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On appeal from: [2016] EWCA Civ 1160

This appeal considered whether, when HMRC exercise discretion to cancel gross payment registration, they are required to consider the impact on the person holding that registration.

The Supreme Court unanimously dismissed the appeal. This is because the statutory requirements for registration for gross payment are highly prescriptive, including a requirement that the applicant for registration complied, within the previous 12 months, with various tax obligations subject to an exception for noncompliance with reasonable excuse.

s 66(1) of the Finance Act 2004 provides that “the Board of Inland Revenue may at any time make a determination cancelling a person’s registration for gross payment” where certain conditions are satisfied. The word “may” imports an element of discretion. The appellant contended that the discretion under s 66 is unfettered in its terms, which do not exclude consideration of the consequences of cancellation for the company, and therefore, without any indication to the contrary, the impact on the company must be a relevant consideration. The appellant also argued that the cancellation clearly involves an interference with the possessions represented by (at least) the sub-contractor’s entitlement to the full contract price or the bundle of rights inherent in registration, and as such breaches ECHR, art 1 of the First Protocol.

The Supreme Court held that appellant’s first argument, that the discretion under s 66 is unfettered, overlooks the basic principle that any statutory discretion must be exercised consistently with the objects and scope of the statutory scheme. In the instant case, the scheme is highly prescriptive, setting out narrowly-defined conditions for registration in the first place, including a record of tax compliance, and therefore the Court considered it wholly inconsistent with the tightly drawn scheme for there to be implied a general dispensing power. Finally, the Court held that it was unnecessary to decide the art 1 of the First Protocol point as it agreed with the Court of Appeal’s finding that any interference with the rights was proportionate.

For judgment, please download: [2018] UKSC 31
For Court’s Press Summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII

To watch the hearing, please visit: Supreme Court Website (10 May 2018 morning session) (10 May 2018 afternoon session)