Refson v Revenue and Customs

A claim that HM Revenue and Customs created a legitimate expectation about tax treatment cannot ordinarily be determined by the General Commissioners or on an appeal by way of case stated. The appropriate route is judicial review. Such a claim is subject to stringent requirements. The taxpayer must ordinarily have made full disclosure and obtained a clear, unambiguous and unqualified representation. A taxpayer is generally entitled to be taxed according to statute, rather than an incorrect concession or view of the law. Where HMRC has failed to explain the jurisdictional position to a litigant in person, that conduct may justify a limited costs order even though the appeal is dismissed.

The appellant appealed by way of case stated from the General Commissioners’ dismissal of amendments to his self-assessments. The underlying dispute concerned deductions for travel between Cheshire and London and accommodation in London. The General Commissioners decided the expenses were not wholly, exclusively and necessarily incurred in the performance of his duties, but did not determine his contention that HMRC had previously represented that the expenses were deductible or had failed to challenge similar earlier claims.

The central issue was whether that legitimate-expectation contention could be determined in the statutory tax appeal.

1. Jurisdiction. The appeal was dismissed because the General Commissioners had no jurisdiction to determine the appellant’s legitimate-expectation claim, and the High Court could not determine it on an appeal by way of case stated. The appropriate remedy was judicial review.
2. Legitimate expectation. The court applied the principles stated by Bingham LJ in Crown v Inland Revenue Commissioners, ex parte MFK Underwriting Agencies Ltd [1991] WLR 1545. A taxpayer’s prima facie expectation is taxation according to statute. In an informal approach to HMRC, the taxpayer must ordinarily disclose the relevant facts fully and obtain a representation that is clear, unambiguous and unqualified.
3. The court accepted the authorities stating that an extra-statutory concession or legitimate-expectation challenge must be brought by judicial review, including Hatt v Newman and Demibourne Ltd v HMRC [2005] UKSPC 00486. The appellant’s alleged telephone conversation had not been evaluated by the Commissioners, and the case stated procedure could not supply the necessary findings.
4. HMRC undertook not to enforce the tax for six weeks. If the appellant submitted a fully particularised legitimate-expectation case within that period, HMRC would not enforce pending its decision, and would allow ten days after service of that decision before enforcement. Any judicial review claim could seek a further stay.
5. The court declined to decide whether dismissal of the statutory appeal might affect any discretion arising from the alleged expectation. That issue had not been argued and would be for the Administrative Court if raised.
6. Although the appeal was dismissed, HMRC’s failure to explain the jurisdictional objection to a litigant in person justified departing from the ordinary costs rule. HMRC was awarded £300 rather than its claimed £2,907.50.

• General Commissioners: dismissed the appellant’s appeal against amendments to his self-assessments, holding that the expenses were not deductible. They did not determine the legitimate-expectation issue.
• High Court (Chancery Division): dismissed the appeal by way of case stated. The legitimate-expectation issue could be pursued only by judicial review, subject to HMRC’s undertaking.