the following matters—

… (c) the amount of any input tax which may be credited to a person ….”

Then, at [63], he said:

“On the ordinary meaning of the language of that provision, it appears that it covers all the issues between Oxfam and HMRC regarding the question whether HMRC should have allowed Oxfam credit for a higher amount of input tax under the approved method formula, including both the contract issue and the legitimate expectation issue. The words, ‘with respect to’, in s 83(1) appear clearly to be wide enough to cover any legal question capable of being determinative of the issue of the amount of input tax which should be credited to a taxpayer. The tribunal’s jurisdiction is defined by reference to the subject matter specified in the section, not by reference to the particular legal regime or type of law to be applied in resolving issues arising in respect of that subject matter.”

After recording that the parties had agreed that the tribunal’s jurisdiction extended to the contract issue, and saying that he concurred in that view, he went on to say:

“[66] However, the parties thought that the tribunal did not have jurisdiction to consider Oxfam’s alternative legitimate expectation argument. In my view, this is not correct. By the same construction of s 83(1)(c) and the same reasoning which led to the conclusion that Oxfam’s contract claim was within the jurisdiction of the tribunal, Oxfam’s legitimate expectation argument also fell within the jurisdiction of the tribunal. I can see no sensible basis in the language of that provision for differentiating between Oxfam’s contract claim and its legitimate expectation claim. In both cases, if Oxfam’s claim had been made out, an error of law on the part of HMRC in arriving at its decision on the amount of input tax to be credited to Oxfam would have been established (either a failure to respect Oxfam’s contractual rights or a failure to treat Oxfam fairly, in breach of Oxfam’s legitimate expectation) which would, on the face of it, be a proper basis for an appeal to the tribunal against HMRC’s decision within the terms of s 83(1)(c).

[67] Usually, of course, an appeal under one of the sub-paragraphs of s 83(1) will be on the merits of [a] decision taken by HMRC, and questions of private law or public law (such as whether HMRC took into account irrelevant considerations or failed to take account of relevant considerations) will simply not be relevant to the tribunal’s task on the appeal. But in my view it does not follow from this that the tribunal will never have jurisdiction to consider issues of general private law and general public law where that is necessary for it to determine the outcome of an appeal against a decision of HMRC whose subject matter falls within one of the sub-paragraphs of s 83(1).

[68] I do not think that it is a valid objection to this straightforward interpretation of s 83(1)(c) according to its natural meaning that it has the effect that sometimes the tribunal will have to apply public law concepts in order to determine cases before it. It happens regularly elsewhere in the legal system that courts or tribunals with jurisdiction defined in statute by general words have jurisdiction to decide issues of public law which may be relevant to determination of questions falling within their statutorily defined jurisdiction. No special language is required to achieve that effect. Where they are themselves independent and impartial courts or tribunals (as the tribunal is) there is no presumption that public law issues are reserved to the High Court in the exercise of its judicial review jurisdiction. So, for example, a county court may have to consider whether possession proceedings issued by a local authority have been issued in breach of its public law obligations (Wandsworth London BC v Winder [1994] 3 All ER 976, [1985] AC 461); magistrates’ courts and the Crown Court may have to decide issues of public law in so far as they arise in relation to criminal proceedings (eg to determine if a byelaw is a valid and proper foundation for a criminal charge: Boddington v British Transport Police [1998] 2 All ER 203, [1999] 2 AC 143 or to determine the validity of a formal instrument which is in some way a necessary foundation for the criminal charge: DPP v Head [1958] 1 All ER 679, [1959] AC 83); and employment tribunals may have to decide issues of public law in employment proceedings (eg to determine whether a contract of employment with a public authority is vitiated as having been made ultra vires).

[69] I cannot see any good reason for adopting a different approach to the interpretation of the jurisdiction of the tribunal in s 83 of VATA. The tribunal is used to dealing with complex issues of tax law. There is no reason to think that it would not be competent to deal with issues of public law, in so far as they might be relevant to determine the outcome of any appeal. That view is reinforced by the fact that the tribunal may have to deal with complex public law arguments in relation to Convention rights when construing legislation under s 3 of the Human Rights Act 1998, and is recognised by Parliament as being competent to do so.

[70] Moreover, there is a clear public benefit in construing s 83 by reference to its ordinary and natural meaning which strongly supports that construction. It is desirable for the tribunal to hear all matters relevant to determination of a question under s 83 (here, the amount of input tax to be credited to a taxpayer) because (a) it is a specialist tribunal which is particularly well positioned to make judgments about the fair treatment of taxpayers by HMRC and (b) it avoids the cost, delay and potential injustice and confusion associated with proliferation of proceedings and ensures that all issues relevant to determine the one thing the HMRC and taxpayer are interested in (in this case, the amount of input tax to be recovered) are resolved on one occasion in one place. It seems plausible to suppose that Parliament would have had these public benefits in mind when legislating in the wide terms of s 83.

[71] Therefore, apart from any authority on this question, I would hold that s 83(1)(c) bears its ordinary and natural meaning, so that resolution of the issue of legitimate expectation which arose between Oxfam and HMRC fell within the tribunal’s jurisdiction.”

The judge then went on to consider whether there was any authority which compelled him to a different conclusion (mentioning, among others, Corbitt, NatWest and Marks & Spencer), and decided that there was not.

In HMRC v Hok Limited, [2012] UKUT 363 (TCC) (“Hok”), Warren J and Judge Colin Bishopp (the then Presidents of the Tax and Chancery Chamber of the Upper Tribunal and the Tax Chamber of the First-tier Tribunal) dealt with an appeal by the taxpayer against penalties imposed on it by HMRC for failing to submit an employer’s end of year return by the due date for its submission. Although it was conceded that the return was late and that there was no reasonable excuse for the lateness, the FTT had concluded, on grounds of fairness, that the taxpayer should be penalised for only the first of the five months which passed before the return was submitted. HMRC appealed against that decision on the basis that the FTT had no jurisdiction to discharge such penalties if they are properly due. Section 100 of the Taxes Management Act 1970 provided that:

“… an officer of the Board authorised by the Board for the purposes of this section may make a determination imposing a penalty under any provision of the Taxes Acts and setting it at such amount as, in his opinion, is correct or appropriate.”

Relying on Corbitt, NatWest and Marks & Spencer, the UT held (at [41]) that, “There is in our judgment no room for doubt that the First-tier Tribunal does not have any judicial review jurisdiction”. At [43] they explained that the legislation creating the current tribunal system pointed to this being the only conclusion. They said:

“That the First-tier Tribunal has 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 this Tribunal, a function it would not have had (since 5 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 perfectly plain, from perusal of the 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 10 Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (SI 2009/56), which points to a contrary conclusion.”

At [49], having set out Sales J’s observations on the jurisdiction issue in Oxfam, they observed that:

“We interpose by way of caution that his conclusion was not necessary for resolution of the appeal, thus what he said is obiter, and that the extent of the First-tier Tribunal’s legitimate expectation jurisdiction, if any, is the central issue in two cases to be heard by this Tribunal later in 2012.”

Having reviewed cases said to lead to a different conclusion and decided that they did not support the idea that the tribunal has jurisdiction to apply general principles of public law, they made these comments on Oxfam:

“53.

At first glance, what Sales J said in Oxfam leads to a different conclusion, but on closer analysis we do not think it does. The judge described the basis of the claim at [46]:

“Although the agreement of HMRC to the use of the approved method formula by Oxfam did not constitute a binding contract, it clearly did amount to an express assurance by HMRC that Oxfam’s recoverable input tax would be calculated by reference to that formula.”

54.

From that sentence it becomes clear that the issue in that case and the issue here are quite different. There, the tribunal was required to decide the amount of input tax which Oxfam could recover, a question which, as Sales J said at [63], comes four-square within the ambit of s 83(1)(c) of VATA. Here, the question is not the amount of a penalty, or even whether one is due as a matter of law—there is no dispute that s 98A was engaged, and that it imposed a liability for five monthly penalties of £100 each—but whether HMRC should be precluded from imposing the penalties prescribed by that section, or from collecting them if imposed. That, in our judgment, is a quite separate question of administration, one which, in accordance with the authorities to which we have already referred, is capable of determination only by way of judicial review and therefore not by the First-tier Tribunal.”

In HMRC v Noor [2013] UKUT 71 (TCC) (“Noor”), a UT of the same composition as that in Hok considered whether the FTT had any jurisdiction to consider a legitimate expectation ground on an appeal against a decision concerning a claim for input tax credit under section 83(1)(c) VATA. The UT held that it did not. Although the UT acknowledged that it was dealing with an appeal under section 83(1)(c), the UT was very clear from the outset that its observations would be of wider impact; see its comments in [1].

At [30], having built out from its analysis in Hok, the UT concluded:

“It is clear that the TCEA 2007 does not confer a general supervisory jurisdiction. It is also the case that s 83(1) of the VATA 1994 does not confer a general supervisory jurisdiction, as Sales J recognised (see [2010] STC 686 at [73]); and there is no other provision of the VATA 1994 (or indeed any other legislation) which confers such a jurisdiction in relation to the legitimate expectation on which Mr Noor seeks to rely.”

Nevertheless, at [31] they observed:

“It does not follow from the analysis above that the FTT can never take account of or give effect to matters of public law, and in particular legitimate expectation. There are many examples in the authorities of a court or tribunal with no judicial review function giving effect to public law rights. Examples are given by Sales J in Oxfam and we will identify them when addressing his judgment. It would, however, be open to the FTT to consider public law issues only if it was necessary to do so in the context of deciding issues clearly falling within its jurisdiction.”

Turning to Oxfam, the first question was the status of Sales J’s remarks. In Hok, the UT had observed that his comments on jurisdiction were obiter, but now they changed their minds. Having reviewed the position in great detail, they concluded (at [50]) that Sales J’s “conclusion was a matter of decision. In so doing, we depart from our own (clearly obiter) remark to the contrary in Hok.” Even though the UT concluded that Sales J’s comments on jurisdiction in Oxfam were a matter of decision, they considered that they were not bound by that decision, nor did they consider that, although not bound by his decision, they ought to follow it; see [94].

In reaching their decision, the UT explained (at [77]) why they did not consider that it was plausible that Parliament would have intended to give the FTT a wide power of judicial review in relation to all matters within section 83(1), which they thought (see [75]) would be the result of Sales J’s comments, on the basis that “His approach to the ‘ordinary and natural’ meaning of s 83 applies to all its paragraphs; there is no hint in his reasoning that it turned somehow on the particular wording of para (c).” Most important here was the structure of the tribunal system created by TCEA 2007, which led the Tribunal to conclude (at [77](c)) that “It is simply inconceivable that Parliament would have contemplated conferring a similar power [to the judicial review powers of the UT] on the FTT”.

They considered that section 83(1)(c) was concerned only with “the right to a credit arising under the terms of the VAT legislation (including, on one view, HMRC’s care and management powers)”. The words ‘with respect to’ in the opening language of section 83(1) were not “wide enough ‘to cover any legal question capable of being determinative of the issue of the amount of input tax which should be attributed to a taxpayer’ at least not in relation to the ‘amount of input tax’ which should be attributed to a taxpayer. … financial adjustment within the phrase ‘amount of input tax’. On that basis, Sales J’s reading goes too far, in our view. It departs from the natural meaning of s 83(1)(c) which, reading the subsection as a whole, is focused on the large number of decisions on rights and obligations under the VAT legislation which HMRC have to make and in respect of which a specialist tribunal is provided.”; see [92]-[93].

Similar conclusions, that the terms of TCEA make it clear that the FTT should not have a judicial review function, were reached in the context of very different pieces of tax legislation by the UT (in Reed Employment plc v HMRC, [2014] UKUT 160 (TCC) (“Reed”), and the Court of Appeal (in Trustees of BT Pension Scheme v HMRC, [2015] EWCA Civ 713 (“BT Pension Scheme”)). Although dealing with section 84(10) VATA, the Court of Appeal in Metropolitan International Schools Ltd v HMRC, [2019] EWCA Civ 156 (“MIS”), was of a similar view. Newey LJ (with whom David Richards and McCombe LJJ agreed) said this:

“19.

Secondly, the School’s interpretation of s 84(10) of the VATA would appear to imply that public law arguments could routinely be advanced in appeals to the FTT. …

20.

That would be a very surprising result. …

21.

Mr Ramsden did not attempt to persuade us that the UT was wrong in Noor. Were, however, his contentions as to the ambit of s 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 s 84(10)) (‘by the back door’, as Miss Mitrophanous would say), rather than under s 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 54.4 and 54.5). It is highly improbable that Parliament intended this when it enacted what has now become s 84(10).”

Beadle v HMRC, [2020] EWCA Civ 562 (“Beadle”), concerned a penalty notice for non-payment of a partner payment notice (‘PPN’ – the PPN regime was introduced by Finance Act 2014 as part of a set of provisions enabling HMRC to require accelerated payments to be made by taxpayers on account of disputed or unresolved tax liabilities in certain prescribed circumstances) issued to the taxpayer in relation to certain film scheme arrangements the taxpayer had participated in, requiring the taxpayer to make a payment. The PPN regime confers no statutory right of appeal to a specialist tribunal against a PPN, but a partner who receives a PPN is entitled to make written representations to HMRC objecting to the PPN.. The taxpayer made representations to HMRC challenging the validity of the PPN, but those were rejected. The taxpayer did not pay the amount due under the PPN in time and was issued with a penalty notice. He appealed the penalty notice, asserting, inter alia, that the PPN was a nullity in law and/or the amount payable under the PPN should have been zero so that the penalty should also have been zero. The taxpayer contended (inter alia) that, in the absence of any statutory appeal process against PPNs, collateral challenges to PPNs on public law grounds could be made by a taxpayer in the course of a statutory appeal against a penalty notice for non-compliance with a PPN

In her judgment, in which she ultimately concluded that the tribunal did not have jurisdiction to determine the validity of the underlying PPN in the penalty appeal proceedings, Simler LJ started with the general rule (derived from O’Reilly v Mackman, [1983] 2 AC 237 at 285) that it is an abuse of the process of the court to permit a person to challenge a public law decision by means other than judicial review, but acknowledged (at [44]) that this rule is:

“… subject to an important limitation which itself has limits as follows. Where a public body brings enforcement action against a person in a court or tribunal (including a court or tribunal whose only jurisdiction is statutory) the promotion of the rule of law and fairness means, in general, that person may defend themselves by challenging the validity of the enforcement decision or some antecedent decision on public law grounds, save where the scope for challenging alleged unlawful conduct has been circumscribed by the relevant statutory scheme, which excludes such a challenge. The question accordingly is whether the statutory scheme in question excludes the ability to raise a public law defence in civil (or criminal) proceedings that are dependent on the validity of an underlying administrative act.”

She went on to hold (at [45], disagreeing with Mr Beadle’s counsel) that, whilst a statute might expressly exclude a public law challenge, “the express words used by a statutory scheme looked at in isolation may not be sufficient on their own to restrict or exclude public law challenges, but that may be the clear and necessary implication when the relevant statutory scheme is construed as a whole and in light of its context and purpose”. As to the correct approach to take to construing the relevant statutory scheme, she said this (at [47]):

“In approaching the question of statutory construction the nature and purpose of the statutory regime and the nature of the rights in issue are the starting point for consideration. There is a strong presumption that Parliament will not legislate to prevent individuals affected by legal measures promulgated by public bodies from having a fair opportunity to challenge such measures and vindicate their rights in court proceedings. Further, whether the impugned administrative act is specifically directed at the respondent to enforcement proceedings, who in consequence has had clear and ample opportunity to challenge the legality of that act before being pursued in enforcement proceedings, or is of a general character directed to the public at large where there has been no obvious or reasonable opportunity to challenge the validity of the underlying administrative act, is an important consideration.”

Looking at the statutory scheme in that case, she concluded (at [48]) that it is a clear and necessary implication of the PPN regime, construed as a whole and in light of its statutory purpose, that the ability to raise a collateral public law challenge to the validity of the underlying PPN is excluded at the penalty and enforcement stages.

In Zeman the taxpayer appealed to the FTT against an assessment to VAT on the grounds that it had a legitimate expectation that it would not be assessed to VAT on certain supplies. It said that its legitimate expectation arose from statements made by HMRC. The FTT dismissed its appeal, finding that KSM could not rely on the principle of legitimate expectation because it had not acted reasonably in relying on HMRC’s statements. There were two issues in the taxpayer’s appeal to the UT:

The UT held that the FTT did not err in its decision that the taxpayer did not have a legitimate expectation that it would not be taxable on the supplies in question. It then observed (at [20]):

“That is sufficient to dispose of this appeal, but we should say something about the more vexed question of whether the FTT had jurisdiction to consider the legitimate expectation argument.”

The assessment in that case was raised under section 73(1) VATA and the appeal was brought under section 83(1)(p) VATA (“an appeal … with respect to … an assessment”).

The UT began by observing (at [27]) that “the nature of the FTT’s jurisdiction depends on the proper construction, in the context of the statutory provisions to which it relates, of the statutory provision by which it is given, in this case, s 83(1)(p)”. They described that as the beginning rather than the end of the enquiry. At [29] they acknowledged the exclusivity principle derived from O’Reilly v Mackman, but considered it to be well established that the principle is subject to exceptions, one of which was “certain cases where a public law defence is raised in a private law action” and here they referred to Wandsworth London BC v Winder, [1985] AC 461 and Pawlowski (Collector of Taxes) v Dunnington [1999] STC 550. At [30] they said that, “The question in this case is how the exclusivity principle operates in the context of a statutory scheme which contemplates private enforcement action being taken against a defendant.” And that “An important part of that analysis is to determine the proper approach to be taken to construction of the relevant statutory language.”

At this point the UT referred to the CA decision in Beadle, citing paragraph [44] of Simler LJ’s judgment and her comment that the exclusion need not arise expressly but might arise by clear and necessary implication when the relevant statutory scheme is construed as a whole and in light of its context and purpose. The UT then observed (at [34]):

“It seems to us that a similar logic must apply here. Although technically the taxpayer is a claimant in the proceedings rather than a defendant, in substance he is defending part of an enforcement action by HMRC. The promotion of the rule of law and fairness means that the taxpayer should be entitled to defend himself by challenging the validity of the enforcement decision or some antecedent decision on public law grounds, unless that entitlement is excluded by the relevant statutory regime. That is a question of construing the relevant statutory language.”

The UT started their analysis of the position where section 83(1) VATA is concerned with Sales J’s judgment in Oxfam. They considered (at [42]) that Sales J in Oxfam had held that, depending on the nature of the issues falling within the scope of a particular sub-heading or subsection of section 83, it may well be that public law principles do fall within the scope of the appeal jurisdiction that subsection confers. They acknowledged that the UT took exactly the opposite view of the same issue under s 83(1)(c) in Noor, where it had disagreed with Sales J’s view that as a matter of ordinary language in context the words ‘with respect to’ were wide enough to cover any legal question relevant to the issue of the amount of input tax attributable to the taxpayer, on the basis that any result of giving effect to the legitimate expectation would not affect the ‘amount of input tax’. They noted that this approach (which they described at [46] as “draw[ing] a distinction between determining of the amount of tax due (which falls within the appeal jurisdiction), and other matters (which do not)”) echoes other decisions such as NatWest and Aspin.

At [48] the UT observed that cases are likely to depend on the statutory language in question. So, Aspin could be explained by the limitation in section 50 TMA on the actions the General Commissioners could take, and NatWest by Jacob J’s reading of s 83(1)(t) VATA, that it conferred an appeal jurisdiction only where the challenge was that an amount of VAT was not in fact due. It did not confer jurisdiction in a case where the relevant VAT amount was due but was said to be repayable for an extraneous reason.

As regards the provision here, the UT noted that section 73(1) VATA is permissive; it enables but does not require HMRC to raise an assessment. Also, section 83(1)(p) VATA (“an appeal … with respect to … an assessment”) is wider than section 83(1)(c) (an appeal with respect to the amount of an assessment). It analysed the leading cases on best judgment (Rahman (t/a Khayam Restaurant) v Customs and Excise Comrs (No 2) [2002] EWCA Civ 1881, and Customs and Excise Comrs v Pegasus Birds Ltd [2004] EWCA Civ 1015) and concluded that they did not lead to a different conclusion, not least because “neither decision was concerned with defining definitively the full scope of the appellate jurisdiction under s 83(1)(p). They were concerned with defining the scope of the ‘best of judgment’ test and with the consequences of breach of that test”. Indeed, the UT observed that:

“80.

Under the formulation of the ‘best of judgment test’ endorsed in Rahman (No 2), the relevant question is ‘whether the mistake is consistent with an honest and genuine attempt to make a reasoned assessment of the VAT payable, or is of such a nature that it compels the conclusion that no officer seeking to exercise best judgment could have made it.’ It seems to us that issues are likely to arise in the operation of that test which might well be characterised as relating not only to the process of assessment but also to the decision to assess.

81.

Assume for example a case in which the taxpayer’s defence is that an assessment was made dishonestly or maliciously in knowing disregard of an undertaking not to assess. HMRC’s argument would be that that defence has no place on an appeal under s 83(1)(p), because it relates to the decision to assess. It is true that it does, but that is not the same as saying that it relates only to that question. On the contrary, it seems to us it might equally well be said to be relevant to the process assessment, because it is difficult to see how an assessment made in knowing disregard of such an undertaking – whether binding in contract or under general principles of public law – could be said to be an assessment made to best judgment. …

82.

In such circumstances, it seems to us there are good policy reasons for not adopting a construction of s 83(1)(p) which strictly limits the appellate jurisdiction of the FTT in the manner identified in the Gore decision at [30] (see [65] above), and which therefore excludes consideration of a legitimate expectation argument. We refer again to the comments of Sales J in Oxfam quoted at [39] above. Were one to adopt such a restrictive approach, there would be an obvious risk of duplication, delay and potential injustice given the potential for disputes to arise as to which forum any particular challenge should be brought it.”

The UT concluded (at [84]):

“Coming back then to where we started our analysis, the critical question in this case (see Beadle at [44]) is whether the relevant statutory scheme expressly or by implication excludes the ability to raise a public law defence of legitimate expectation (again, see Beadle at [44]). For all the reasons given above, we do not consider that s 83(1)(p) does exclude that ability. On the contrary, on the facts of this case and given the broad subject-matter of s 83(1)(p), we see strong reasons for thinking that it would be artificial and unworkable to exclude a defence based on the public law principle of legitimate expectation from the tribunal’s appellate jurisdiction. We therefore consider that the FTT did have jurisdiction to determine that question in this case.”

The Executors of David Harrison (Deceased) v HMRC, [2021] UKUT 273 (TCC), involved a challenge to HMRC’s decision not to accept a notice electing for fixed protection for a pension scheme. There was a deadline for submitting a notice electing for fixed protection but HMRC had a discretion to accept a notice served after that date. One issue was whether the FTT had jurisdiction to review the exercise of HMRC’s discretion. Relying on paragraph 45 of Simler LJ’s judgment in Beadle, the appellants in that case argued that the relevant regulations would need to contain express words or a necessary implication to exclude their right to make a public law challenge to HMRC’s exercise of discretion. The UT rejected that argument commenting:

“30.

… [I]n paragraph 44, Simler LJ was considering the situation of persons defending themselves against “enforcement action” brought by a public body such as HMRC. In such enforcement action, whether before a court with inherent jurisdiction or a tribunal whose jurisdiction derives from statute, the taxpayer should “in general” be able to challenge the enforcement decision or some antecedent decision on public law grounds. In paragraph 45, Simler LJ considers the scope of the exception to this proposition implicit in her use of the words “in general” concluding that any such exception could consist either of express words in the relevant statutory provision or “clear and necessary implication when the relevant statutory scheme is construed as a whole and light of its context and purpose”.

31.

Paragraphs 44 and 45 of Simler LJ’s judgment in Beadle cannot be read as laying down some general proposition to the effect that the FTT always has jurisdiction to consider public law challenges to HMRC decisions unless express words or “necessary implication” exclude that jurisdiction. Her conclusion was more limited and addressed at the specific situation of persons defending themselves against enforcement action brought by a public body and seeking, in the context of their defence, to make a public law challenge to either the enforcement action itself or some antecedent action.”

The appellants also argued that the UT decision in Zeman had extended the principle set out in paragraph 45 of Simler LJ’s judgment in Beadle and urged the UT to adopt the same approach. The UT responded as follows (at[34]):

“We will not, however, do so. The approach that the Upper Tribunal followed in KSM Henryk Zeman, was predicated on its conclusion that the taxpayer in that case was, in substance, a defendant in enforcement proceedings taken by HMRC. That is not the case here. The Appellants are not seeking to defend themselves against an assessment or penalty that HMRC are seeking to impose. On the contrary, the Appellants are in substance in the position of claimant: seeking to obtain the issue of a Paragraph 14 certificate that HMRC do not wish to issue.”

At [36] they rejected HMRC’s submission that clear words would be needed in order for the Regulations to give the Appellants the right to challenge the exercise of HMRC’s discretion before the FTT, saying:

“We think, however, that it overstates matters to say that there is a strong presumption against the FTT having power, in any statutory appeal, to consider public law arguments to the effect that HMRC have exercised discretion wrongly, with that strong presumption being rebutted only with clear words or necessary implication. Ultimately, the task in each case is to construe the right of appeal conferred by the statute or secondary legislation. Whilst the exercise of construction must acknowledge that the FTT does not have a general supervisory jurisdiction, it does not follow that the FTT does not have jurisdiction to take into account public law matters in exercising the jurisdiction which is conferred upon it by statute. Whether or not the FTT has that jurisdiction is simply a matter of statutory construction.”

Caerdav Limited v HMRC, [2023] UKUT 00179 (TCC) (“Caredav”), concerned an appeal under section 83(1)(b) VATA (which permits appeals to the FTT with respect to “the VAT chargeable… on the importation of goods from a place outside the member States”) against a C18 demand notice for VAT and customs duty. The FTT had held that, as a matter of statutory construction of section 83(1)(b), it did not have jurisdiction to consider legitimate expectation as a ground of appeal and it was only a matter that could be raised on judicial review.

At [152] the UT endorsed the starting point,” that appeal grounds which concern public law arguments should be pursued in judicial review proceedings rather than before the FTT. However, we, like the FTT, accept that the FTT may have jurisdiction to consider appeal grounds based on public law arguments (such as legitimate expectation) depending on the statutory provisions under consideration.”

At [154]-[155] the UT drew a distinction between the rights of appeal under section 83(1)(b) and that under section 83(1)(c), both of which it thought were simply concerned with whether the conditions prescribed for a charge to arise under the legislation are present and the amount of the charge. They contrasted this with the right of appeal in section 83(1)(p), discussed in Zeman, which (they said) “provides a right of appeal against the discretion of HMRC whether to make an assessment under section 73(1)”. In their words (at [155]):

“There is a discretion inherent in s.83(1)(p) VATA read together with section 73, which were the statutory provisions considered in Henryk which led it to decide public law arguments could be pursued in the FTT appeal. However, there is no discretion conveyed by subsections 83(1)(b) or (c) VATA which are the mandatory provisions concerning the appeals applicable in this case and in Noor respectively.”

Ms Sloane’s position is that the issue of jurisdiction has already been decided by the UT in Zeman. The ordinary course is for this Tribunal to follow it (irrespective of whether this Tribunal would have decided the issue in the same way or can see force in some arguments criticising its rationale). As an inferior tribunal, we can only depart from Zeman if we consider that the comments on jurisdiction were obiter or if the decision was reached per incuriam. Even if we do not consider that Zeman is binding on us, we should only depart from it if we consider the decision to be plainly wrong.

In Queenscourt Limited v HMRC, [2024] UKFTT 00460 (TC) (“Queenscourt”), the FTT (Judge Robin Vos and Mrs Catherine Farquharson) was faced with a submission that, following Zeman, the FTT had jurisdiction to consider arguments based on legitimate expectation in the context of an appeal under section 83(1)(t) VATA. They concluded (at [142] that, because the UT had already decided that the appeal failed because Zeman did not have the legitimate expectation which it alleged and that (in its words) was sufficient to dispose of the appeal, the UT’s comments on jurisdiction were obiter. However, being a decision of the Upper Tribunal and, having addressed the question of jurisdiction at some length, the FTT considered that the decision was potentially of significant persuasive authority. At [163] the FTT said that the approach taken in Zeman was correct in the light of the decision of the Court of Appeal in Beadle and (at [166]) “that the First-tier Tribunal (and for that matter any other Tribunal) is required to follow the approach set out in Beadle at [44]”. They concluded (at [175] that there was nothing in the statutory scheme of s 80(4A) and s 83(1)(t) VATA which either expressly or implicitly excludes the Tribunal’s jurisdiction to consider public law arguments and, in particular, arguments based on legitimate expectation, in relation to HMRC’s decision to make the recovery assessments. They then said:

“176.

We have to say that we reach our conclusion in relation to this issue with some hesitation. Our own view, in line with the authorities prior to Beadle is that, for the reasons explained in those cases, it would be surprising if Parliament intended to confer on the First-tier Tribunal an ability to routinely consider arguments based on public law grounds in the context of appeals under s 83(1) VATA.

177.

Indeed, it appears to us that the underlying assumption in Metropolitan International (a case dealing with s 84(10) VATA rather than s 83(1) VATA) appears to be that the First-tier Tribunal has no jurisdiction to consider arguments based on legitimate expectation in the context of s 83(1)(p) as it would otherwise have been unnecessary for the appellant to rely on s 84(10) VATA, although the Court of Appeal did not say this in clear terms.

178.

However, as we have explained, we can find nothing in the statutory scheme which is relevant to this appeal which suggests that Parliament intended to exclude the jurisdiction of the Tribunal to entertain arguments based on public law grounds. We were perhaps hindered in that task by the fact that HMRC did not address the detailed analysis of the relevant legislative provisions in their submissions and it may well be that another Tribunal in the future comes to a different conclusion on this point with the benefit of fuller submissions.”

In Treasures of Brazil Limited v HMRC (“Treasures of Brazil”), [2024] UKFTT 00929 (TC), the FTT (Judge Malcolm Frost and Mr Derek Robertson JP) needed to decide whether it had jurisdiction to consider a legitimate expectation argument on an appeal under section 83(1)(p). On the question whether Zeman was binding authority, the FTT said:

“40.

It has been suggested (see Queenscourt Ltd v HMRC [2024] UKFTT 460 (TC)) that the Upper Tribunal’s decision on the question of jurisdiction was obiter and not binding. With the greatest respect to our colleagues, we differ from that view.

41.

In Zeman, the Upper Tribunal first decided that the taxpayer did not in fact have a legitimate expectation, before considering the question of whether or not the First-tier Tribunal would have had jurisdiction to consider such issues.

42.

The fact that the Upper Tribunal decided the question of whether or not the taxpayer had a legitimate expectation at an early stage in its reasoning meant it did not need to consider the jurisdiction question. However, despite not needing to, the UT did in fact go on to consider the jurisdiction point.

43.

Therefore, the entire decision of the Upper Tribunal was (i) that the First-tier Tribunal had jurisdiction but (ii) that there was no legitimate expectation. If the Upper Tribunal had decided there was no jurisdiction then the legitimate expectation question would have itself been redundant. The jurisdiction point was therefore a constituent part of the decision made. We do not consider that the fact that the Upper Tribunal could have chosen not to determine the jurisdiction question means that it is open to this Tribunal to treat the jurisdiction question as obiter.

44.

We are supported in that view by authorities such as Jacobs v LCC [1950] A.C. 361, (at p369 per Lord Symonds):

“there is in my opinion no justification for regarding as obiter dictum a reason given by a judge for his decision, because he has given another reason also. If it were a proper test to ask whether the decision would have been the same apart from the proposition alleged to be obiter, then a case which ex facie decided two things would decide nothing.”

45.

In any event, even if the Upper Tribunal’s analysis in the Zeman case were not binding upon us, we consider that it is a correct statement of the law.

46.

As such, we conclude this Tribunal does have jurisdiction to consider the Appellant’s legitimate expectation argument.”

A differently constituted FTT (Judge Natsai Manyarara and Mr John Agboola JP) in United Carpets (Franchisor) Ltd v HMRC [2025] UKFTT 895 (TC) (“United Carpets”), explicitly agreed (at [238]) with the propositions in paragraphs [41]-[45] of Treasures of Brazil.

Ms Sloane says that the approach taken in Treasures of Brazil effectively mirrors the reason why the UT in Noor reconsidered its decision in Hok (that Sales J’s comments in Oxfam on jurisdiction were obiter) and held that Sales J had to decide that he had jurisdiction in order to go on and consider the legitimate expectation point, and so his comments on jurisdiction were a matter of decision.

As to whether Zeman was decided per incuriam, Ms Sloane says that HMRC overstate that principle. It does not apply just because a court did not consider all relevant authorities or might have reached a different conclusion. She referred us to the recent Court of Appeal decision in Merck Serono SA v The Comptroller-General of Patents, Designs and Trade Marks, [2025] EWCA Civ 45 (“Merck Serono”), where Lewison LJ (with whose judgment Birss and Arnold LJJ agreed) said this about the per incuriam concept:

“84.

In my judgment, therefore, Merck must persuade us that Newron was decided per incuriam. This court gave consideration to the meaning of that expression in Morelle Ltd v Wakeling [1955] 2 QB 379. The judgment of the court states at 406:

“As a general rule the only cases in which decisions should be held to have been given per incuriam are those of decisions given in ignorance or forgetfulness of some inconsistent statutory provision or of some authority binding on the court concerned: so that in such cases some part of the decision or some step in the reasoning on which it is based is found, on that account, to be demonstrably wrong.”

85.

They added:

“In our judgment, acceptance of the Attorney-General's argument would necessarily involve the proposition that it is open to this court to disregard an earlier decision of its own or of a court of co-ordinate jurisdiction (at least in any case of significance or complexity) whenever it is made to appear that the court had not upon the earlier occasion had the benefit of the best argument that the researches and industry of counsel could provide. Such a proposition would, as it seems to us, open the way to numerous and costly attempts to re-open questions now held to be authoritatively decided.”

86.

Plainly there was no authority binding the court in Newron which would have compelled a different decision. The court in Newron was faced with a choice between Neurim and Santen both of which were decisions of the CJEU. Nor, in my judgment, was there an inconsistent statutory provision. The power to depart from retained EU law is not inconsistent with deciding what EU law was. In Miliangos v George Frank (Textiles) Ltd [1975] QB 487, 503 Lord Denning MR pointed out that “a case is not decided per incuriam because counsel have not cited all the relevant authorities or referred to this or that rule of court or statutory provision”. Moreover, in Duke v Reliance Systems Ltd [1988] QB 108, 113 Lord Donaldson MR said:

“I have always understood that the doctrine of per incuriam only applies where another division of this court has reached a decision in the absence of knowledge of a decision binding upon it or a statute, and that in either case it has to be shown that, had the court had this material, it must have reached a contrary decision. That is per incuriam. I do not understand the doctrine to extend to a case where, if different arguments had been placed before it or if different material had been placed before it, it might have reached a different conclusion. That appears to me to be the position at which we have arrived today.” (Original emphasis)””

HMRC criticise the UT in Zeman for not addressing MIS, but that concerned a different issue (section 84(10) VATA) and did not decide the basis of jurisdiction as canvassed in Zeman. There are no authorities not addressed in Zeman which would (as opposed to might) have led to a different analysis or outcome.

As to whether Zeman is plainly wrong on jurisdiction, which would (Ms Sloane accepts) be a reason not to follow it if it is not binding, Ms Sloane readily acknowledges that there are many arguments which can be made in support of a different analysis. It is no part of her case that Zeman is so compellingly correct that it is bound to be followed were the same jurisdictional issue to arise in the UT or a higher court. It is, however, very much her case that none of the questions that can be raised around Zeman establish that Zeman is “plainly wrong”. This is an area of law which is “not straightforward” (Noor at [82]) and the authorities “present a somewhat fragmented picture” (Zeman at [36]).

HMRC argue that the UT failed to appreciate that Beadle applies only to enforcement proceedings in the sense of debt collection/recovery proceedings. That is not obviously right. Beadle itself was not an enforcement case, in the sense of debt collection/recovery proceedings by the Crown. It was an appeal against a penalty; the tax had been paid. If the Court of Appeal were confining the relevant principles to debt collection/recovery action against a taxpayer, it could have dealt with the case much more shortly by saying they did not apply to an appeal brought by a taxpayer against a penalty. HMRC argue that it may be “happenstance” whether a taxpayer makes a claim or faces an assessment. Beadle is itself an example of where the same situation can lead either to a repayment claim by the taxpayer or a claim for payment from HMRC. While each scenario has the same practical effect in terms of the taxpayer being out of the money, the mechanisms for legal proceedings and the applicable legal principles and remedies may differ fundamentally. There is nothing “plainly wrong” in that. In Zeman, the UT did carefully consider contrary authorities, in particular Aspin and Noor, and addressed them.

Mr Watkinson first submitted that Zeman is not binding on us because the UT’s decision on jurisdiction was either obiter or reached per incuriam. He then went on to launch what might colloquially be described as an “all guns blazing” attack on that decision. At the end of his submission it was quite difficult to think of anything the UT said in Zeman on the jurisdiction point that he did not consider to be deeply suspect or just plain wrong.

Dealing first with the question whether what the UT said in Zeman about jurisdiction is a matter of decision or obiter, Mr Watkinson points to the decision of the Court of Appeal in R (oao Youngsam) v Parole Board, [2019] EWCA Civ 229 (“Youngsam”). He says that the ratio is the best or preferred justification for the conclusion reached: it is necessary in the sense that the justification for that conclusion would be, if not altogether lacking, then at any rate weaker if a different rule were adopted. In looking for the ratio decidendi of a case, the starting point is always the rulings and reasons given in the judgment(s) to justify the court's decision, read in the light of the facts of the case and the issues that arose. Generally, this is also where the inquiry ends. One can identify the ratio of Zeman with relative ease, because the UT did so itself. It is clear on the face of the UT’s decision that what it said about jurisdiction was not “part of the best or preferred justification for the conclusion [it] reached" and that what it said about jurisdiction was obiter dicta. Whilst of course persuasive, it does not bind this Tribunal.

On the per incuriam point, Mr Watkinson says that, possibly because in Zeman the UT was making obiter observations, it did not deal with the earlier several authorities. It may also be that it did not have all the authorities put before it. These include Dollar Land, Marks & Spencer, Hok, Reed and BT Pension Scheme and MIS are not there.

Especially with the most recent authority, MIS not being before it, Zeman appears to be per incuriam.

Finally, the UT in Zeman does not appear to have considered the TCEA at all in its construction of the appeal provisions. As the authorities show, that is a serious error.

Mr Watkinson says that the remarks on jurisdiction in Zeman were wrong, per incuriam, and obiter as is any FTT decision purporting to apply that approach. In broad terms, his reasons for saying this are as follows:

The first question we need to answer is whether the comments on jurisdiction in Zeman are binding on us or are obiter. Here Ms Sloane points us to the way the UT in Hook and Noor analysed Sales J’s comments on jurisdiction in Oxfam, and she says that we should approach Zeman in the same way that the UT ended up approaching Oxfam in Noor. In Hok, the UT had simply observed that they thought these comments were obiter. In Noor they said that they had changed their mind and inclined to the view that those comments were a matter of decision.

At [4] in Oxfam, Sales J observed that “as I explain below, I consider that Oxfam's claim based upon public law principles and the doctrine of legitimate expectation could properly have been raised in its appeal to the tribunal”. He went on at [5] to say that he thought that the correct approach was to treat the legitimate expectation argument as a new argument raised on the appeal under VATA with the leave of the court and to rule upon it in the context of that appeal, applying principles of public law and not to grant permission for the same argument to be brought by way of judicial review. At [61] et seq he set his analysis of the Tribunal’s jurisdiction, which links back to the words “as I explain below” in [4]. However, at [59] he had already expressed his conclusion “that there was no abuse of power on the part of HMRC in acting as they did. Therefore, Oxfam's claim based on legitimate expectation also falls to be dismissed.”

At [43] in Noor the UT observed that Sales J could have “declined to decide which jurisdiction he was exercising, deciding simply that Oxfam’s claim based on legitimate expectation failed whichever jurisdiction he was exercising” and (at [44]) they said:

“On one view, that is precisely what he did. Support for that view is found at [42] where he expressed his conclusion dismissing the appeal and at [44] where he refers to the dismissal of the appeal. Had he seen the issue of legitimate expectation as simply a further ground of appeal (which is what it would have to be in order to fall within the jurisdiction of the VAT Tribunal and within his jurisdiction as a judge of the Chancery Division on an appeal) he could not have dismissed the appeal at that stage but could have done so only after he had rejected that further ground of appeal.”

However, another view (discussed by the UT at [47]) was that paragraph [5] in Sales J’s judgment was a necessary part of his reasoning, so that his conclusion concerning the jurisdiction of the FTT was not obiter at all and the reasons for his conclusion which appear at [61] are to be read into para [4]. As a result his decision and reasoning in relation to jurisdiction inform everything which follows under the headings ‘The Appeal against the Tribunal’s Decision’ and ‘Legitimate Expectation’ and the words of dismissal at [44] refer to the part of the VAT appeal that related to the VAT Tribunal’s decision, not the (new) legitimate expectation argument. The words at the beginning of [44] in Oxfam (“The dismissal of the appeal is not the end of the matter …”) might be thought to support that view.

At [50] the UT in Noor said that it inclined to that view, but later (at [52]) observed “We acknowledge that the view that what Sales J said was simply obiter cannot be dismissed out of hand.” Because of the strength of the view that what Sales J said was a matter of decision, the UT felt that they needed to decide whether they were bound by that decision (assuming Sales J’s comments were a matter of decision) and concluded that they were not. As a result, it was not necessary for the UT to reach a conclusion about which view was correct since, on either view, it was able to make its own decision about the jurisdiction of the FTT.

Mr Watkinson referred us to Youngsam, where the Court of Appeal needed to decide what constituted the ratio of an earlier Supreme Court decision. Nicola Davies LJ (with whom Haddon-Cave LJ agreed) commented:

“21.

In R (Kadhim) v Brent London Borough Council Housing Benefit Review Board [2001] QB 955 Buxton LJ approved the statement of Professor Cross in Cross & Harris, Precedent in English Law, 4th ed (1991), p 72, namely: “The ratio decidendi of a case is any rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him.”

22 In my view the key words contained in the statement of Professor Cross are “treated by the judge as a necessary step in reaching his conclusion”. “

Leggatt LJ went further, observing:

“49.

The description given by Cross and Harris is helpful in drawing attention to the fact that the ratio of a case must be a proposition of law, capable of extrapolation to other cases, and not a finding of fact, and in focusing attention on the reasoning which justifies the judge’s conclusion. But the reference to “a necessary step” in reaching that conclusion - like other descriptions of the ratio as a rule or ruling which is “necessary” to the court’s decision - is ambiguous. The word “necessary” is capable of bearing a range of meanings. On one view, it might be taken to suggest that a proposition of law cannot constitute a ratio unless it can be said that, had the court not endorsed that proposition, the court would have reached a different result. Yet such a test does not work. For example, it quite often happens that a judge gives rulings on two (or more) separate points of law, either of which would by itself be sufficient to justify the judge’s conclusion. It is generally accepted that in such cases each ruling can have the status of ratio although it is manifest that the judge would still have reached the same conclusion even if that ruling were reversed. …

50 Even where a judge gives only one reason for a decision, there is generally no warrant for supposing that the ruling contained in the judgment was treated by the judge as a necessary step in reaching his or her conclusion in the sense that the judge would have reached a different conclusion if he or she had not thought it appropriate to express the ruling as broadly, or as narrowly, as it was in fact expressed. As Professor Neil Duxbury has observed in his insightful book The Nature and Authority of Precedent (2008), p 78:

“No doubt judges will sometimes expressly or impliedly treat particular rulings as necessary to particular conclusions; but it is just as likely that they will sometimes treat particular rulings as their preferred means by which to reach particular conclusions. Necessity tests, however formulated, provide only inadequate conceptions of the ratio decidendi.”

51 It therefore seems to me that, when the ratio decidendi is described as a ruling or reason which is treated as “necessary” for the decision, this cannot mean logically or causally necessary. Rather, such statements must, I think, be understood more broadly as indicating that the ratio is (or is regarded by the judge as being) part of the best or preferred justification for the conclusion reached: it is necessary in the sense that the justification for that conclusion would be, if not altogether lacking, then at any rate weaker if a different rule were adopted.”

Against that background we turn to consider whether the observations in Zeman on the FTT’s jurisdiction are binding on us.

The structure of the decision in Zeman is relatively straightforward. The UT decision starts with five paragraphs of introduction, in the last of which the UT identifies the two issues which arise for decision: whether, on the assumption that the FTT had jurisdiction to deal with legitimate expectation, it erred in concluding that the appellant did not have a legitimate expectation on which it could rely. Secondly, the question whether the FTT has jurisdiction to consider public law issues in an appeal against a VAT assessment. The UT then summarised the background facts, the legislative background and the decision of the FTT. At paragraph [13] it turns to consider the first question, whether the appellant had a relevant legitimate expectation. At paragraph [19] it expressed its conclusion, that the appellant did not have a relevant legitimate expectation, and then at paragraph [20] it says,

“That is sufficient to dispose of this appeal, but we should say something about the more vexed question of whether the FTT had jurisdiction to consider the legitimate expectation argument”.

In many respects, the structure of the decision in Zeman is very similar to that in Oxfam. In both cases there was a conclusion that the taxpayer had no legitimate expectation, and therefore its claim based on legitimate expectation was bound to fail, followed by an analysis of the jurisdiction issue.

As it simplest, the argument that the UT’s conclusion on jurisdiction is a matter of decision is that the tribunal should only be using language which suggests that its conclusion on the legitimate expectation issue has led it to dismiss the appeal, if it has first concluded that it has jurisdiction to do that, a kind of chicken and egg point (if we dare use that expression in this case). Put another way, a positive conclusion on jurisdiction is a necessary first step in dismissing an appeal based on a lack of legitimate expectation, in contrast to declining to decide whether the tribunal has jurisdiction but adding that the claim based on legitimate expectation would fail even if it did. A purist view might be that the tribunal should not even do that; it should only hear argument on a matter and express any view at all if it is first satisfied that it has jurisdiction.

Unlike the FTT in Treasures of Brazil, we do not consider that this is a case where the UT has given two alternative reasons for its decision, where both should be regarded as matters of decision. The positive conclusion on jurisdiction is not an alternative reason for deciding that the taxpayer’s appeal in Zeman failed; a negative conclusion might be, but a positive conclusion is a necessary precursor to entertaining and deciding that ground in the first place.

As we have explained, at least on a purist view, the UT’s conclusion on jurisdiction was a necessary first step to being in in a position to express a view on whether the appellant had a legitimate expectation, and so that conclusion was “necessary” to the UT’s decision. But was that conclusion a “rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him”? Although Nicola Davies and Haddon-Cave LJJ did not endorse Leggatt LJ’s comments on precedent in Youngsam, they did not disagree with them. Moreover Nicola Davies LJ (with whom Haddon-Cave LJ agreed) considered that “ … the key words contained in the statement of Professor Cross are “treated by the judge as a necessary step in reaching his conclusion”. “ Leggatt LJ elaborates on that idea at [51], when he observes that “necessary” does not mean logically or causally necessary; it means what the judge considers “part of the best or preferred justification for the conclusion reached”.

Looked at in that light, the only justification for the UT’s decision in Zeman is that the appellant did not have a relevant legitimate expectation. At [19] they say that this conclusion is “sufficient to dispose of this appeal” and at [85] they again say that the appeal is dismissed “in light of our conclusion on the legitimate expectation issue”. Indeed, in the same paragraph they say that their decision is reached in spite of (“notwithstanding”) their conclusion on jurisdiction.

To the extent there are structural similarities between the decisions in Zeman and Oxfam, which might point towards the UT’s observations on jurisdiction in Zeman being a matter of decision, we note that the UT in Noor, whilst it was inclined to move away from its views in Hok, deliberately did not express a concluded view on the point. In any event, the question for us is what was “treated by the [UT in Zeman] as a necessary step in reaching [its] conclusion” and we are sure, for the reasons we have given, that, although the UT should arguably not have expressed a view on the legitimate expectation issue without first having reached a positive conclusion on jurisdiction, the only relevant justification the UT advanced for dismissing the appeal was that the appellant did not have a relevant legitimate expectation.

The conclusions of the UT in Zeman on the scope of the tribunal’s jurisdiction are not binding on us.

Initially, we thought that we could deal with this question in quite short order. As the discussion at [341] above indicates, a decision is not reached per incuriam just because, if different arguments or different material had been placed before it, the court making the earlier decision might have reached a different conclusion. It applies only where the earlier court reached a decision in the absence of knowledge of a decision binding upon it or a statute, which, had the court had this material, it must have reached a contrary decision.

Mr Watkinson criticises the UT in Zeman for reaching its decision without canvasing all relevant authorities (in particular MIS) and not considering the overall statutory scheme for tribunals in TCEA. Although Newey LJ delivered some fairly trenchant observations on the FTT’s jurisdiction (or lack of it) to consider public law issues in MIS, that case was concerned with section 84(10) VATA, not the question of the tribunal’s public law jurisdiction under section 83(1)(p). Although the way TCEA allocates judicial review jurisdiction to the UT alone is an important factor in considering the breadth of the FTT’s jurisdiction, Zeman was concerned with the interpretation of a particular provision VATA, and the TCEA regime is not determinative of this issue.

It occurred to us as we wrote this decision that the provisions under which the appeals were brought in Corbitt and Zeman were near identical, and that prompted us to ask Mr Watkinson and Ms Sloane whether Corbitt is binding authority on the scope of the tribunal’s jurisdiction under section 83(1)(p) VATA, so we are (and the UT in Zeman should have considered itself to have been) bound to hold that public law issues cannot be canvassed in an appeal under section 83(1)(p). If that is the case, Zeman would have been decided per incuriam.

Ms Sloane submits that, in Corbitt the House of Lords merely decided that the Tribunal did not have jurisdiction to supervise HMRC’s exercise of discretion under Article 3(5) of the Value Added Tax (Works of Art, Antiques and Scientific Collections) Order 1972 (the “margin scheme”). Sales J in Oxfam addressed this issue. He considered that the House of Lords addressed the issue before it as a narrow point of construction, holding that since (as was common ground) the setting of requirements in a published notice within the first limb of Article 3(5) did not fall within the defined jurisdiction of the tribunal and there was no basis for distinguishing the position where the commissioners exercised their discretion under the second limb of Article 3(5), therefore as a matter of construction an appeal in relation to a decision under the second limb also did not fall within the jurisdiction of the Tribunal. Lord Lane’s wider observation was obiter, as the House’s decision was based on the narrow point just outlined.

In contrast, Mr Watkinson says that the better view, on balance, is that Corbitt is binding authority that the tribunal has no supervisory/public law jurisdiction on a section 83(1)(p) appeal. He accepts that the precise focus in Corbitt was on whether section 40(1) FA 1972 permitted the tribunal to review the Commissioners’ exercise of their discretion as regards the sufficiency of the records and accounts for the purposes of the margin scheme, but says that Lord Lane specifically considered both the assessment provision in section 31(1) FA 1972, and the appeal provision in section 40(1)(b), before observing that, if it had been intended to give a supervisory jurisdiction of that nature to the tribunal, he would have expected clear words to that effect in the Act. Instead, he observed, section 40 (1) set out nine specific headings under which an appeal may be brought “and seems by inference to negative the existence of any general supervisory jurisdiction”.

He says that the justification for Lord Lane’s conclusion would be weaker if his dictum as to the absence of the general supervisory jurisdiction was not adopted. Had he thought that section 40(1)(b) FA 1972 provided a supervisory jurisdiction, that would have justified a different conclusion. Lord Lane’s final dictum was, therefore, part of the ratio of Corbitt, which includes that the Tribunal had no supervisory jurisdiction over an appeal against a VAT assessment.

He also points out that Corbitt has been treated as authoritative on this point in NatWest and Dollar Land and a similar approach (that the tribunal’s jurisdiction is limited to the consequences of the statute and not the conduct of HMRC) was adopted in Marks and Spencer without express reference to Corbitt.

None of these cases referred to by Mr Watkinson concerned what is now section 83(1)(p) and it is therefore difficult to see them as confirming that Corbitt is binding authority on the scope of the tribunal’s jurisdiction under section 83(1)(p). Indeed, despite his conclusion that Corbitt was “authoritative” that an appeal provision must be capable of being construed as giving the tribunal a supervisory jurisdiction, absent which the tribunal had no supervisory jurisdiction, in Dollar Land Judge J noted that the appeal provision (section 40(1) Value Added Tax Act 1983) had been expanded since the time of Corbitt and now included provisions which were accepted (including by HMRC) as supervisory in nature, concluding:

“Therefore, contrary to the position at the time of the Corbitt decision, it is no longer possible to conclude that the value added tax tribunal may never exercise supervisory jurisdiction in an appeal against the decision of the commissioners.”

We are with Ms Sloane on this point. The very clear focus of the House of Lords in Corbitt was on the way the margin scheme worked and in particular the way the (accepted) lack of jurisdiction in the tribunal to entertain challenges to the accounting requirements imposed by the Customs and Excise Commissioners led to the conclusion that there could be no jurisdiction to entertain challenges to their decision not to recognise a trader’s accounts (which did not comply with those requirements) as sufficient. Although Lord Lane commented that he would expect to see clear language in a statutory appeal provision before accepting that it conferred a supervisory jurisdiction, that observation was not necessary for his decision. He could have held that the tribunal had a supervisory jurisdiction on an appeal against an assessment and still reached the conclusion he did because of the way the margin scheme worked. Corbitt did not bind the UT in Zeman to come to a different conclusion.

The question of the breadth of the tribunal’s jurisdiction is a vexed and difficult one, which has been considered in a number of previous decisions, but none of those authorities which Mr Watkinson identified as missing in action in Zeman (nor Corbitt, which was not on his list but which we raised ourselves and have just addressed) would have compelled the UT to a different conclusion, nor in fact did he specifically identify any which he thought would have that effect. They might have made the UT reconsider its view (although we rather doubt that given the range of authorities the UT did address), but it is not the case that any authority or statutory provision not addressed by the UT would have compelled it to reach a different conclusion.

The UT decision in Zeman on the jurisdiction question was not reached per incuriam.

We were not addressed to any great extent on the answer to this question. Mr Watkinson’s position is that Zeman is wrong and, as it is not binding on us, we can and should say that it is wrong and decline to follow it. Ms Sloane says that, even if it is wrong, Zeman is binding on us. In argument, she said that, if we were to find (as we have) that Zeman is not binding on us, we should still follow it unless we were to conclude that it is “plainly wrong”. Given the vexed and difficult nature of the jurisdiction question, her position is that, even if we thought Zeman was wrong on this point, we could not possibly think that it was “plainly wrong”.

During argument, Ms Sloane drew our attention to a passage in Lewison LJ’s judgment in Merck Serono, where he was addressing the question whether the CA should depart from a previous decision if it concluded that the earlier decision was decided per incuriam and was therefore not binding on it. He identified several points, arising out of the jurisprudence on when the highest court considers that it is appropriate to depart from an earlier decision of that court. Clearly, we are not the Supreme Court engaged in that exercise, but we respectfully found Lewison LJ’s list of things to think about in that context to be helpful when deciding whether to depart from Zeman. His points (which start at [89]) are as follows:

Although not a case cited to us, the UT (a panel including Judge Greg Sinfield, then the President of this Chamber of the FTT) had this to say about horizontal stare decisis in the FTT in HMRC v Taher Suterwalla and another, [2024] UKUT 00188 (TCC) at [23]:

“In [57], the FTT gave no reasons for disagreeing with decision of the FTT in Brandbros, a case in which Mr Cannon had appeared for the taxpayer and deployed the same argument based on scintilla temporis, but where the panel reached the opposite conclusion to the FTT in this case. Of course, the decision of one FTT is strictly not binding on another FTT as a matter of precedent, but the principle of judicial comity, or horizontal stare decisis, requires that a FTT should follow the decision of a previous tribunal of co-ordinate jurisdiction unless ‘convinced’ or ‘satisfied’ (there is no practical difference between the two) that the earlier decision was wrong (see Gilchrist v HMRC [2014] UKUT 169 (TCC) at [91] to [94]). There are good reasons for this practice: it promotes consistency in judicial decisions and predictability of outcomes thereby avoiding re-litigation of identical legal issues, and it builds public confidence in the appeals process by ensuring that similar cases are treated similarly over time. If a later FTT considers that a previous decision of the FTT on materially identical facts and/or law was wrong, then it should set out why. It need not do so at great length but simply stating, as the FTT did in this case, that other decisions not on the same point are preferred leaves the reader in the dark. We consider that, where a FTT decides not to follow the decision of another FTT on the same or a materially similar point, it should explain why it has taken a contrary view.”

This broadly reflects the summary of horizontal stare decisis in Halsbury’s Laws of England (2020):

“There is no statute or common law rule by which one court is bound to abide by the decision of another court of co-ordinate jurisdiction. Where, however, a judge of first instance after consideration has come to a definite decision on a matter arising out of a complicated and difficult enactment, the opinion has been expressed that a second judge of first instance of co-ordinate jurisdiction should follow that decision; and the modern practice is that a judge of first instance will as a matter of judicial comity usually follow the decision of another judge of first instance unless he is convinced that that judgment was wrong. Where there are conflicting decisions of courts of co-ordinate jurisdiction, the later decision is to be preferred if reached after full consideration of earlier decisions.”

If the FTT should be slow to depart from a non-binding decision of an earlier FTT, the FTT should clearly be equally slow (if not slower) to depart from a non-binding decision of the UT reached after consideration on a matter arising out of a complicated and difficult enactment.

Our starting point, therefore, is that we should not depart from Zeman, even if we would have reached a different conclusion ourselves, unless we are convinced that it was wrong. Just as the UT in Suterwalla regarded “convinced” and “satisfied” as effectively the same test, we regard both of those as equating with whether we regard Zeman as “plainly” wrong. We can only be “convinced” that Zeman is wrong if we are so sure of that that we are prepared to say that it is “plainly” wrong.

Whether these are separate factors, or (at least to some extent) just aspects of our conclusion that Zeman was not “plainly wrong”, our observations on how Lewison LJ’s considerations play out here are as follows:

For the reasons set out above (particularly the need for the tribunal to speak consistently with one voice on an issue as fundamental as jurisdiction), we have decided that, although we do not consider that the comments on jurisdiction in Zeman are binding on us and although we are far from persuaded by them, we should follow them.

It follows that our answer to the second question (Does the FTT have jurisdiction to entertain Morrisons’ legitimate expectation argument?) is “Yes”.

Before we turn to consider the merits of Morrisons’ legitimate expectation argument, we should briefly explain why we consider that the comments in Zeman on jurisdiction are wrong but not plainly so.

With the exception of Oxfam (which was not followed in Noor), the authorities (including Corbitt, a House of Lords decision in relation to essentially the same appeal gateway as that considered in Zeman) we have reviewed before Beadle lean heavily against the tribunal having a supervisory jurisdiction (to consider public law issues), even where the appeal is “in respect of” a decision which the tax authority “may” make. These conclusions have been reached in the light of the tribunal structure established by TCEA and the rule in O’Reilly v Mackman (that public law issues should generally be raised in judicial review proceedings in the High Court).

In Beadle itself the CA concluded that the tribunal had jurisdiction to consider an appeal against a penalty assessment, basing its decision on the accepted exception to the rule in O’Reilly v Mackman for “enforcement proceedings” except where (as was held to be the case there) the statutory scheme in question excludes the ability to raise a public law defence.

Nowhere in her judgment did Simler LJ equate an appeal against an ordinary tax assessment with enforcement proceedings, and assessment and enforcement are quite different matters. She was addressing a ground of appeal that, “in the absence of any statutory appeal process against PPNs, collateral challenges to PPNs on public law grounds may be made by a taxpayer in the course of a statutory appeal against a penalty notice for non-compliance with a PPN”, put another way, the appellant was seeking to challenge the validity of the PPN in the course of challenging an enforcement action (the penalty) in relation to the unappealable decision to issue the PPN. That is radically removed from a statutory appeal against a tax assessment, and we are far from convinced that it is right (as the UT did in Zeman) to equate a taxpayer bringing an appeal against a tax assessment with, in substance, a defendant in enforcement proceedings, and then go on to hold that the taxpayer should be entitled to challenge HMRC’s decision to raise the assessment on public law grounds in proceedings before the FTT “unless that entitlement is excluded by the relevant statutory language”.

Although, like Judge Brown KC in Drinks and Food, we entertain significant doubts about whether Zeman is correctly decided, there are clearly arguments (for example, those adopted by Sales J in Oxfam) to the contrary. Indeed, we note that the UT in Caerdav, although reaching the conclusion that a legitimate expectation argument could not be raised in that case and suggesting that the question of supervisory/public law jurisdiction should be approached from the opposite perspective (that the starting point is therefore that appeal grounds which concern public law arguments should be pursued in judicial review proceedings rather than before the FTT), appeared (at [155]) to endorse the decision in Zeman itself.

So, even if Zeman is wrong on jurisdiction, which we rather think it is, we agree with Ms Sloane that we could not possibly say that it is “plainly wrong”.

Morrisons and HMRC have agreed that there are four issues to be addressed here, namely:

There is no real dispute as to the law in this area. There is a summary of the applicable principles in the context of VAT clearances in R (Airline Placement Limited) v HMRC, [2023] EWHC 1191 (Admin) (“APL”):

“(1)

A legitimate expectation arises in circumstances where:

(a)

the claimant has an expectation of being treated in a particular way favourable to the claimant by the defendant public authority;

(b)

the authority has caused the claimant to have that expectation by words or conduct;

(c)

the claimant's expectation is legitimate; and

(d)

it would be an unjust exercise of power for the authority to frustrate the claimant's expectation.

See R (on the application of GSTS Pathology LLP) and others v. HMRC [2013] STC 2017 (“GSTS”) at [72]-[73].

(2)

Whether HMRC have created an expectation is to be objectively assessed and does not depend upon their intention: see R v. Barking and Dagenham LBC ex parte Lloyd [2001] LGR 86 at [31]-[35] and R (oao Vacation Rentals (UK) Limited) v. HMRC [2019] STC 251 at [60]-[62].

(3)

For a legitimate expectation to arise in relation to an HMRC non-statutory clearance:

(a)

the communication from HMRC should be clear, unambiguous and devoid of relevant qualification: see R v. IRC ex parte MFK Underwriting Agents Limited [1990] 1 WLR 1545 at p.1569G.

(b)

the taxpayer must show that he has put all his cards face up on the table by giving full details of the specific transaction on which a ruling is sought. The taxpayer is to treat HMRC with complete frankness and make full disclosure of all the material facts known to him. The situation calls for utmost faith on the part of the taxpayer: see MFK at p.1569E, p.1575B.

(c)

full disclosure will not have been made where statements made in the clearance request are materially inaccurate or misleading. It does not follow that full disclosure has been made because sufficient information was disclosed to enable inference to be drawn therefrom. Where a piece of information essential to the deliberations required of HMRC by the taxpayer was not furnished to them there is no unfairness in revoking a clearance: see R v. IRC (ex parte Matrix Securities Limited) [1994] 1 WLR 334 at p.342B, p.352B, p.354B & H and p.356A & G.

(d)

the requirement for full disclosure will be especially difficult to satisfy if there has been a purely oral exchange with a tax official. Full disclosure requires the taxpayer to disclose the perceived problem which the taxpayer wishes to have addressed: see Corkteck Ltd v HMRC [2009] STC 1681, at [30]-[31].

(4)

Where a clear and unambiguous undertaking has been made in a Clearance Letter it must be shown that it would nonetheless be fair to allow HMRC to depart from it: see In the matter of an application by Geraldine Finucane for Judicial Review for Judicial Review (Northern Ireland) [2019] 3 All ER 191 at [62].

(5)

In a tax context it is for the taxpayer to demonstrate a high degree of unfairness in order to override the public interest in HMRC collecting taxes in accordance with the law: see R (oao Aozora GMAC Investment Ltd) v. HMRC [2020] 1 All ER 803 at [52].

(6)

Where the taxpayer has a legitimate expectation as to a particular tax treatment, they also have a legitimate expectation that it will not be withdrawn retrospectively and that any withdrawal will be managed fairly. Reasonable notice of any withdrawal should be given so as to allow the taxpayer time to make any necessary adjustments to its affairs: see R (on the application of Cameron v Ors) v HMRC [2012] STC 1691 at [71] and GSTS at [96]-[101].

(7)

Where the taxpayer has a legitimate expectation from a Clearance Letter it is unfair for HMRC to depart from it retrospectively in circumstances where the Claimant has relied upon it in carrying on its business and has no mechanism for recovering the VAT now retrospectively demanded: see GSTS at [99] and in contrast to R (oao Dixons Retail plc) v. HMRC [2018] EWHC 2556 (Admin) at [67].

(8)

It is unreasonable and/or an abuse of power for HMRC to depart from a long-standing treatment of a taxpayer that HMRC has either agreed or implicitly accepted: see R v. IRC ex parte Unilever [1996] STC 681 at p.690-692.”

These comments largely reflect the classical statement of Bingham LJ in the Divisional Court in R v IRC ex p MFK Underwriting Agencies Ltd & Ors, [1990] 1 WLR 1545 (“MFK”), of what is required before guidance given to a taxpayer might create a legitimate expectation that HMRC would forego tax due under statute:

“No doubt a statement formally published by the Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the Revenue is of a less formal nature a more detailed inquiry is, in my view, necessary. If it is to be successfully said that as a result of such an approach the Revenue has agreed to forego, or has represented that it will forego, tax which might arguably be payable on a proper construction of the relevant legislation it would, in my judgment, be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled. I say 'ordinarily' to allow for the exceptional case where different rules might be appropriate, but the necessity in my view exists here. First, it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the Revenue's ruling, unless it is the same as an earlier transaction on which a ruling has already been given. It means that he must indicate to the Revenue the ruling sought. It is one thing to ask an official of the Revenue whether he shares the taxpayer's view of a legislative provision, quite another to ask whether the Revenue will forego any claim to tax on any other basis. It means that the taxpayer must make plain that a fully considered ruling is sought. It means, I think, that the taxpayer should indicate the use he intends to make of any ruling given. This is not because the Revenue would wish to favour one class of taxpayers at the expense of another but because knowledge that a ruling is to be publicised in a large and important market could affect the person by whom and the level at which a problem is considered and, indeed, whether it is appropriate to give a ruling at all. Secondly, it is necessary that the ruling or statement relied on should be clear, unambiguous and devoid of relevant qualification.”

In APL (at [68]) Constable J described the test for materiality of non-disclosure as:

“Therefore, in order to determine whether the inaccuracy in the NSC Request was ‘material’, the Court must consider on the ordinary standard of balance of probabilities, had the NSC Request not been inaccurate, whether there is a real possibility that consideration of the matter as corrected would have made a difference to the decision.”

Appropriate (i.e. clear and unambiguous and devoid of relevant qualification) statements can be made by HMRC in dealings with individual taxpayers following a request for a ruling or in published guidance directed at the whole world, such as their published guidance booklet on individual residence (R (Gaines-Cooper) v HMRC, [2011] UKSC 47 at [29]) or their Manuals (R (Aozora GMAC Investment Ltd) v HMRC, [2019] EWCA Civ 1643).

Morrisons say that all these conditions are met, for the following reasons:

The first dealing between HMRC and Morrisons in relation to CDRCs was in the autumn of 2012. There is very little evidence about exactly what took place. We do know, from Officer Dean‘s letter of 5 September 2013, that he discussed the CDRC VAT liability issue with Mr. Prince and went on a site visit. His understanding of CDRCs is that they were “packaged in plain bags, left to cool naturally and made available (for self-selection by customers) from table type displays in the aisles”. Following his store visit, Mr Dean said that he was satisfied that the tax treatment Morrisons adopted, that CDRCs were zero rated and HRC’s standard rated, “appeared acceptable”.

The prompt for Officer Dean‘s letter in September 2013 was his visit to a store, near to where his daughter lived, where he noticed that several aspects of the placement, promotion and sale of chickens had changed and that he found these changes concerning. He thought that it would be useful to follow up on his concerns to make sure that he had a full understanding of the position and “to minimise the risk of the group building up a substantial tax liability (and potentially penalties)”.

It is clear from MFK that it is one thing to ask an HMRC officer whether he shares a taxpayer’s view on a point and quite another to ask whether HMRC would forgo any claim to tax on any other basis. For us find that the discussions in 2012 are sufficient to establish a legitimate expectation, Morrisons must prove, on the balance of probabilities, that it was clear that HMRC were being asked for a formal ruling which they would stand behind. Similarly, Morrisons must show that they made full disclosure to HMRC of all relevant material and the statement Officer Dean gave must be clear, unambiguous and devoid of relevant qualification. If these conditions are met, an ordinary sophisticated taxpayer could reasonably conclude that (whatever HMRC actually thought) HMRC had created a legitimate expectation.

All we know about what took place in the autumn of 2012 is that there was a discussion and a site visit which led to Officer Dean concluding that what Morrisons were doing “appears acceptable”, which is consistent with his comment in his witness statement that “there were no issues of contention”. We do not know what Morrisons asked him for or told or showed him or indeed in exactly what terms he delivered his thoughts to Morrisons. 

Whilst (of course) a ruling can be given orally, in the absence of evidence beyond what we can learn from Officer Dean’s letter and witness evidence (which absence itself rather suggests to us that Morrisons were not seeking a ruling on the VAT liability of CDRCs – if they were, we consider that they would have generated records of their dealings with HMRC and kept them safe), we do not consider that there is evidence of dealings from which an ordinary sophisticated taxpayer could reasonably conclude that HMRC had created a legitimate expectation.

During his submissions, Mr. Watkinson described the dealings between Morrisons and HMRC as “fireside chats”. Ms Sloane says that that rather underestimates their seriousness and points to the acceptance in this letter by Officer Dean that getting the VAT treatment of CDRCs right is important for Morrisons in order to avoid them building up a significant VAT liability. We agree with Ms Sloane that the discussions in 2012 (even though we do not know much about them) and the correspondence in 2013/14 clearly amounted to a serious dialogue, but that is not the same as saying that they concluded with something from which an ordinary sophisticated taxpayer could reasonably conclude that HMRC had given an unequivocal ruling on VAT liability. Indeed, there is absolutely no evidence of Morrisons asking HMRC for a “ruling” (a confirmation that they regard CDRCs as zero rated and will forego any claim to tax on any other basis) as opposed to asking Officer Dean whether he shared Morrisons’ view of a legislative provision. As MFK makes clear, those two things are miles apart.

Moving on to the correspondence in the autumn of 2013 and the early part of 2014, this starts with Officer Dean‘s letter of 5 September 2013. This starts with a summary of what took place in the autumn of 2012, including what he saw on his site visit in 2012.

After that, the letter records Officer Dean’s concerns from visiting (in a personal capacity) the store near where his daughter lived. He acknowledged that this was an important issue both for HMRC (so he wants to understand what Morrisons are doing) and for Morrisons and suggests a meeting to take the matters forward.

In her email of 17 September 213, Ms Harrison asked Officer Dean to “be more specific as to why you feel the VAT liability of the cool down chickens has been changed”. Mr. Watkinson says that this email amounts to an acknowledgement that, if Officer Dean had made a ruling in the autumn of 2012, this had now been withdrawn. Given our conclusion that there was no ruling sufficient to establish a legitimate exhibition expectation in 2012, this is an academic point. We agree, however, that Ms Harrison realised that Officer Dean’s view had changed, although she did not know why.

Officer Dean replied to Ms Harrison on 20 September 2013, as set out at [52] above. It is clear from this email that Officer Dean was clearly not giving an unequivocal ruling in relation to the VAT liability of CDRCs. In the second main paragraph of his email he indicates that Note (3B)(a) may well need to be explored in some detail in the future. Clearly, that reservation alone indicates that he was not signing off on all five tests in Note (3B), and there is nothing from which an ordinary sophisticated taxpayer could reasonably conclude that Officer Dean was giving an unequivocal ruling on the overall VAT liability of CDRCs. Apart from any specific points he made, this was just the beginning of the correspondence, so any “sign off” would have been wildly premature.

Officer Dean then refers to his summary of the initial position regarding CDRC displays in his previous letter, but now he runs through what he saw in 2012 and what he observed more recently. He records his initial understanding that CDRCs were placed together for display and self-selection by customers from a table several metres away from the area housing the ovens and rotisserie counters. The tables were of a plain type and not heated and the bags were “essentially plain paper (with barcode and VAT free stickers)”. So, he commented, the chickens were not displayed or sold in heat retentive packaging within Note (3B)(d). There was no advertising/signage on the packaging, the display tables or the immediate environment to indicate that the products were supplied hot. He concluded that the group had “clearly structured the arrangements to differentiate the “VAT free/cool down” chickens from HRCs and “could support a case” that Note (3B)(a) was not engaged.

He then says that he observed on his recent visit that CDRCs were no longer being displayed at some distance from the rotisserie on tables. They were displayed for self-selection from a stainless-steel open display next to the heated rotisserie display counter. This might engage Note (3B)(c). He said that there were “no changes regarding the immediate packaging”– so the packaging used is not breaching Note (3B)(d).

His main concern related to advertising and signage in potential breach of Note (3B)(e). This, of course, formed a large part of the subsequent discussions.

Overall, he was concerned, given “a number of indications … that “cool down” products are being re-integrated into the main rotisserie range, [that] the entire approach of the group to these sales, in terms of determining it’s (sic) “purpose” – under the Note 3B a) test – may need to be examined”.

Officer Dean wrote a letter to Rowan Robinson (VAT manager - Taxation at Morrisons) on 15 January 2014. This followed his conversation with colleagues in the RUE. He referred to the objective tests introduced by FA 2012 and the group‘s concern about how phrases used within the example signs they had provided could impact on VAT liability. Having introduced the signage issue, Officer Dean says, “I would stress that my response to your request purely addresses is that single issue” (i.e. whether the proposed signage/placement means that products are being advertised or marketed as hot within Note (3B)(e)). He goes on to say that:

“Any agreement that a particular sign does not meet the criteria covered by Note 3B e) does not mean that all products within that area would be considered to qualify for zero rating. It simply means that products sold above ambient temperature in that area will not inevitably be considered to be standard rated,. …Clearly, there are a number of other circumstances which need to be considered as part of establishing the VAT liability of each individual product line … , So, even if it is accepted that general signage does not indicate a supply whilst hot, if any food lines are provided above the ambient temperature … and they fall to be treated under any one, or more, of the other criteria within note 3B, the products should be standard rated.”.

The rest of his letter is devoted to a detailed analysis of signs he has been sent. He concludes that, “based on assurances given by the group with regard to intention and in the absence of other indicators” of standard rated treatment and despite his still harbouring concerns, applying a blanket standard rate treatment to products sold under the signs he has seen and approved “would not be (fully) justified”.  He signs off by observing “Clearly, any decision as to the precise format/wording of any marketing/advertising material adopted is a matter for the group but I do hope these comments are useful in informing your deliberations.”

On 11 September 2015 Morrison’s wrote to HMRC making a voluntary disclosure of underpaid VAT because of wrongly categorising certain products as zero rated. In the introductory part of that letter they referred to the 2012 changes affecting the liability of hot takeaway food and said that, as a result of these changes, all hot products sold from the “Oven Fresh” counter became liable to VAT at 20% with the exception of “VAT free cooldown chickens which meet the new conditions for rating”. We have seen Mr. Nichols point to this letter, but this letter is primarily explaining the (very significant) VAT coding errors Morrisons has found and admits to. The VAT treatment of CDRCs is presented as part of the background picture and no more. It would be wholly unreasonable to read this letter and HMRC‘s not replying and questioning the VAT treatment of CDRCs as any kind of acceptance by HMRC that CDRCs were being correctly zero-rated. HMRC are not asked to say anything about CDRCs, and therefore not surprisingly they pass no comment on them.  

Mr. Watkinson criticises Morrisons for (he alleges) trying to assemble a VAT ruling out of several component parts, in other words taking passages or exchanges from different pieces of correspondence or other dealings and adding them together to make a ruling. He says that there is no authority that this can be done, and the clear implication is that, if HMRC are being asked to rule on the VAT liability of a product, they must be asked, in clear terms, to do exactly that taking all factors into account at the same time. It is, he says, not possible to assemble a ruling piecemeal or by stealth. Put in those terms, that must be right; MFK makes it abundantly clear that any representation which is sufficient to establish a legitimate expectation must be obtained from HMRC in response to the taxpayer making it abundantly clear why they are asking a particular question and what they are going to do with the answer. That said, in a case (like this one) where several, quite distinct, criteria need to be considered, we can see no fundamental reason why a taxpayer in Morrisons’ position might not ask HMRC for a clear ruling on one issue and then come back later and ask for a clear ruling on another, as long as they make it clear that they are asking for a ruling in each case and indicate what the effect of a later ruling would be, when combined with rulings already obtained.

The relevance of that point here is that, as we have just seen, the correspondence in the autumn of 2013 and the early part of 2014 is focused primarily on Note (3B)(e). To the extent Officer Dean made any comments on Note (3B)(a), (c) or (d), they were made in 2012 and merely repeated in his letters of 5 and 20 September 2013.

To be completely clear on this point, for the reasons discussed at [401]-[404] above, we do not regard Officer’s Dean’s comment that what he saw on 2012 “appeared acceptable” to be a clear, unambiguous statement devoid of relevant qualification, which an ordinary sophisticated taxpayer could reasonably take to be a ruling by HMRC on the VAT liability of CDRCs, either in the Autumn of 2012 or when it was repeated on 5 September 2013.

If we look for a moment at what Officer Dean said in his letter of January 15 2014, the first point to make is that he was very clear that he was addressing Note (3B)(e) only. He was not even providing a complete commentary on Note (3B)(e), as the examples he gives of other issues that would need to be thought about, such as whether pies and pasties put in cool down areas might be the subject of other in store advertising indicating a supply whilst hot, make clear. All he was doing was passing comment on particular signs, and whether products sold adjacent to or underneath them would eo ipso be treated as advertised or marketed as hot for the purposes of Note (3B)(e).

Even though Officer Dean makes some comments in relation to those signs, he is very clear at the end of his letter that the decision on the signs to use is for Morrisons to make and that he hopes his comments are “useful”. He was very definitely not saying anything more expansive; indeed, given his concerns about the potential effect of “other circumstances”, it is hard to see how he could do that. At most, he was saying, by way of (he hoped) helpful comment, that, if the only issue to be considered in relation to Note (3B)(e) was these signs (i.e. absolutely nothing else pointed to standard rating), he would not expect (“in the vast majority of cases, I do accept”) that the signs would cause the product in question to be standard rated. There is nothing here from which an ordinary sophisticated taxpayer could reasonably conclude that Officer Dean had created a legitimate expectation as to the VAT liability of CDRCs generally or in relation to Note (3B)(e).

Going back in time to the longer email of 20 September 2013, again there was no complete sign off on the liability of CDRCs.

So, if we look at what Morrisons had obtained from HMRC by the start of the assessment period (in January 2017) in relation to the tests in Note (3B), we can see:

We cannot read into the very small amount of coverage of Note (3B)(c) or (d) in September 2013 anything that could reasonably be taken to be a ruling by Officer Dean on the position of CDRCs so far as these two tests are concerned. We can see Officer Dean’s concern about Note (3B)(c) and heat transfer from adjacent cabinets. We know that this concern was allayed, but there is no record of the outcome in this correspondence. As far as packaging is concerned, the correspondence records what Officer Dean saw and his assumption, as he thought he was looking at essentially plain paper bags which were not heat retentive, that the packaging raised no issues as regards Note (3B)(d). The focus of the 2013/2014 correspondence was on advertising and marketing, ultimately only on the impact of the wording of Morrisons’ signage on Note (3B)(e). That was where Officer Dean’s attention was ultimately focused. His “initial/current” summary (in his email of 20 September 2013) was (as he put it) to set the issues he was concerned about (signage/place of display) in context, given Ms Robinson’s request for “early advice” so Morrisons could think about the triggers that had raised his concerns. In the light of those comments and the explicit limitations in Officer Dean’s letter of 15 January 2014, we do not consider that a reasonable sophisticated taxpayer reading this correspondence would distil a ruling on chicken paper bags and Note (3B)(c) and (d) from the references to this issue in correspondence where the writer’s attention was focused elsewhere and where he ultimately ended up giving only guarded guidance on the issues that were “front and centre” in the correspondence..

We do not know why Officer Dean thought that the chicken paper bags were plain paper, and therefore non-heat retentive, bags. We know, from Mr. Whitaker’s evidence if nothing else, that all packaging is heat retentive to some degree and that the chicken paper bags perform well so far as heat retention is concerned. We also know that, as late as 2021, Morrisons were telling HMRC that the chicken paper bags were not heat retentive, when, as Mr Nichols readily acknowledged in cross examination, this was just not true.

We do not know whether Morrisons told Officer Dean anything about the bags in 2012, which he repeated in his 2013 emails. Ms Sloane says that he could see them for himself, but it is not Officer Dean’s job to try to work out the properties of the chicken paper bags even if (which we very much doubt) a non-expert could work out how heat retentive these bags were just by looking at them. Mr Whitaker did find out how (absolutely and relatively) heat retentive the bags are, but he and his team conducted a significant amount of research before reaching their conclusions. If Morrisons wanted a ruling on the VAT liability of CDRCs, generally or on particular aspects of the new tests introduced in 2012, it was for them to put their cards face up on the table. There is no evidence of Officer Dean being told anything about the bags at all; we know no more than that he saw some CDRCs sitting in these bags on a table.

We do not need to know why Mr Prince and his colleagues did not (so far as we know) tell Officer Dean anything about the heat retentive properties of the bags in 2012, or did not correct his misapprehension when he repeated it in his 2013 emails, or made an incorrect statement to HMRC in 2021. (2021 is, of course, after the end of the assessment period and statements made by Morrisons in 2021 are not relevant to the question whether Morrisons had a legitimate expectation at the start of the assessment period.) Mr Nichols said that Morrisons would never try to deceive HMRC, and (we should stress) no one has suggested, even for a moment, that they did. There is evidence of mis/non-communication between the Tax Department at Morrisons and other parts of the group. Mr Watkinson described the relationship between the Tax Department of Morrisons and the operational parts of the group as “chaotic”. There is insufficient evidence to suggest that the relationship was systemically chaotic, but it is undoubtedly the case that internal communication was imperfect from time to time. That may well explain that failure. Another explanation (the possibility of which was touched on during Mr Nichols’ cross-examination) is that no serious research had been carried out and Morrisons simply did not know about the heat retentive properties of the bags, and they proceeded (and allowed HMRC to proceed) on an important, but wrong, assumption they had not rigorously checked.

What is abundantly clear, though, is that, if HMRC had known about the heat retentive properties of the chicken paper bags in 2012/13, there is more than a “real possibility” that Officer Dean would not have made the comments he did. We hold that there was material non-disclosure so far as that issue was concerned. If (which we do not consider to be the case at all) Officer Dean’s comments so far as Note (3B)(c) or (d) and the chicken paper bags were concerned would otherwise amount to a representation which could establish a legitimate expectation, Morrisons’ material non-disclosure (whatever its explanation) of the heat retentive properties of the chicken paper bags would negate that conclusion.

Officer Dean also said that he was concerned that he had not been made aware of the two-hour limit on the time Morrisons could expose CDRCs for sale. He told us that this would have raised concerns as, contrary to his understanding (which he says he obtained from his discussions with Mr Prince in 2012), CDRCs could not fully cool down to the ambient temperature before sale. We have already expressed (at [230]) our conclusion that a policy of taking CDRCs off sale after two hours at a time when they are still well above the ambient temperature, is not a problem so far as Note (3B)(c) is concerned, as that does not (in our view) amount to a step taken to ensure that particular CDRCs remain hot within Note (3C). But we have also seen that the process of construing these provisions is not straightforward and that our reading does not reflect Mr Gauke’s policy explanation. For those reasons, we consider that this factor (that CDRCs could only be sold hot and would never fully cool down to or below the ambient temperature whilst on sale) was a “legitimately relevant” (APL at [74]) issue for Officer Dean to consider. He should have been given an opportunity to reflect on that issue, given that what Morrisons were doing ran counter to Mr Gauke’s articulation of the policy behind the legislation and the concerns Officer Dean had articulated about “the entire approach of the group to these sales” and the impact on Note (3B)(a). Given that, there was a “real possibility” that, had he known of this, he might have refused to give Morrisons any kind of guidance (which we consider to be just as relevant as the possibility that he might give a ruling or commentary in different terms) about CDRCs at all or formed a (or a different) view on Note (3B) (a) or (c) which negated any reassurance (if such it was) he gave on Note (3B)(e). If (which we do not consider to be the case at all) Officer Dean’s comments would otherwise amount to a representation which could found a relevant legitimate expectation, Morrisons’ material non-disclosure of the requirement to take CDRCs off sale after two hours (while they were still well above the ambient temperature) would negate that conclusion.

For the reasons we have just given, we do not consider that there is anything in HMRC’s dealings with Morrisons which is sufficient to establish a legitimate expectation either that the overall VAT treatment of CDRCs was that they would be zero-rated or that HMRC would take a particular position as regards any aspect of the storage or marketing of CDRCs and any of the tests in Note (3B).

We turn now to look at HMRC‘s published guidance, to see if there is anything here which could found a legitimate expectation as to the VAT treatment of CDRCs. This guidance comprises VAT Note 709/1 (from which we have set out some extracts earlier in our decision) and relevant passages in HMRC’s Manuals.

So far as HMRC comments on the particular tests in the passages in paragraph 4.3 of VAT Notice 709/1, are concerned, we do not find anything here to be particularly helpful to Morrisons. The commentary on Test 3 (whether food or drink has been kept hot) focuses on whether products have been stored in cooling down ovens or other appliances that slow down the rate of cooling, and all the examples involve appliances (such as heat lamps or hot water baths) of this nature. There is, however, no comment to the effect that it is only the use of an appliance which engages this test.

The commentary on Test 4 (the packaging in which products are supplied) restates the legislation and then says that in practice this will mainly affect products that are supplied in specialised packaging, such as foil lined bags and insulated containers, and that it will not affect products that are sold in ordinary paper bags or similar packaging. To the extent that specialised packaging might include anything beyond an ordinary paper bag, this comment is unhelpful to Morrisons, as is the specific confirmation about ordinary paper bags or similar packaging. As we have seen, the chicken paper bags are not foil lined, but they are not ordinary paper bags either. One of the examples under Test 4 is, however, very unhelpful to Morrisons. It refers to cooked chickens being supplied in heat retentive packaging or packaging designed to prevent the leakage of hot fluids or grease. We know that the chicken paper bags, although not designed to retain heat, are heat retentive and, much more importantly, are designed to prevent the leakage of hot fluids and grease.

So far as Test 5 is concerned, there is clear confirmation that phrases such as “freshly baked” do not indicate the products are supplied hot, but there is confirmation, if it were needed, that advertising or marketing a product as hot could be by way of a picture (of a product with steam coming off it) not just by words saying that it is hot.

Paragraph 4.4 of Notice 701/9 contains examples of hot food products that are caught (or not) by the new tests. We see the text starting with a warning that the new tests ensure that the vast majority of hot takeaway food is standard rated. The exception is hot food that does not satisfy any of the tests in Note (3B) and it then (perhaps echoing Mr Gauke’s comment) gives as an example freshly baked bread that is “incidentally hot” at the time it is sold. CDRCs, as we have seen, are very much not “incidentally hot” at the point of sale.

If we turn to look at Example 5 in paragraph 4.4, we again see a discussion of a hot freshly cooked chicken being standard rated just because it is provided to customers in “specially designed (foil lined) bags designed to prevent leakage of fluids and grease” even though the chicken is fine as regards the other tests. There is a clear warning here, that selling hot chickens in packaging designed to retain fluids and grease is sufficient on its own for the chickens to be standard rated. The text here refers to “(foil lined)”, but there is nothing here that justifies a business taking the view that only foil lined bags are a problem and that any other “bags designed to prevent leakage of fluids and grease” from hot food do not create problems so far as zero rating is concerned.

Officer Dean, of course, passed absolutely no comment on whether the chicken paper bags retained grease and fluids. He only said that he (incorrectly) thought they were ordinary paper bags that did not retain heat. Morrisons, of course, knew that the chicken paper bags were specifically designed to retain grease and fluids. The clear evidence from Mr Maestri is that the bags were designed to be, and from Mrs Whittle that they needed to be, leakproof. This is something else Morrisons did not share with Officer Dean.

The extract we looked at from the VAT Food Manual (VFOOD4260) deals with the purpose text (in Note (3B)(a)) and tells us that HMRC consider it to be “necessary to consider all the facts and circumstances relating to how the food is supplied” if it is suggested that food supplied hot does not meet this test.

Except for the confirmation that marketing something as “fresh” is not the same as marketing it as “hot” (which is relevant for Note (3B)(e)), we cannot see anything in VAT Notice 701/9 or this passage from the Manual that helps Morrisons to establish a relevant legitimate expectation. The commentary on Note (3B)(a) reflects, but does not add to, what can be derived from the caselaw. The comments on Note (3B)(c) are not unhelpful to Morrisons, in that they focus on keeping products hot using appliances, but the text is clear that this test will “in practice … mainly affect” products kept hot this way; there is no suggestion that its effect is restricted to products kept hot using appliances. Most importantly, the commentary, so far as it touches on Note (3B)(d), is very unhelpful. An ordinary sophisticated taxpayer who knew what VAT Notice 701/9 had to say about packaging could not reasonably construe what little Officer Dean had to say about chicken paper bags as a ruling that they were not problematic as far as Note (3B)(d) was concerned.

 For the reasons we have just given, we do not consider that there is anything in HMRC’s published guidance which is sufficient to found a legitimate expectation either that the overall VAT treatment of CDRCs is that they would be zero-rated or (beyond the helpful point that marketing a product as fresh is not to be equated with marketing it as hot and the unhelpful point about grease retentive packaging) that HMRC would take a particular position as regards any aspect of the storage or marketing of CDRCs and any of the tests in Note (3B).

Our answers to the first two of the four questions set out at [394] above are:

Our answers to these questions make it unnecessary for us to prolong an already extremely long decision by considering questions (3) and (4).

For the reasons discussed above we have concluded that:

For the reasons set out above, we have found against Morrisons on both the Liability Ground and the Legitimate Expectation Ground.

This appeal is dismissed.

This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.