MWL International Ltd & Anor v The Commissioners for HMRC

Estoppel by convention may operate against HMRC, but only within the limits imposed by the relevant statutory scheme. It cannot prevent HMRC from performing a positive statutory duty, exercising a statutory power for the public good, or applying mandatory tax provisions which the estoppel would override or undermine.

Whether the First-tier Tribunal has jurisdiction to determine a legitimate expectation argument is a question of purposive statutory construction. Relevant considerations include the substantive legislation, the decision-making provisions, the appeal rights, and whether the proceedings constitute enforcement action. Where liability is mandatory and the appeal rights do not confer a supervisory jurisdiction, the FTT has no jurisdiction to determine such an argument.

The appellants appealed against First-tier Tribunal decisions concerning Class 1A national insurance contributions on cars provided to employees. The FTT found that the cars did not satisfy the statutory pooled-car exemption in Income Tax (Earnings and Pensions) Act 2003, section 167.

The appellants relied on a 1993 agreement with an Inspector of Taxes and argued that HMRC was prevented by estoppel or legitimate expectation from assessing contributions retrospectively. The FTT accepted that the factual requirements for estoppel by convention would otherwise have been met, but held that estoppel could not prevent enforcement of the statute and that it had no jurisdiction to decide the legitimate expectation issue. HMRC sought permission to cross-appeal on the estoppel findings.

The central issues were whether HMRC could be estopped from applying the statutory liability provisions and whether the FTT had jurisdiction to determine the legitimate expectation argument.

1. New point on appeal. Permission was refused for HMRC to argue that the conditions of the 1993 agreement were not satisfied in practice. The point had not been raised below and might have required different evidence and a different trial. The principles in Notting Hill Finance Limited v Sheikh [2019] EWCA Civ 1337 applied.
2. Estoppel against HMRC. Estoppel by convention can in principle operate against HMRC, but its operation is limited by the statutory context. The relevant questions are whether the legislation imposes a positive duty for public benefit, whether the authority could have avoided the statutory provisions by contract, and whether the estoppel would override or undermine those provisions. The principles apply equally to statutory powers and discretions.
3. The agreement substituted ownership of another car for the statutory requirement that private use of the pooled car be merely incidental. It did not regulate actual use and could permit exclusive private use. Enforcing the agreement would therefore prevent HMRC from applying the mandatory conditions in section 167 of Income Tax (Earnings and Pensions) Act 2003. HMRC could not have achieved that result by contract and could not be estopped from doing so. The estoppel appeal was dismissed.
4. Legitimate expectation jurisdiction. The extent of the FTT’s jurisdiction depends on a purposive construction of the particular statutory scheme. The court must consider the substantive legislation, the decision-making provisions, the appeal rights, and whether the proceedings are enforcement proceedings. The provisions governing NIC liability were mandatory. Section 8 of the Social Security Contributions (Transfer of Functions etc) Act 1999 did not confer a discretion to disregard liability, and the appeal provisions did not signal a supervisory jurisdiction. The FTT therefore had no jurisdiction to determine the legitimate expectation argument.
5. Alternative legitimate expectation conclusion. Even if jurisdiction existed, the claim would fail. The agreement would have allowed the appellants to obtain the pooled-car exemption without satisfying a central statutory condition. The public interest in collecting the correct amount of tax substantially counterbalanced the unfairness of retrospective departure. The high degree of conspicuous unfairness required in such a case was not established.
6. The appeal was dismissed. HMRC’s cross-appeal was unnecessary to determine.

• First-tier Tribunal (Tax Chamber): Found that the cars were not pooled cars; held that estoppel could not prevent HMRC from enforcing the statutory provisions; and held that it lacked jurisdiction to determine the legitimate expectation issue.
• Upper Tribunal (Tax and Chancery Chamber): Appeal dismissed. Permission to cross-appeal on whether the agreement’s conditions were satisfied in practice was refused, and HMRC’s remaining cross-appeal was unnecessary to determine.