Browallia CAL Ltd, R (On the Application Of) v General Commissioners of Income Tax

Under section 49(1) of the Taxes Management Act 1970, an inspector considers whether there was a reasonable excuse for a late appeal. If permission is refused, the General Commissioners determine the application on reference. Their discretion is not confined to the question of reasonable excuse. They may consider all relevant circumstances, including prejudice, the public interest and the injustice that refusal may cause. Where the Commissioners mistakenly treat their discretion as restricted, their decision contains an error of law. Judicial review may then quash the decision and, where only one lawful outcome is possible, direct the Commissioners to hear the substantive appeal.

The taxpayer sought judicial review of the General Commissioners’ refusal to extend time for an appeal against a loss determination disallowing claimed trading losses. The taxpayer’s advisers had appealed related tax and penalty assessments but, through an office-transfer and document-handling error, failed to appeal the loss determination within time. The inspector refused an extension, and the matter was referred to the General Commissioners under section 49(1) of the Taxes Management Act 1970. The Commissioners held that their discretion was limited to deciding whether there was a reasonable excuse. The central issue was whether, on reference, their discretion was wider.

1. Statutory scheme. Section 49(1) of the Taxes Management Act 1970 contemplates two stages. The inspector may permit a late appeal where there was a reasonable excuse and the application was made without unreasonable delay. If the inspector is not satisfied, the application must be referred to the General Commissioners.
2. Scope of Commissioners’ discretion. On such a reference, the General Commissioners’ discretion is at large. Section 49(1) does not prescribe how that discretion must be exercised. They may consider matters beyond reasonable excuse, including absence of prejudice to the Revenue, the public finances and the Commissioners, and demonstrable injustice to the taxpayer.
3. Application. The losses had been disclosed in the taxpayer’s return. The related assessment had been appealed in time, putting the availability of the losses in issue, and the Revenue could identify no relevant prejudice. Refusal would irretrievably prevent examination of whether the losses were properly allowable. The circumstances were therefore an appropriate case for extending time.
4. Disposition. The Commissioners had misstated the extent of their statutory powers and thereby erred in law. Their determination was quashed. Time was extended so as to validate the taxpayer’s appeal by its letter of 31 May 2002, and the Commissioners were directed to hear and determine that appeal.

The judgment describes an earlier refusal by the inspector and a subsequent determination by the General Commissioners. This was a first-instance application for judicial review of the Commissioners’ decision. The decision was quashed and the Commissioners were directed to hear and determine the substantive appeal.