UK Uncut Legal Action Ltd v HM Revenue and Customs & Anor

A public authority’s published settlement policy does not necessarily govern an exceptional situation outside the policy’s contemplation. HMRC has a broad managerial discretion to secure the highest practicable net revenue, including by weighing litigation, relationship and reputational consequences. A decision-maker must disregard irrelevant considerations, but a decision may stand where the court is satisfied that the same decision would inevitably have been reached without the irrelevant factor. Equality requires rationally based distinctions between materially comparable cases.

The claimant sought judicial review of HMRC’s agreement with Goldman Sachs concerning outstanding National Insurance Contributions, interest and other tax disputes. HMRC officials agreed terms on 19 November 2010 without recognising the need for Programme Board approval. Two Commissioners subsequently ratified the agreement on 9 December 2010.

The claimant alleged breach of HMRC’s Litigation and Settlement Strategy, unlawful consideration of irrelevant matters, breach of HMRC’s statutory duty, and unequal treatment compared with companies that had settled similar disputes in 2005. The claim was confined to declaratory relief.

1. Claim dismissed. The operative decision was the Commissioners’ ratification on 9 December 2010, not the provisional agreement reached on 19 November. The earlier agreement had been affected by mistakes concerning the recovery of interest and the need for Programme Board approval.
2. The 2007 Litigation and Settlement Strategy was not infringed. Interest and principal were treated as separate issues, and the policy was not designed for an apparently concluded agreement reached through HMRC’s own mistakes and requiring later approval. The court also noted that the claimant did not allege that the Commissioners’ assessment of the overall settlement was irrational.
3. Under section 5 of the Commissioners for Revenue and Customs Act 2005, HMRC has a broad managerial discretion. It may weigh the costs and benefits of maintaining a settlement, including litigation risk, the relationship with the taxpayer, continued adherence to the Code of Practice on Taxation for Banks, and HMRC’s wider reputation, provided the considerations are not irrational.
4. Mr Hartnett’s personal or professional embarrassment was not a permissible consideration, but the claimant had not cross-examined him. His evidence denying that it influenced the decision therefore stood. The general rule is that a witness’s evidence is ordinarily accepted unless challenged in cross-examination, subject to the exceptional case of manifest contradiction by objective evidence.
5. The possible embarrassment to the Chancellor was irrelevant. Nevertheless, the court was satisfied that the decision would inevitably have been the same without that factor, because other independent and substantial reasons supported ratification and Ms Dawes reached the same conclusion without relying on it.
6. The statutory-duty challenge failed because it depended on the other unsuccessful grounds. Equality did not require HMRC to charge Goldman Sachs interest in the same way as companies settling in 2005: the circumstances were materially different, and the distinction had a rational basis.

The application for judicial review was dismissed. A declaration was unnecessary, including because HMRC accepted that the Chancellor-related consideration was irrelevant.