Lower Mill Estate Ltd & Conservation Builders, R (on the application of) v HM Revenue & Customs

Where a judicial review claim concerning legitimate expectation depends on disputed primary facts, the normal and appropriate course is for the statutory appeal tribunal to determine those facts first. This is particularly so where the tribunal can hear oral evidence and resolve conflicts of fact.

A legitimate expectation may in principle protect a taxpayer from retrospective enforcement where the Revenue made a specific, unambiguous representation on full disclosure and had power to make it. The VAT context, including the practical effect on invoices and third parties, may strengthen the case against retrospective departure. The application should be adjourned where the tribunal’s findings may determine whether the expectation arose at all.

The claimants sought judicial review concerning VAT assessments raised by HMRC for periods from 2005 onwards. They relied on alleged oral and written representations that their transactions qualified for zero-rating and contended that retrospective assessment was unfair and breached a legitimate expectation.

The claimants had also appealed to the VAT Tribunal. Permission for judicial review had been granted after consideration of R (Davies) v HM Revenue and Customs [2008] EWCA Civ 933. The central issue was whether the judicial review should proceed before the statutory appeal, or be adjourned so that the tribunal could determine the disputed facts relevant to disclosure, the nature of the transactions and the alleged representations.

1. The judicial review was adjourned. The application could be restored after determination of the statutory VAT appeal, and the claimants had liberty to apply if unforeseen circumstances frustrated that course.
2. The ordinary sequence is for the statutory appeal to be determined before judicial review where the disputed facts are central to the public-law claim. The VAT Tribunal was better placed to hear oral evidence, resolve conflicts and draw factual inferences. The facts were material to whether the claimants had made full and frank disclosure and whether any legitimate expectation arose.
3. The court distinguished R (Davies) v HM Revenue and Customs [2008] EWCA Civ 933. That case concerned reliance on general income-tax guidance and residence, whereas this case concerned alleged express representations about the VAT rate applicable to particular transactions and the practical need to invoice third parties correctly. The interlocutory approach in Davies did not require judicial review to proceed first here.
4. In principle, legitimate expectation may operate even though the underlying tax would otherwise be payable. It may be unfair or an abuse of power for the Revenue retrospectively to enforce tax contrary to a specific representation, provided the representation was within the authority’s powers and the necessary factual requirements are established.
5. Al Fayed v Advocate General for Scotland [2004] STC 1703 illustrated the limit: a public authority cannot bind itself by an ultra vires representation. The court was satisfied that HMRC had power to give VAT rulings and guidance, but made no final finding on whether the alleged representations were made, whether disclosure was sufficient, or whether the transactions engaged the Halifax doctrine.
6. The court urged the VAT Tribunal to list the appeal promptly because the unresolved VAT liability created serious commercial uncertainty and the judicial review had already been delayed.

First-instance judicial review proceedings. Permission had been refused on the papers by Cranston J and later granted by Goldring J after consideration of R (Davies) v HM Revenue and Customs [2008] EWCA Civ 933. The present court adjourned the substantive judicial review pending determination of the VAT Tribunal appeal.