Beech Developments (Manchester) Limited & Ors. v The Commissioners for Her Majesty's Revenue and Customs

Permission for judicial review should be granted where the claimant identifies a properly arguable point of statutory construction, even though the court considers that the defendant’s interpretation may ultimately be correct. Regulation 13(3) of the Income Tax (Construction Industry Scheme) Regulations 2005 arguably permits a non-liability direction under regulation 9(5) after a regulation 13(2) determination where an extant appeal could result in the liability being reassessed or the determination being remade. The court should not determine the merits at the permission stage. A delay objection cannot be considered independently where the relevant timing issues are inseparable from the substantive legal question.

The claimants sought judicial review of HMRC decisions dated 13 December 2021 refusing to make non-liability directions under regulation 9(5) of the Income Tax (Construction Industry Scheme) Regulations 2005. HMRC considered that it had no power to issue such directions after making determinations under regulation 13(2).

The claimants maintained that they had extant appeals against those determinations and that an appeal tribunal could remake the relevant assessment or determination, allowing a regulation 9(5) direction to have practical effect. The central issue was whether the regulations mutually excluded those powers.

1. Permission granted. The claimants had identified a properly arguable point of law. The court was deciding whether there was an arguable claim, not whether the claimants had an arguable defence or would succeed on the merits.
2. Regulation 13(2) of the Income Tax (Construction Industry Scheme) Regulations 2005 empowers HMRC to determine and notify the amount payable by a contractor. Regulation 13(3) provides that a determination must exclude amounts in respect of which a regulation 9(5) direction has been made, and that such directions do not apply to amounts already determined.
3. The claimants’ construction was properly arguable. Regulation 9(5) might permit a direction after a regulation 13(2) determination where an extant appeal could lead to the appeal tribunal remaking the appealable assessment, whether in form or substance by making a fresh determination, so that the amount covered by the direction would then be deductible. A related issue arose as to whether HMRC itself could remake a determination.
4. HMRC’s contrary construction might ultimately prove correct. That conclusion did not remove arguability, particularly where the impugned decisions arguably contained a material misdirection of law.
5. HMRC accepted that there was no freestanding delay objection independent of the statutory-construction issue. The timing arguments therefore fell to be considered together with the substantive issue.

The judgment records a renewal hearing following an earlier paper decision by Heather Williams J dated 10 June 2022, which had treated HMRC’s construction as beyond argument. This court granted permission for judicial review.