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

The Commissioners’ care and management power permits pragmatic tax administration and concessions where they facilitate the overall task of tax collection and the highest practicable net return. It does not confer a general dispensing power to refrain deliberately from collecting tax which Parliament has unequivocally imposed merely because the liability is considered objectionable. Nor can the Human Rights Act 1998 be used to reinterpret a general power as authorising an allowance contrary to clear primary legislation. The court further considered that declining to settle a comparable claim was neither unfair nor irrational, and that just satisfaction did not require extending an unjustified tax advantage to the excluded class.

Mr Wilkinson, a widower whose wife died on 23 June 1999, sought an allowance equivalent to Widow’s Bereavement Allowance for the 1999–2000 tax year. The Commissioners refused, stating that there was no legal basis or power to make the payment. Moses J declared section 262 of the Income and Corporation Taxes Act 1988 incompatible with Convention rights under section 4 of the Human Rights Act 1998, but otherwise dismissed the application: [2002] EWHC Admin 182; [2002] STC 347. Mr Wilkinson appealed and the Commissioners cross-appealed. The issues were whether the Commissioners could create an equivalent allowance, whether the Human Rights Act excused non-exercise of that power, and whether refusal to settle was unfair or irrational.

Disposition. The appeal was dismissed. The Commissioners’ cross-appeal succeeded in substance on the first issue. The declaration of incompatibility was upheld, but for a different reason. The Court nevertheless addressed the second and third issues as additional observations.

1. Care and management powers. Section 1 of the Taxes Management Act 1970 gives the Commissioners a wide managerial discretion to administer tax pragmatically. They may make concessions where doing so facilitates the overall task of tax collection and the highest practicable net return. The power does not authorise deliberate non-collection of tax which Parliament has unequivocally imposed merely because the Commissioners regard the liability as objectionable. The authorities, including Bates v IRC [1968] AC 483, the Vestey decisions and R v IRC, ex parte the National Federation of Self-Employed and Small Businesses Ltd [1982] AC 617, supported that constitutional limitation.
2. Widow’s Bereavement Allowance. Parliament intended section 262 of the Income and Corporation Taxes Act 1988, together with section 34 of the Finance Act 1999, to restrict the allowance to women while it remained in force. The Commissioners therefore had no power to grant an equivalent allowance to widowers. Section 3 of the Human Rights Act 1998 could not be used to create that power. Section 262 was incompatible with Article 14 read with Article 1 of Protocol No. 1.
3. Section 6(2)(b). This provision addresses a statutory power whose exercise would inevitably be incompatible with Convention rights, regardless of the circumstances. It does not excuse refusal to exercise a wide general power which is ordinarily Convention-compatible where exercise becomes necessary to avoid a breach. This issue was unnecessary to the result, but the Court disagreed with Moses J’s conclusion.
4. Fairness, irrationality and just satisfaction. The Strasbourg settlements in Crossland and Fielding did not make Crossland a test case or prevent the Commissioners from contesting a similar domestic claim. On the assumed basis that settlement was within their powers, refusal to settle was neither unfair nor irrational. The allowance was an anachronistic and unjustified advantage, prospectively abolished before the Human Rights Act came into force. Unlike Darby v Sweden (1990) 13 EHRR 774, the case did not concern a justified exemption wrongly withheld. Just satisfaction did not require an equivalent payment.

• Court of Appeal (Civil Division). The appeal was dismissed. The declaration of incompatibility was upheld, while the Commissioners succeeded on the scope of their care and management power.
• High Court of Justice, Administrative Court. Moses J, on 14 February 2002, declared section 262 of the Income and Corporation Taxes Act 1988 incompatible with Convention rights under section 4 of the Human Rights Act 1998, but otherwise dismissed the application: [2002] EWHC Admin 182; [2002] STC 347.