Refson v HM Revenue and Customs
| Jurisdiction | England & Wales |
| Judgment Date | 18 June 2008 |
| Neutral Citation | [2008] EWHC 1759 (Ch) |
| Docket Number | Case No: CH/2007/APP/803 |
| Court | Chancery Division |
| Date | 18 June 2008 |
[2008] EWHC 1759 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
His Honour Judge Peling QC sitting as a Judge of the High Court
Case No: CH/2007/APP/803
Mr E Refson appeared in person
Mr T Buley appeared on behalf of the Respondent
JUDGE PELLING QC:
This is the hearing of an appeal by way of case stated from a decision of the General Commissioners for Customs & Excise, in relation to an issue concerning the ability of Mr Refson, the appellant, to claim as legitimate expenses the cost of travelling from his home in Cheshire to a rented flat in London. There is no dispute (at any rate before me) that, as a matter of tax law, he is not entitled to that relief. However, what the appellant has contended before me, and indeed, contended before the General Commissioners, as is recorded in paragraph 6 of the case stated, is that:
“6.1 The appellant contacted the respondents to enquire about the tax treatment of his renting a property in London, travel expenses between Cheshire and London and expenses incurred in New York. The appellant was informed that, provided the expenses were reasonable, he would be able to claim them in relation to both sets of travel. The appellant accordingly claimed relief for this expenditure.
6.2 Had the appellant known that he would have had a more favourable tax treatment in the US, he would have elected to be resident there.
6.3 Although the appellant accepted that he had not produced documentary evidence in support of his travel expenses of £7,500, for each of 2002/2003 and 2003/2004 tax years, this was in any event a conservative estimate.
6.4 In the event, the appellant was informed that the expenses would not be allowed for tax purposes, and the appellant's case is that it is unreasonable for the respondents to, effectively, renege on what had previously been agreed between the parties.”
The Revenue's response in relation to that issue is recorded at paragraph 7 of the case stated, where it is recorded that:
“The respondents contended that:
7.1 They had no record of the alleged telephone conversation during which the appellant was told that his travelling expenses would be allowed as long as they were reasonable. The appellant has not produced any evidence to corroborate that testimony.
7.2 The appellant's claim that his returns for the earlier years were not challenged may well be correct. His return for 1998/1999 contains a deduction of £6,960, which was not taken up for enquiry. This is simply a consequence of the self-assessment regime of, 'process now, check later'. The fact that the respondents failed to enquire into one or more returns containing a possible ineligible expense does not affect their right to enquire into subsequent returns.”
This issue was not determined by the General Commissioners, who, having set out the relevant statutory provisions and relevant case law relating to the liability to deduct expenses of the sort which the appellant seeks to deduct, dismissed the appeal against the respondent's amendments of the self-assessment on the basis that the appellant's expenses were not wholly, exclusively, necessarily incurred in the course of his duties.
The question of law, which was stated for the opinion of the High Court, is set out in paragraph 11 of the case stated and is to the following effect:
“The question of law for the opinion of the High Court is whether or not the appellant is entitled to deduct his expenses of travelling to and staying in London for the year ended 5 April 2002 and for the year ended 5 April 2003 on the grounds that the respondent had not queried similar expenses deducted by the appellant in previous self-assessment returns and that he had purportedly been informed by the respondent that these expenses were deductible.”
As will be apparent from what I have said so far, the issue which the appellant wishes to have resolved is an issue concerning “legitimate expectation” (to use the phrase familiar to those lawyers who practice in the judicial review field). The circumstances in which a claim of legitimate expectation can succeed against the Inland Revenue are very limited. They were dealt with, authoritatively, by Bingham LJ (as he then was) in the well-known case of Crown v Inland Revenue Commissioners ex parte MFK Underwriting Agencies Ltd [1991] WLR at 1545, where, at page 1569, Bingham LJ set out the circumstances in which a plea of legitimate expectation can succeed as follows:
“I am, however, of opinion that in assessing the meaning, weight and effect reasonably to be given to statements of the Revenue the factual context, including the position of the Revenue itself, is all important. Every ordinarily sophisticated taxpayer knows that the Revenue is a tax-collecting agency, not a tax-imposing authority. The taxpayers' only legitimate expectation is, prima facie, that he will be taxed according to statute, not concession or a wrong view of the law (see R v A-G, ex p Imperial Chemical Industries plc (1986) 60 TC 1 at 64 per Lord Oliver). Such taxpayers would appreciate, if they could not so pithily express, the truth of Walton J's aphorism: 'One should be taxed by law, and not be untaxed by concession' (see Vestey v IRC (No 1) [1977] 3 All ER 1073 at 1098, [1979] Ch 177 at 197). No doubt a statement formally published by the Revenue to the world might safely be regarded as binding, subject to its terms, in any case falling clearly within them. But where the approach to the Revenue is of a less formal nature a more detailed inquiry is, in my view, necessary. If it is to be successfully said that as a result of such an approach the Revenue has agreed to forgo, or has represented that it will forgo, tax which might arguably be payable on a proper construction of the relevant legislation it would, in my judgment, be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled. I say 'ordinarily' to allow for the exceptional case where different rules might be appropriate, but the necessity in my view exists here. First, it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the Revenue's ruling, unless it is the same as an earlier transaction on which a ruling has already been given. It means that he must indicate to the Revenue the ruling sought. It is one thing to ask an official of the Revenue whether he shares the taxpayer's view of a legislative provision, quite another to ask whether the Revenue will forgo any claim to tax on any other basis. It means that the taxpayer must make plain that a fully considered ruling is sought. It means, I think, that the taxpayer should indicate the use he intends to make of any ruling given. This is not because the Revenue would wish to favour one class of taxpayers at the expense of another but because knowledge that a ruling is to be publicised in a large and important market could affect the person by whom and the level at which a problem is considered and, indeed, whether it is appropriate to give a ruling at all. Second, it is necessary that the ruling or statement relied on should be clear, unambiguous and devoid of relevant qualification.
In so stating these requirements I do not, I hope, diminish or emasculate the valuable developing doctrine of legitimate expectation. If a public authority so conducts itself as to create a legitimate expectation that a certain course will be followed it would often be unfair if the authority were permitted to follow a different course to the detriment of one who entertained the expectation, particularly if he acted on it. If in private law a body would be in breach of contract in so acting or estopped from so acting a public authority should generally be in no better position. The doctrine of legitimate expectation is rooted in fairness. But fairness is not a one-way street. It imports the notion of equitableness, of fair and open dealing, to which the authority is as much entitled as the citizen. The Revenue's discretion, while it exists, is limited. Fairness requires that its exercise should be on a basis of full disclosure. Counsel for the applicants accepted that it would not be reasonable for a representee to rely on an unclear or equivocal representation. Nor, I think, on facts such as the present, would it be fair to hold the Revenue bound by anything less than a clear, unambiguous and unqualified representation.”
The difficulty (which immediately occurred to me when I first read these papers prior to the start of the appeal) is that the issue which arises has not been the subject of any findings by the General Commissioners, which makes it virtually impossible for an appellate court to deal with the issue by way of case stated. However, on the opening of the appeal, counsel for Her Majesty's...
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John Walter Boulting v The Commissioners for HM Revenue and Customs
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