© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
F6. Effectiveness
- Presumption in favour of liability to tax being effective
"[34] Finally, the effect of this argument, if it were correct, would be that HMRC cannot and have never been able to assess charges imposed on individuals under section 208 or 209. That interpretation renders the legislation unworkable. Where possible, the interpretation of legislation by the courts and tribunals should be such as to secure a workable result in a case where Parliament has clearly imposed a liability. As Lord Dunedin stated in Whitney v Inland Revenue Commissioners [1926] AC 37 (at page 52):
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.
[35] For these reasons, we consider that the FTT reached the right conclusion, and we reject Mr Gordon's first submission." (Trachtenberg v. HMRC [2025] UKUT 206 (TCC), Judge Thomas Scott and Judge Greenbank)
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- Presumption that merely permissive power to make regulations not critical to operation of tax charge
"[28] First, beginning with the statutory wording, the power to make regulations in section 255 is clearly expressed in discretionary or permissive terms. Section 255(1) states that the Board "may by regulations make provision for and in connection with the making of assessments...". Subsection (2) adopts the same language.
[29] We agree with Ms Murray that if the drafter had intended the provisions introduced by FA 2004 to be an exclusive and self-contained code, with no provisions as to collection and assessment included in the primary legislation, it is very likely that they would have specifically addressed such a fundamental feature of the code, rather than simply including permissive powers." (Trachtenberg v. HMRC [2025] UKUT 206 (TCC), Judge Thomas Scott and Judge Greenbank)
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- Long-standing assessment provision not effective to allow assessment to new charge
"[29] ...
i) Read naturally, the wording of section 29(1)(a) is not apt to give HMRC the power for which it contends. Section 29(1)(a) speaks of “income” not “amount”, and HICBC is neither “income” nor even charged on income;
ii) While it is doubtless the case that, once self-assessment had been introduced, section 29 was in general terms meant to provide a back-up to that as well as to assessment by HMRC, the provision was framed more precisely. Parliament did not simply authorise HMRC to make an assessment wherever they discovered a shortfall in income tax or capital gains tax, but restricted exercise of the power it was conferring to the particular circumstances specified in, respectively, section 29(1)(a) (income/gains ought to have been assessed to tax), section 29(1)(b) (insufficient assessment) and section 29(1)(c) (excessive relief). It cannot be inferred that Parliament intended section 29(1) to operate wherever income or capital gains tax was thought to be outstanding;
iii) In 1994/1998, there was no question of section 29 giving rise to the anomaly which HMRC say exists now: HICBC had not yet been introduced. Nor, as Mr Yates fairly accepted, could he identify any other anomaly which Mr Wilkes’ construction of the provision would have created in 1994/1998. Not only did HICBC lie in the future, but so did the charges relating to pensions (as to which, see paragraph 47 below) in respect of which comparable issues might be thought to arise (compare Monaghan v Revenue and Customs Commissioners [2018] UKFTT 156 (TC)). Mr Yates suggested that in 1994/1998 there was the potential for anomalies to arise in the future if “income” were not understood to extend to “amount” in section 29(1)(a), but it was entirely within Parliament’s power to prevent any problem. If when enacting subsequent legislation it wished to ensure that section 29(1)(a) applied as regards a new charge to income tax, it could adopt a variety of techniques (among them, amendment to section 29(1)(a) or deeming amounts to be “income”) to ensure that it did so. The simple fact is that, as at 1994/1998, there was no reason to think that the reference to “income” rather than to “amount” in section 29(1)(a) should cause any anomalies or (to quote Lord Hodge) any “absurd or unlikely results”. In other words, that there was no need to depart from the plain wording of the provision for Parliament’s purpose to be achieved; and..." (HMRC v. Wilkes [2022] EWCA Civ 1612, Newey, Baker, Arnold LJJ)
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