© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A6. Absurdity and unworkability
THE PRINCIPLE
- If a literal construction leads to injustice or absurdity adopt another reasonably possible construction that avoids such a result
"[57] Secondly, there is a presumption against absurdity. As explained in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28; [2023] 1 WLR 2594 ("PACCAR") at para 43 (per Lord Sales):..." (Wathen-Fayed v. SoS [2025] UKSC 32)
"[43] The courts will not interpret a statute so as to produce an absurd result, unless clearly constrained to do so by the words Parliament has used: see R v McCool [2018] UKSC 23, [2018] 1 WLR 2431, paras 23-25 (Lord Kerr of Tonaghmore), citing a passage in Bennion on Statutory Interpretation, 6th ed (2013), p 1753. See now Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), section 13.1(1): “The court seeks to avoid a construction that produces an absurd result, since this is unlikely to have been intended by the legislature”..." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)
"[54] It is well established that the court will lean against a construction of legislation which produces absurd or unworkable results, if there is an available alternative construction which does not do so. I am persuaded that a construction of the 2002 Act which either (on a rigorous view of section 97(2)) confers sole management of estate facilities on the RTM company with a right to manage one block or, on a more realistic view, forces the RTM company and the former manager (landlord, third party or manager under the 1987 Act) or the RTM companies managing other blocks into a shared management relationship of the type contended for by the First Respondent, is both absurd and unworkable. By contrast a right to manage the premises, which extends only to the relevant building, and to facilities exclusively used by its occupying tenants, avoids all, or almost all, of those difficulties." (FirstPort Property Services ltd v. Settlers Court RTM Company Ltd [2022] UKSC 1)
"[23] As I have said, it is my opinion that Parliament cannot have intended that a potentially extremely wide range of post-2003 offences would be excluded from the ambit of the 2002 Act. That would produce a result which would be plainly at odds with the entire scheme of the legislation. It is, of course, possible to regard section 156 as an open and simple gateway and that, on a literal interpretation, every offence of which the defendant is convicted, whether or not it preceded March 2003, must be considered. But the absurd outcome which this would produce is a strong indication against treating the section in that way." (R v. McCool [2018] UKSC 23)
"[34]...iii) "[I]t is without question a legitimate method of purposive statutory construction that one should seek to avoid absurd or unlikely results": Project Blue Ltd v Revenue and Customs Commissioners [2018] UKSC 30, [2018] 1 WLR 3169, at paragraph 31, per Lord Hodge. In R (Edison First Power Ltd) v Central Valuation Officer [2003] UKHL 20, [2003] 4 All ER 209, Lord Millett said in paragraphs 116 and 117 that the Courts "will presume that Parliament did not intend a statute to have consequences which are objectionable or undesirable; or absurd; or unworkable or impracticable; or merely inconvenient; or anomalous or illogical; or futile or pointless" but that "the strength of these presumptions depends on the degree to which a particular construction produces an unreasonable result". That observation was quoted with approval by Lord Scott in Gumbs v Attorney General of Anguilla [2009] UKPC 27, at paragraph 44, and also cited by Lord Kerr in R v McCool [2018] UKSC 23, [2018] 1 WLR 2431, at paragraph 25;" (HMRC v. Innovative Bites Limited [2025] EWCA Civ 293, Newey, Males, Nugee LJJ)
“In particular, if a literal construction would lead to injustice or absurdity, and the language admits of an interpretation which would avoid it, then such an interpretation may be adopted: e.g. Luke v IRC [1963] AC 557, at 577; Mangin v. Commissioner of Inland Revenue [1971] AC 739 at 746; Jenks v. Dickinson [1997] STC 853.” (Harding v. HMRC [2008] EWCA Civ 1164, §51, Lawrence Collins LJ).
"In my view the interpretation proposed by the taxpayer does produce an anomaly as it results in the accrued gain on the shares falling out of the charge to tax. If that is the result of a mistake or omission by the legislature then the only remedy is amending legislation. But if, having regard to the anomaly, and to the scheme of the legislation, s 139(1) could be interpreted to apply only to disposals of qualifying corporate bonds, that should be done in order to give effect to the intention of the legislature." (Jenks v. Dickinson [1997] STC 853)
- Strained interpretation permissible to avoid absurdity
"[21] The only principle of statutory interpretation which might enable the plain meaning of legislation to be circumvented is that it can be given a strained interpretation where that is necessary to avoid absurd or perverse consequences: see, for example, Inland Revenue Comrs v Hinchy [1960] AC 748, 768 (Lord Reid), and R (Edison First Power Ltd) v Central Valuation Officer [2003] 4 All ER 209, paras 25 (Lord Hoffmann) and 116 (Lord Millett). Indeed, even greater violence can be done to statutory language where it is plain that there has been a drafting mistake: R v Federal Steam Navigation Co Ltd [1974] 1 WLR 505, 509 (Lord Reid), and Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586, 592 (Lord Nicholls of Birkenhead).” (Shahid v Scottish Ministers [2015] UKSC 58)
"[25] My Lords, the presumption against double taxation is one facet of a wider common sense principle of the construction of statutes by which courts will often imply qualifications into the literal meaning of wide and general words in order to prevent them from having some unreasonable consequence which it is considered that Parliament could not have intended: see Stradling v Morgan (1560) 1 Pl 199 and, for a more recent example, R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2002] 2 WLR 1299. The strength of the presumption depends upon the degree to which the consequences are unreasonable, the general scheme of the legislation and the background against which it was enacted." (R (Edison First Power Limited) v. Central Valuation Officer [2003] UKHL 20)
MEANING OF ABSURDITY
- Wide meaning of absurdity (inconvenient, pointless, artificial, disproportionate counter-mischief)
"[43] ... As the authors of Bennion, Bailey and Norbury say, the courts give a wide meaning to absurdity in this context, “using it to include virtually any result which is impossible, unworkable or impracticable, inconvenient, anomalous or illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief”..." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)
[24] In Bennion on Statutory Interpretation (6th ed) at section 312 of what the author describes as the Code, the following statements are made:
“(1) The court seeks to avoid a construction that produces an absurd result, since this is unlikely to have been intended by Parliament. Here the courts give a very wide meaning to the concept of ‘absurdity’, using it to include virtually any result which is unworkable or impracticable, inconvenient, anomalous or illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief.
(2) In rare cases, there are overriding reasons for applying a construction that produces an absurd result, for example where it appears that Parliament really intended it or the literal meaning is too strong.”
[25] Bennion suggests that the courts have been prepared to give the concept of absurdity an expansive reach. In support of that view, he cites Lord Millett in R (Edison First Power Ltd) v Central Valuation Officer [2003] UKHL 20, [2003] 4 All ER 209 at paras 116 and 117, where he said:
“The courts will presume that Parliament did not intend a statute to have consequences which are objectionable or undesirable; or absurd; or unworkable or impracticable; or merely inconvenient; or anomalous or illogical; or futile or pointless. But the strength of these presumptions depends on the degree to which a particular construction produces an unreasonable result. The more unreasonable a result, the less likely it is that Parliament intended it ...”
See also Lord Scott of Foscote’s approval of this dictum in Gumbs v Attorney General of Anguilla [2009] UKPC 27, para 44." (R v. McCool [2018] UKSC 23)
- Accidental association of companies arising from coincidence not what Parliament was seeking to identify with control test
"On the whole matter, in my opinion, what Parliament was dealing with in Section 469 was a real association between two companies, not just the accidental association arising from what must often be a coincidence - namely, that the same individual is the first-named trustee in the register of two companies in respect of a majority holding of shares by two trusts which may have no connection with one another at all." (CIR v. Lithgows Ltd (1960) 39 TC 270 at 278 (Court of Session))
- Hesitate before accepting results contrary to business sense
“The capital gains tax is of comparatively recent origin. The legislation imposing it, mainly the Finance Act 1965, is necessarily complicated, and the detailed provisions, as they affect this or any other case, must of course be looked at with care. But a guiding principle must underlie any interpretation of the Act, namely, that its purpose is to tax capital gains and to make allowance for capital losses, each of which ought to be arrived at upon normal business principles. No doubt anomalies may occur, but in straight-forward situations, such as this, the courts should hesitate before accepting results which are paradoxical and contrary to business sense. To paraphrase a famous cliché, the capital gains tax is a tax upon gains: it is not a tax upon arithmetical differences.” (Aberdeen Construction Group Ltd v Inland Revenue Commissioners [1978] AC 885 at 892 – 893, per Lord Wilberforce, adopted in Hardy v. HMRC [2016] UKUT 332 (TCC), §29, Arnold J and Judge Sinfield).
- Clear words needed to reach counter-intuitive result (approach with common sense)
"[84] It is necessary to approach the matter with a degree of common sense. In Revenue and Customs Comrs v Apollo Fuels Ltd [2016] EWCA Civ 157, [2016] 4 WLR 96, [2016] STC 1594 ("Apollo Fuels") this court rejected an attempt to tax employee car-leasing arrangements where the employees paid the full market rate for the use of the vehicles, observing at [3] that income tax is a tax on income, and that such a counter-intuitive result would require Parliament to express itself in clear terms. In the same way here, unless compelled by clear legislation or binding authority I would not hold that a payment made to fund an employee benefit (or indeed something that is not in fact taxable, as in Apollo Fuels) is itself a taxable emolument. In particular, Rangers SC is not authority for that proposition.
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[106] The potential consequences of HMRC's arguments are not difficult to see. For example, owner-managed companies (which, it should be borne in mind, must self-assess their tax liabilities) would have to consider whether the longstanding practice of allowing directors to draw on loan accounts in fact gives rise to immediate PAYE and NIC obligations. Groups that fund service companies that employ staff would have to consider whether those funding payments also result in an immediate earnings charge when they are used to confer benefits such as season-ticket loans." (HMRC v. Currell [2026] EWCA Civ 445, Falk LJ)
Use of hypothetical examples to illustrate unworkability/absurdity
"[9] Before becoming immersed in the complexities of the arguments each way, it is instructive to focus for a moment upon two examples of the surprising consequences of the way in which HMRC puts its case. First, take a case in which P first acquires an interest in a relevant care home building by a zero-rated first grant of a 21-year lease. A year later the ownership of the building (ie the real right of property) comes on the market and P buys it, (or in England the freehold reversion), so as to become the outright owner of the building. Five years later it grants an identical 21-year lease of the building to a care home operator but retains the ownership (the real right of property). On HMRC’s case, paragraph 36(2) is triggered, because P has disposed precisely of the entirety of the (leasehold) interest which it acquired under the first grant. The continued right of ownership which P had later acquired would be ignored, as would the fact that, from year two until year six, the original lease had merged (by confusion with the property right) and been extinguished.
[10] In the second example P, the owner of a disused mill which has been owned by his family for over a hundred years, decides to convert it into a care home and operate it to make a living, and receives numerous zero-rated supplies in connection with its conversion, but no zero-rated first grant of the mill itself. Within ten years after completion of the conversion he either sells the ownership and retains a lease, or leases the care home while retaining the ownership. Since there is no earlier zero-rated first grant with which the later sale or lease can be matched, how can it be decided, on HMRC’s case, whether or not paragraph 36(2) is triggered? In this context it is important to note that Part 2 of Schedule 10 (of which paragraphs 36 and 37 are the main operative provisions) applies whenever there has been any kind of zero-rated supply or supplies in connection with the relevant building, not merely a zero-rated first grant of a major interest in it. They include the supply of specified construction or conversion services, and of building materials.
[11] These two examples, and many others, suggest that there must be something wrong with any interpretation of the simple language of paragraph 36(2) which leads to a conclusion that P has disposed of P’s entire interest in relevant premises when, in reality, P had at all material times an interest in it or a fortiori, as in the present case, a major interest in it.
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[44] More fundamentally, this construction contended for by HMRC simply fails to make sense of sub-paragraph (2), whatever rational purpose may be assigned to it, as is illustrated by the two examples at the beginning of this judgment. Why should a self-supply charge be triggered where P, after the receipt of an earlier lease as a zero-rated first grant, later acquires full ownership and then disposes only of a lease? And how on HMRC’s case does paragraph 36(2) work at all when other zero-rated supplies are received by P without ever receiving a zero-rated first grant? Nor is there any rational purpose behind paragraph 36(2) under which it could be triggered by a financing by way of sale and leaseback, but not by way of a loan on security." (Balhousie Holdings Ltd v. HMRC [2021] UKSC 11)
- Overly wide interpretation of prohibition: what possible objection could there be?
"[81] Secondly, section 5 provides that no crematorium may be constructed "in the consecrated part of the burial ground of any burial authority". It is well understandable why a crematory building should not be allowed to be built on consecrated ground, but what possible objection could there be, for example, to the disposal of ashes on such ground, or indeed to a memorial or ornamental garden? Indeed, the same applies to the building of a chapel. The extended wording and the appellant's interpretation would, however, require all such uses to be restricted." (Wathen-Fayed v. SoS [2025] UKSC 32)
EFFECT OF ABSURDITY
- Effect depends on extent to which construction produces unreasonable result and availability of alternative construction
"[43] ... The width of the concept is acceptable, since the presumption against absurdity does not apply mechanistically but rather, as they point out in section 13.1(2), “[t]he strength of the presumption … depends on the degree to which a particular construction produces an unreasonable result”. I would add that the courts have to be careful to ensure that they do not rely on the presumption against absurdity in order to substitute their view of what is reasonable for the policy chosen by the legislature, which may be reasonable in its own estimation. The constitutional position that legislative choice is for Parliament cannot be undermined under the guise of the presumption against absurdity. There is an issue between the parties whether the presumption against absurdity provides relevant guidance in the circumstances of this case." (R (oao PACCAR Inc) v. CAT [2023] UKSC 28, Lord Sales)
- Not permissible to disregard words of statute because of a perception of practical difficulty
“...we accept [HMRC’s] point it is not permissible to disregard the words of a statute because of a perception of practical difficulty.” (HMRC v. Leekes Limited [2016] UKUT 320 (TCC), §31, Roth J and Judge Bishopp).
- Lack of any obvious explanation for treating similar situations differently not overriding ordinary interpretation
"[38] The only countervailing consideration, to my mind, is the lack of any obvious explanation, in the statutory history or otherwise, of the different treatment of this form of loss relief. In a post-hearing note Mr Nawbatt gave a detailed account of the treatment of the various forms of loss relief under the previous legislation. This shows, as is common ground, that the pre-2007 law did not draw any material distinction between share loss relief (section 574 ICTA 1988), and trade and employment loss relief (section 380 ICTA 1988). Mr Nawbatt was also able to point to some indications in the ITA Explanatory Notes (eg in respect of section 1025, which is not directly relevant to the present case) that the authors of the notes may have assumed that share loss relief would be subject to TMA Schedule 1B, in the same way as the other forms of relief. However, taken at their highest, these indications are far from providing a basis for departing from the ordinary principles of statutory interpretation, absent any suggestion that they produce a result which is absurd or unworkable. Indeed, for the taxpayer’s liability to be determined by reference to legal archaeology of this kind would negate the whole purpose of the tax law rewrite. It is neither necessary nor appropriate for the court to speculate as to Parliament’s intentions to justify a departure from the natural interpretation of the statutory language." (R (oao Derry) v. HMRC [2019] UKSC 19)
Keep odd results in perspective
"That is a puzzle to which I can offer no answer, but it is in my judgment important to keep it in perspective. The problem, such as it is, is one which will arise only in the probably infrequent cases where the material time does not coincide with the date of disposal, and where the qualifying beneficiary's interest in possession did not subsist at the earlier date. There is no indication in the material before us that this relatively remote possibility has in practice given rise to any difficulty in the 14 years since entrepreneurs' relief was first enacted in its modern form, or indeed in relation to the predecessor provisions which can be traced back to the Finance Act 1985. I appreciate, of course, that this is not necessarily an answer to inferences which can legitimately be drawn from the way in which the section is drafted; and in his able submissions for HMRC, Mr Nawbatt KC, who did not appear below, was at pains to emphasise that he was not relying on section 169O as itself being the source of a further requirement which the qualifying beneficiary has to satisfy, but rather as an integral part of the overall statutory scheme which must be taken into account when construing the requirements of section 169J." (The Quentin Skinner 2015 Settlement L v. HMRC [2022] EWCA Civ 1222, Henderson, Lewison, Snowden LJJJ)
- Parliament decided to draw a bright line test which inevitably leads to anomalies at the border
“The requirement that a Company must certify to HMRC that all the conditions of EIS relief (including that in section 173(2)(aa)) are satisfied, effectively required the Company in this case to make a declaration to HMRC that the shares being issued did not carry any preferential rights to assets on a winding up. That requirement 5 seems to us a clear “bright line” test (as Mr Pritchard described it), which would have been much easier for a company officer to understand, than a test which, on Mr Howard’s argument, required an application of the de minimis test or a test which required “a normal commercial interpretation” of the words “carry…any… preferential right”. We therefore reject Mr Howard’s submission.” (Flix Innovations Limited v. HMRC [2016] UKUT 301 (TCC), §49, Mann J and Judge Brannan).
“The plain legislative intent is to draw a clear, and readily understandable, dividing line between those debt securities which are exempt from CGT and those which are chargeable. That will inevitably lead to some cases where there is a difference in treatment even though a similar economic result may obtain. That is nothing more than a normal incident of the drafting of statutory conditions defining a particular statutory concept that has no independent existence outside the terms set by the legislation. That outcome is, with respect to the FTT which thought otherwise, neither illogical nor absurd. It is not for the tribunal to fill any perceived gap, or to seek to equate cases on one side of the dividing line with similar cases falling on the other side by reason of similarity in effect or economic equivalence. Purposive construction cannot go so far. To construe such legislative conditions in that way would risk undermining rather than applying the distinction determined upon by Parliament according to the plain words of the legislation.” (HMRC v Trigg [2016] UKUT 165 (TCC), §57, Asplin J and Judge Berner).
- Anomalies arising only in unusual circumstances less of an aid to construction
“Where a particular construction produces an anomaly which only arises in the context of a rather unusual set of facts, its force as an aid to construction is, in my judgment, somewhat weakened. If, in construing a statute, the court's object is 'to ascertain the will of the legislature', it is a little easier to accept a construction which gives rise to an undisputed anomaly only in the context of a somewhat unusual series of facts, whose existence simply may not have occurred to the legislature, than where such an anomaly is comparatively self-evident or of more general application (as in Luke and O’Rourke).” (Jenks v. Dickinson [1997] STC 853 at 873).
- Parliament may have been aware of and intended this absurdity
“The unfairness of a rule which allows no deduction for a wasting capital asset is recognised in the authorities…The very fact of those [capital] allowances indicates that the meaning of “capital” in the prohibition in section 33 remains as it was understood more than half a century ago…Thus it seems to us that we must resolve this question by reference to the understanding of “capital” in, and the reasoning of, the authorities without regard to whether or not the result might seem absurd or unfair.” (Ingenious Games LLP v. HMRC [2017] UKFTT 429 (TC), §§21…22…23, Judge Hellier).
Query whether there is a threshold
- Query whether anomaly must be sufficiently astonishing
“I accept that in consequence the immigrant tax avoider who makes his dispositions before taking up residence in this country would escape liability under the section. I would for my part find it fruitless to speculate whether this consequence was foreseen and accepted, or arose through inadvertence. I would not, in any event, regard it as sufficiently astonishing in itself to cast doubt on what I have described as the natural meaning of the words used…” (CIR v. Willoughby [1997] STC 995)
"As regards the assertion that anomalies will follow from acceptance of the taxpayer's interpretation, I think that one must remember that any scheme designed to give relief in one country from income tax suffered in another on the same income for the same or a corresponding period is productive of many difficulties, not all of which can be perceived and provided against in advance. The disputes which have come before the court in this connexion amply bear this out. In these circumstances, anomalies cannot be treated as a satisfactory guide in matters of construction, though no doubt there are cases where they may turn the scale. The present is not such a case, and the courts can here do no more than look at the language used and give it a fair and reasonable construction." (Duckering v. Gollan 42 TC 333)
- Odd results only relevant if there is a real ambiguity
“The Tribunal was influenced by its perception that it would be “very odd” to permit a taxpayer to elect to claim EIS relief against the gain made on the disposal of an asset which was, for taper relief purposes, a non-business asset without also allowing the taxpayer to make such an election against different parts of a single gain arising on the disposal of a single asset. Such considerations may be relevant to resolving any real ambiguity in the terms of particular provisions, but in this case it does not appear to me that there exists any ambiguity in the provisions for EIS relief and taper relief.” (HMRC v. Stolkin [2014] UKUT 165 (TCC), §37, Richards J).
- But ambiguity may arise from anomalies
"I am unable to accept that this strict approach is the right one. An ambiguity in a statutory provision may arise in more than one way. In the present case, s 72(4) read in the context of the Act as a whole and, in particular, in the context of s 72 as a whole, leads the reader to conclude that the statutory intention was to limit the subsection to small distributions. That was how the learned Judge read it. That was how I read it. The natural construction of subs (4) in its context is, in my opinion, that it is limited in its scope. But the absence of any express limitation makes it possible that no limitation was intended. The contrast between the limitation that would be inferred from a reading of the subsection in its statutory context on the one hand, and the absence of any express limitation on the other hand, produces, in my Judgment, an ambiguity.
Accordingly, in my opinion, it is permissible as an aid to construction as an aid to identifying the legislative intention behind s 72(4), to take into account the anomalies that the absence of any limitation to the scope of the subsection will produce. It is permissible to take account of the antecedent legislation. The 1979 Act is a consolidating Act and it is to be presumed that there was no intention to change the previous law. It is permissible to take account of the manner in which, in the 1979 Act, other types of small distributions are dealt with." (O'Rourke v. Binks 65 TC 165 at 184, Scott LJ)
LIMITS
- There may be cases in which an anomaly cannot be avoided by interpretation
“But there may be cases in which the anomaly cannot be avoided by any legitimate process of interpretation: 30 eg Revenue and Customs Comrs v Bank of Ireland Britain Holdings Ltd [2008] EWCA Civ 58 at [44], [2008] STC 398 at [44].” (Harding v. HMRC [2008] EWCA Civ 1164, §51, Lawrence Collins LJ).
“This conclusion, of course, means that the aim of the legislation as a tax avoidance measure has not been achieved in the present case. However, this is because the measures, which were tailored to deal with a situation such as the present, did not have the intended effect, and admittedly failed to transfer trust gains so that they could be matched with capital payments. That being so, in my judgment it is not opento this tribunal to strain the facts, and the clear meaning and effect of the legislation, to the extent which would be necessary to produce the outcome for which HMRC argue.” (Bowring v. HMRC [2015] UKUT 550 (TCC), §92, Barling J).
See further Drafting mistakes
EXAMPLES
- No rational legislature could have intended traders to be able to refresh capital allowances without any real cost
"[78] We are not concerned in the present case with a scheme designed to exploit generous first-year allowances, but rather with a scheme designed to subvert the basic scheme of the legislation by enabling a trader with existing capital allowances for plant and machinery used in his trade to sell those assets to a bank and then reacquire them from the bank in a way that would generate fresh allowances at no additional cost to the trader apart from the fees charged by the promoter of the scheme and implementation costs. No rational legislature could have intended traders with existing allowances to be permitted to increase the amount of their capital allowances in such a way, not least because (if it worked) the scheme could then be repeated indefinitely at intervals of a few weeks (or even less). Nor, by any stretch of the imagination, could an artificial scheme of this nature, financed by circular movements of money from and back to the Bank, be described as a legitimate means of providing the trader with the equivalent of a deduction in computing his profits for the depreciation of assets in respect of which he already enjoyed capital allowances, and which he could continue to use in his trade without interruption while the scheme ran its course." (HMRC v. Altrad Services Limited [2024] EWCA Civ 720, Henderson, Nugee, Whipple LJJ)
- Nonsensical gap in the period looked at by an anti-avoidance provision would be absurd
"[60] In short, the FTT and UT were correct to conclude that the proviso does not contain a loophole that permits transactions earlier on the same day of the distribution to escape its application, a result which would be absurd.
[61] The difficulty with the drafting is that the term "effective date" is defined in s.119 FA 2003 as a particular date, generally the date of completion. It is a concept used throughout the legislation – Ms Shaw told us that it was used almost 200 times – with no indication of any scope to treat it as referring to a particular time on a day. Accordingly, read literally, s.54(4)(b) appears to refer to a three year period ending on the day immediately before completion, in this case 4 July rather than 5 July 2011. But that would leave a nonsensical gap between midnight on that date and the completion of the relevant transaction on the following day.
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[70] Similarly, in this case Parliament cannot have intended the operation of the proviso to be avoided by the simple expedient of ensuring that the transaction qualifying for group relief was entered into after, rather than before, midnight on the effective date." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588, Falk LJ)
"[19] We are satisfied that a literal interpretation of section 77(5)(a) is anomalous to the explicit purpose of the Act. It could not have been intended that criminals have a day's grace to dispose of their assets or to require either the prosecution, the enforcement agencies or the court to devise a scheme, outside the Act, to catch relevant assets. A literal interpretation of section 77(5) would require this.
[20] In argument Mr McNally was asked to address a factual scenario somewhat different to the one that presents in this case. What if, he was asked, the appellant had committed the offence late at night and unable to access her bank account had given herself a period of lying low and had made the deposit within her bank account and onward transfer minutes after midnight had struck? That, he said, would mean that that particular disposal would have been caught by the statutory provision because it would have been made on a date after the date on which the offence had been committed.
[21] It cannot be right that the Parliamentary draftsman would have encompassed within section 77(5)(a) the potential different treatment of any asset dependent on which time of the day an offence was committed. We see this particular example, extreme though it may be, as demonstrating what could rightly be categorised, and which Mr Evans invites to conclude, was the absurdity or gross anomaly of a literal translation of section 77(5)(a) as contended for by Mr McNally.
[22] We have no hesitation in endorsing the argument that there must be a purposive construction of the provision and in doing so, the subsection must read as though the date upon which an offence is committed must refer to the actual time of commission and after which any tainted gift will fall for the consideration in the court's powers of confiscation." (R v. Lehair [2015] EWCA Civ 1324)
"[161] In terms of ascertaining the nature of the transactions to which this part of the proviso was intended to apply, we have regard to the apparent absurdity in policy terms of leaving what Mr Jones described as an "uncovered gap" in the form of transactions which occurred earlier on the effective date, and we place considerable weight on the use of the phrase "immediately preceding" in the legislation. This phrase shows that transactions immediately before the distribution transaction were intended to be within the specified period, and we consider that we should be slow to adopt an interpretation which would mean that those transactions which had occurred the most immediately beforehand (ie that same day) were not within the prescribed period. Such an approach is supported by the Explanatory Notes which, as set out above, state that the exception does not apply if "the vendor has claimed group relief for the land on a transaction that has taken place in the three years prior to the transaction". This explanation focuses on the occurrence of the transactions themselves, which is consistent with SDLT being a tax on transactions.
[162] This means that we consider that the relevant period for lookback should be interpreted as the three years prior to the transaction itself." (The Tower One St George Wharf Limited v. HMRC [2024] UKUT 373 (TCC), Judge Zaman and Judge Bowler)
- Would make "no sense" to deny tax treatment based on whether relief claimed rather than whether relief was actually due
"[47] The effect of HMRC's approach is to impose a market value based charge on a distribution – the starting point for which is no such charge, due to the Case 3 exception – depending on whether a claim for group relief happened to have been made, however erroneously that claim was made and whatever its outcome (including, for example, if the claim was withdrawn). On the facts of this case, HMRC would have to accept that if B64 had claimed sub-sale relief rather than group relief, as HMRC maintained it was entitled to do, then that would have made all the difference.
[48] At the hearing, Mr Henderson confirmed on instruction that even if B64's group relief claim had been formally denied and it had been assessed to SDLT (rather than erroneously being treated as entitled to sub-sale relief) then HMRC's position would remain that the proviso is engaged, because that is how the legislation operates. As he recognised, that is the logical consequence of HMRC's argument. However, it makes no sense in the context of the mischief at which the provision is aimed and indeed it appears to give rise to a penal result. Further, it renders HMRC's own approach to the legislation incoherent." (The Tower One St George Wharf Limited v. HMRC [2025] EWCA Civ 1588, Falk LJ)
- "Incredible" if possibility of a loan treated more harshly than an actual loan
"To a limited extent, particularised in the Section, any such capital sum would be treated for all the purposes of the Income Tax Acts as the income of the recipient for that year. It seems to be incredible that the mere possibility of a loan being made should bring upon the settlor the severe consequences set out in Section 38 (4) if the actual making of a loan only brings about the less severe consequences set out in Section 40." (Vestey v. IRC 31 TC 1 at 115)
- Making charge effective overriding coherent overall scheme
"[39] Regulation 9 does, therefore, give rise to some difficulties for HMRC’s interpretation of Regulation 4. However, our task is to construe Regulation 4 and not to provide a comprehensive explanation for why Regulation 9 is drafted as it is. Our overall conclusion is that Regulation 4 provides a free-standing power to assess the scheme sanction charge arising in these proceedings. We express our conclusion in this limited way since we do not need to decide whether Regulation 4 sets out a freestanding power to assess in all cases (and indeed, as we have noted, determining the source of the power to assess in Cases 1 to 3 is not straightforward given the provisions of Regulation 9).
[40] Our conclusion accords with the ordinary meaning of Regulation 4, as applied to the scheme sanction charge, and avoids what we regard as the illogical outcome for which BFL argues under which, despite Parliament having legislated to impose a scheme sanction charge, HMRC would lack a practical power to assess that charge in many cases. As Lord Dunedin observed in Whitney v Inland Revenue Commissioners [1926] AC 37 (at p52):
"My Lords, I shall now permit myself a general observation. Once that it is fixed that there is a liability, it is antecedently highly improbable that the statute should not go on to make it effective. A statute is designed to be workable, and the interpretation thereof by a Court should be to secure that object, unless crucial omission or clear direction makes that end unattainable"." (HMRC v. Bella Figura [2020] UKUT 120 (TCC), Nugee J and Judge Richards)
- Statute posing a question to which the answer, in practice, is always "yes" is absurd
"Were the chicken paper bags "packaging that retains heat (whether or not the packaging was primarily designed for that purpose)"?
[241] The short and simple answer to this question is "yes". We know from Mr Whittaker's research that the chicken paper bags in which CDRCs are stored and then sold retain heat very effectively.
...
[243] The point that Ms Sloane makes, of course, is that, if it is right that all packaging retains heat at least to some extent, which no one seriously questioned, then this test has been drafted in a very strange way. In effect, any food above the ambient temperature which is provided in some form of packing will be standard rated, because ex hypothesi it is provided in packaging that retains heat (and the legislation makes it abundantly clear that it does not matter whether the packaging was primarily designed for that purpose or not). The second limb of Note (3B)(d) would also be redundant, because there is no form of "other" (i.e. non-heat retentive) packaging". If all Parliament had meant to ask is "Is the product supplied in packaging?" that would have been a much simpler way of putting the point.
[244] Just as Ms Sloane is right that it is very strange to ask a question which isn't really a question at all, because the answer is always "yes", Mr Watkinson is also correct when he says that the language of Note (3B)(d) is simple, straightforward and abundantly clear.
[245] We have discussed at some length the authorities dealing with the correct approach to statutory interpretation, which is (as the CA put it in Innovative Bites) that "absent absurdity or the like" the language of the statute will provide the answer.
[246] However, that is exactly where we find ourselves. We are confronted with what appears to be a consequence which parliament, despite the clarity of the language it has used, cannot sensibly be regarded as intending. So, we can and should consider appropriate extraneous materials to see if they can help us to interpret this legislation in a way which avoids that outcome." (WM Morrison Supermarkets Ltd v. HMRC [2025] UKFTT 1542 (TC), Judge Baldwin)
- Presumption against interpretation that would give rise to burden that was very difficult to discharge
"[74] There are compelling reasons why that principle applies in the present context. First, as was pointed out in Pwr, to require the prosecution to prove that the defendant knew that the organisation had been proscribed would render section 12(1A) virtually unworkable, since it would impose a burden of proof on the prosecution which it would generally be very difficult to discharge. Legislation is not to be interpreted in a way which would deprive it of utility, where another interpretation is reasonably available..." (R v. ABJ [2026] UKSC 8)
- Only core part of statutory definition of crematorium applied (not expanding words) for particular provision to avoid absurdity (including not being able to connect to public highway)
"[75] If the extended wording is given its naturally wide meaning, as explained above, it would include access roads. This, however, results in an absurdity and renders the Act unworkable. It would mean that a burial authority would never be able to connect its proposed crematorium site to a highway because any access road has to be 50 yards from the public highway. The consequence would be that a crematorium could only be built in cemeteries or burial grounds which already had the necessary access roads. That would completely undermine the Act's purpose of facilitating the establishment of crematoria.
[76] Mr Green for the appellant suggested that a possible answer to this is the "balloon and string" theory of statutory interpretation referred to in the Stephen White article. This suggests that a distinction can be drawn between works on the crematorium site and those leading up to it. The crematorium up to its boundary fences is the balloon, from which radius distances are to be measured, and the access road is the string, which is not within the distance requirements. Whilst this may be a convenient solution, there is no basis for it as a matter of statutory wording. If it is necessary to build an access road in order to establish a crematorium then such a road is incidental or ancillary to the purpose of burning human remains. That is as true of an access road within the boundary of a crematorium site as it is of an access road leading to the site. Giving the extended wording its natural meaning results in both sections of that access road being within the definition of crematorium, and so the absurdity remains.
...
[78] The presumption against absurdity therefore strongly suggests that the extended definition of crematorium cannot apply to section 5. There are other indications to the same effect. If there is no justification for limiting the extended wording to the process of burning human remains and to dealings with ashes, then it applies to all incidental and ancillary uses of the site. It is, however, impossible to see what rationale there could be for applying distance restrictions to all such uses. Why, as the judge pointed out, should there be a distance requirement from landscaping or an ornamental garden? The same applies to many other uses, such as a chapel, waiting area, ceremony hall, access road, car park or service yard. This is even more so when one considers that the distance requirement applies not just to a dwelling house but also to a public highway. An example given in oral argument is of a gate lodge building, which is a common feature of many cemeteries. If this is part of a crematorium, then no such building could be located within 50 yards of the gate. It makes no sense to impose such a distance restriction.
[79] A solution to the difficulty and indeed absurdity of applying the extended definition of crematorium to section 5 is to hold that, for the purposes of that section, only the core definition applies. In other words, in section 5 "crematorium" means a "building fitted with appliances for the purpose of burning human remains" (ie the crematory building). This is supported by other provisions in section 5." (Wathen-Fayed v. SoS [2025] UKSC 32)
- Interpretation of procedural provisions that produced bizarre consequences rejected
"It is fanciful to suppose that he is expected to object to the withdrawal of the appeal in the hope that the commissioners will increase the assessment without any prompting from him. Lord Diplock's observations were evidently based on the terms of what is now s 50(3), which he considered to be exhaustive. With all due respect to Lord Diplock, the consequences of this reading of s 50(3) are so bizarre that I cannot bring myself to believe that Parliament intended them. I would hold that the functions of the inspector at the hearing of the appeal are not restricted to what is expressly authorised by the subsection; as a party to an appeal in which the assessment is at large, in that it may be increased as well as reduced or extinguished, he is entitled to ask the commissioners to exercise any of the powers which Parliament has entrusted to them and to adduce evidence in support of his application." (Glaxo Group Ltd v. IRC [1996] STC 191 at 200, Millett LJ)