R (Drax Power Ltd and Another) v HM Treasury and Another

JurisdictionEngland & Wales
JudgeSir Terence Etherton,Lord Justice Lloyd Jones,Lord Justice Sales
Judgment Date21 October 2016
CourtCourt of Appeal (Civil Division)
Date21 October 2016

COURT OF APPEAL

Before Sir Terence Etherton, Master of the Rolls, Lord Justice Lloyd Jones and Lord Justice Sales

R (Drax Power Ltd and Another)
and
HM Treasury and Another
Withdrawal of tax exemption is within the government's power

The Government had been entitled to remove the exemption for renewable source electricity from the Climate Change Levy, an environmental tax levied on electricity, gas, solid fuels and liquefied petroleum gas supplied to business and the public sector.

The Court of Appeal so held in a reserved judgment in dismissing an appeal by the appellant, Infinis Energy Holdings Ltd, against the decision of Mr Justice Jay([2016] EWHC 228 (Admin)) by which he dismissed an application for judicial review, brought by the claimants, Drax Power Ltd and Infinis Energy Holdings Ltd, of the decision of the Government, announced in the Budget of July 2015, to remove the exemption. The defendants were HM Treasury and HM Revenue and Customs. Mr Michael Fordham, QC and Mr Jason Pobjoy for the appellant; Mr James Eadie, QC, Ms Jennifer Thelen and Mr Oliver Jones for the defendants.

THE MASTER OF THE ROLLS, delivering the judgment of the court, said that there was a clear and consistent line of European Union authority that a requirement for a protected legitimate expectation to arise in a context such as the present was the promotion by the relevant public authority, by means of the giving of a precise, unconditional and unambiguous assurance whether by words or conduct, of an expectation as to how it would behave in future, and the same standard governed the application of the related principles of legal certainty and foreseeability.

The appellant could not bring itself within the principle of protection of legitimate expectations according to that test. The Government had made no promise and given no assurance that the exemption would be maintained indefinitely, nor that it would be subject to the giving of a period of notice before being changed.

In the context of establishing and changing the rules of a national tax regime, a prudent and circumspect economic operator would appreciate that the tax authorities and the national legislature might change the tax code without giving notice.

The authorities and legislature were entitled to do so, as it was their function in a democratic society to manage the public finances by weighing up all the competing demands on the public purse against all the possible, conflicting ways of raising tax revenue and...

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