Commissioners of Inland Revenue v Nuttall

JurisdictionEngland & Wales
Judgment Date21 December 1989
Judgment citation (vLex)[1989] EWCA Civ J1221-8
Docket Number89/1256
CourtCourt of Appeal (Civil Division)
Date21 December 1989

[1989] EWCA Civ J1221-8






Royal Courts of Justice


Lord Justice Parker

Lord Justice Ralph Gibson


Lord Justice Bingham


The Commissioners of Inland Revenue
Roland Nuttall

MR STEPHEN J.L. OLIVER, Q.C., instructed by Solicitor of Inland Revenue, appeared for the Appellants (Plaintiffs).

MR COLIN W. CAMPBELL, instructed by Messrs Moon Beever (London Agents for Messrs Warburton Porteous & Co., Birkenhead), appeared for the Respondent (Defendant).




Prior to September 1985 the Inland Revenue had been conducting an investigation into the tax affairs of the respondent. On 24th September the respondent signed a letter addressed to the Commissioners of the Inland Revenue in the following terms: "In consideration of no proceedings being taken against me in respect of the duties set out in the Statement below, which I acknowledge and agree to be unpaid by reason, wholly or in part, of my default, or in respect of the penalties and interest to which I may thereby have become liable under the Taxes Acts, I, Roland Nuttall, of 23A Adelaide Street, Liverpool 5, hereby offer in respect of the said duties, penalties and interest, the sum of £15,000,of which I herewith pay £5,000, and the balance of £10,000 to be paid within 60 days of the date of the letter notifying the acceptance of this offer by you." The "Statement of Duties Unpaid By Me" at the foot of that letter are as follows:





Income Tax



Income Tax



Income Tax



The £5,000 was, as is said in the letter of offer, duly paid. The balance of £10,000 became due within 60 days of 26th September which was the date of the letter of acceptance sent on behalf of the Revenue. That was not paid at that time and has never been paid. Accordingly, the Revenue issued a writ on 21st November 1986 and on 1st June 1988 issued a summons for judgment under Order 14. On 9th November 1988 Master Hodgson, after a very short hearing, gave leave to defend. The Inland Revenue appealed to the judge in chambers who, on 19th May 1989, dismissed the appeal. The hearing on that occasion lasted for one morning. Against the dismissal by the learned judge, who was Mr Justice French, the Inland Revenue now appeal.


The defendant put in a defence, which is exceedingly short. He admits that the letter was sent and accepted, but he denies any liability to pay the sum of £10,000. Paragraph 2 says this: "The said letter of 24th September, 1985 sets out the terms of an agreement reached between the Plaintiffs and the Defendant. The said agreement purports to settle the Defendant's income tax liabilities in respect of the years of assessment 1977/78, 1978/79 and 1979/80." Paragraph 3 reads: "No assessment to income tax was made on the Defendant in respect of the year of assessment 1977/78." Paragraph 4 reads: "The said agreement was entered into by the Inland Revenue in excess of its statutory powers and is therefore ultra vires and of no effect. This is for the following reasons", which I do not set out because they have been fully deployed in the argument before us.


The defendant's case in its shortest form is this. The Inland Revenue are creatures of statute and have only such powers as are conferred upon them by statute. They have never been given by statute any power to make any such agreement as is here the subject of suit. Finally if they had at any time any such power, that power disappeared with the enactment of section 54 of the Taxes Management Act 1970 or, strictly, its predecessor. They point out that in any event this agreement is a hybrid agreement in that it covers three years in respect of one of which there had been no assessment. The learned judge's conclusion is contained in a short paragraph in the last page of the bundle:


"The conclusion I reach is that the argument based on the existence of a short statutory code is correct. If there was a common law power, such power has been superseded by section 54 (or rather by its predecessor). That section is clearly designed to afford the taxpayer a protection he would not otherwise have. By necessary implication any pre-existing power must have been over-ruled.


"The defence raised by the affidavit and the defence which have been filed is one that, in law, I consider will succeed and the appeal should be dismissed."


It will be apparent from the quotation from the learned judge's judgment that although this was an Order 14 application he was asked by the parties to come to a conclusion as to the right answer and not merely to decide whether there was a proper point on which leave to defend should be granted. That there was such a point which was fit for argument appears to me to have been beyond doubt. But as the matter is entirely before us and has been argued, it is right that we should on this occasion decide the point.


It is necessary to refer, but only shortly, to some of the statutory provisions. I start with section 1 of the Inland Revenue Regulation Act 1890. That provides:


"(1) It shall be lawful for Her Majesty the Queen to appoint persons to be Commissioners for the collection and management of inland revenue, and the Commissioners shall hold office during Her Majesty's pleasure.


"(2) The Commissioners shall have all necessary powers for carrying into execution every Act of Parliament relating to inland revenue, and shall in the exercise of their duty be subject to the authority, direction, and control of the Treasury, and shall obey all orders and instructions which have been or may be issued to them in that behalf by the Treasury."


The important words are "shall have all necessary powers for carrying into execution every Act of Parliament relating to inland revenue".


It is also necessary to refer to section 13(1) which provides "The Commissioners shall collect and cause to be collected every part of inland revenue, and all money under their care and management, and shall keep distinct accounts thereof at their chief office."


I now turn to the Taxes Management Act 1970, section 1 of which provides:


"(1) Income tax, corporation tax and capital gains tax shall be under the care and management of the Commissioners of Inland Revenue".


That, I think, is all I need read from that subsection.


Mr Oliver submits that the power to enter into the agreement in issue in this case stems from those two sections. This, in my judgment, is supported by the case of Commissioners of Inland Revenue v. National Federation of Self-Employed and Small Businesses Ltd Vol. 55, Tax Cases, 133. At page 159 in the judgment of Lord Wilberforce there appears this passage which encapsulates the position in a very few words. He says this:


"The Commissioners of Inland Revenue are a statutory body. Their duties are, relevantly, defined in the Inland Revenue Regulation Act 1890 and the Taxes Management Act 1970. Section 1 of the Act of 1890 authorises the appointment of Commissioners 'for the collection and management of inland revenue' and confers on the Commissioners 'all necessary powers for carrying into execution every Act of Parliament relating to inland revenue'. By s. 13 the Commissioners must 'collect and cause to be collected every part of inland revenue and all money under their care and management and keep distinct accounts thereof'. The Act of 1970 provides (s.1) that 'income tax…shall be under the care and management of the Commissioners'. This Act contains the very wide powers of the Board and of inspectors of taxes to make assessments upon persons designated by Parliament as liable to pay income tax."


Then going on to page 162 he deals with the facts and he says this:


"Mr. Hoadley explains the way in which the special offices came to investigate the problem of casual workers in Fleet Street, and the difficulties of discovering the facts. There is, and I think Mr. Payne agrees, no way in which the names and addresses of the defaulting 'casuals' could be obtained, unless their unions were willing to reveal them. Estimating that about £1,000,000 of tax a year were being lost, he decided that action was needed to stop this loss for the future. After reflection he considered that the best way to do so was by way of a special arrangement. In order to make such an arrangement effective, the co-operation of the employers, the workers and the unions was essential. For this purpose he had lengthy discussions in the summer of 1978 with the employers, and the three unions involved, and as a result introduced a special arrangement in March 1979. This provided a method which would ensure that for the future tax would either be deducted at source or would be properly assessed. As regards the past, Mr. Hoadley made it clear to the union representative that, if the arrangement were generally accepted, then if a casual worker registered with the inspector before 6 April 1979 and co-operated fully and promptly in settling his tax affairs (including the payment of any outstanding tax) investigation into tax lost would not be carried out for years before 1977–78, i.e. before 6 April 1977. Investigations into incorrect returns would be unaffected. As I have indicated, to call this an 'amnesty' is liable to mislead. Mr. Hoadley expressed the conviction that an attempt to collect the whole amount due from hostile workers whose identity was unknown, for a period more than two years in the past, would have been unlikely to produce any substantial sums of money and would have...

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