London Borough of Harrow v Ayiku

For the Class N Council Tax exemption, the word “or” in the phrase concerning a non-British spouse prevented from taking paid employment or claiming benefits has its ordinary disjunctive meaning. It is sufficient that either condition is satisfied.

In construing tax legislation, a clearly tenable and natural interpretation favouring the taxpayer should generally be preferred, subject to clear contrary indications. The statutory context, including the Immigration Rules and the absence of a rational basis for distinguishing relevant categories of student spouses, supported that construction.

The London Borough of Harrow appealed against a decision of the Valuation Tribunal for England dated 29 November 2011 concerning Ms Ayiku’s liability for Council Tax. Ms Ayiku was the non-British spouse of a foreign student and lived with her husband in a dwelling otherwise occupied by students.

The issue was whether Class N in article 3 of the Council Tax (Exempt Dwellings) Order 1992, as amended, exempted a student’s spouse who was prevented by the terms of her immigration leave from claiming benefits but was permitted to work. The appeal turned on whether “or” in the relevant definition of “relevant person” was conjunctive or disjunctive.

1. Appeal dismissed. The Valuation Tribunal had correctly construed Class N in article 3 of the Council Tax (Exempt Dwellings) Order 1992, as amended by the Council Tax (Discount Disregards and Exempt Dwellings)(Amendment) Order 1995.

2. The ordinary and natural meaning of “or” in the phrase requiring that a non-British spouse be prevented from taking paid employment or claiming benefits is disjunctive. A spouse qualifies as a relevant person if either condition is met. Although a conjunctive meaning was linguistically possible, it was not the most natural reading in context.

3. That interpretation was particularly appropriate in tax legislation. Where a clearly tenable and natural construction favours the taxpayer, it should be preferred unless there are clear indications to the contrary. The legislation was presumed to intend a fair result which did not defeat reasonable expectations derived from its wording. The approach was consistent with Ingram v Inland Revenue Commissioners [1997] 4 All E.R. 395.

4. The legislative context supported treating both relevant categories of student spouses alike: those prevented from working and claiming benefits, and those prevented from claiming benefits but permitted to work. The Immigration Rules provided the relevant background, and there was no clear indication that the amendment intended to create a radical distinction between those categories.

5. The argument that one limb of the definition would become otiose did not determine the issue. The employment limb remained relevant to spouses admitted on other immigration bases, and the argument was in any event neutral between the competing constructions.

6. The contemporaneous departmental guidance, CTIL3, was a relevant aid to construction. Official statements made sufficiently soon after subordinate legislation by the department responsible for administering it may assist in identifying its intended meaning. CTIL3 supported the disjunctive interpretation.

7. General rules may produce hard or apparently anomalous cases. Such examples should not dictate statutory construction where the broader categories and legislative context support another reading, as illustrated by R v City of London Corporation, ex p. Mystery of the Barbers (1997) 73 P&CR 59.

8. Ms Ayiku was therefore exempt from Council Tax liability because her immigration leave prevented her from claiming benefits, even though it did not prevent her from taking paid employment.

• High Court (Administrative Court): appeal from the Valuation Tribunal for England’s decision dated 29 November 2011; appeal dismissed.