Introduction

The case of OWD Ltd (trading as Birmingham Cash and Carry) & Anor v. Revenue and Customs ([2019] UKSC 30) reached the United Kingdom Supreme Court, addressing the extent of Her Majesty's Revenue and Customs Commissioners' (HMRC) powers under the Alcoholic Liquor Duties Act 1979 (ALDA) and the Commissioners for Revenue and Customs Act 2005. The core issue pertained to whether HMRC could grant temporary approval to wholesalers supplying duty-paid alcohol, enabling them to continue trading while their appeals against HMRC's refusal were pending.

The plaintiffs, OWD Ltd along with Hollandwest and Budge Brands, were wholesalers already operating in the duty-paid alcohol market when the Finance Act 2015 introduced the Alcohol Wholesaler Registration Scheme (AWRS). Under this scheme, wholesalers required HMRC approval to continue trading, a condition which HMRC refused, deeming them not fit and proper persons to carry out such activities. The companies appealed this decision to the First-tier Tribunal (FTT) and subsequently sought judicial review to allow them to trade temporarily during the appeal process.

Summary of the Judgment

The UK Supreme Court concluded that HMRC does not possess the authority under section 88C of ALDA or section 9 of the Commissioners for Revenue and Customs Act 2005 to grant temporary approval to wholesalers pending the outcome of an appeal to the FTT. The Court upheld the Court of Appeal's decision, dismissing the wholesalers' appeals and reinforcing the limitations on HMRC’s regulatory powers within the established statutory framework.

Moreover, the Supreme Court addressed the potential role of the High Court in granting injunctive relief based on violations of the European Convention on Human Rights (ECHR), particularly Article 6 (right to a fair trial). However, due to the lack of sufficient evidence demonstrating that such relief was necessary to prevent irreparable harm, the Court did not find grounds to alter the existing judicial approach.

Analysis

Precedents Cited

The judgment extensively referenced several key precedents:

• CC & C Ltd v Revenue and Customs Comrs [2014] EWCA Civ 1653: This case dealt with similar issues concerning the revocation of approval for duty-suspended goods wholesalers and the scope of judicial review.
• Hazell v Hammersmith and Fulham London Borough Council [1992] 2 AC 1: Established that ancillary powers must be interpreted strictly within their statutory context.
• R (Wilkinson) v Inland Revenue Comrs [2005] 1 WLR 1718: Highlighted the limitations of HMRC's ancillary powers under the Taxes Management Act 1970.
• R v Inland Revenue Comrs, Ex p Preston [1985] AC 835: Discussed the extent of procedural fairness in administrative decisions.
• Tre Trakt Rer AB v Sweden (1989) 13 EHRR 309 and Airey v Ireland (1980) 2 EHRR 305: Addressed the practical effectiveness of rights under the ECHR.

These precedents underscored the importance of adhering strictly to statutory provisions and the limited scope of ancillary powers in administrative law.

Legal Reasoning

The Supreme Court's reasoning was anchored in a strict interpretation of the statutory language governing HMRC’s powers. Section 88C of ALDA explicitly states that approval to carry on a controlled activity may only be granted if HMRC is satisfied that the applicant is a fit and proper person. The Court held that this satisfaction must be objective and not influenced by extraneous factors such as the hardship or potential impact on the appeal rights of the wholesalers.

Furthermore, section 9 of the Commissioners for Revenue and Customs Act 2005 was scrutinized to determine if it could serve as a basis for granting temporary approval. The Court concluded that section 9 does not provide HMRC with discretionary powers to override the explicit approval mechanisms established under ALDA. This interpretation aligns with the precedent set in Hazell v Hammersmith, emphasizing that ancillary powers must be exercised within the confines of the primary statutory provisions.

Addressing the potential for High Court injunctive relief, the Court examined whether such relief could override statutory limitations to uphold ECHR rights. It concluded that without explicit statutory authority, the High Court cannot compel HMRC to grant temporary approval, maintaining the integrity of legislative intent.

Impact

This landmark decision reinforces the principle that regulatory bodies like HMRC must operate strictly within their statutory mandates. By clarifying that HMRC lacks the authority to grant temporary approvals under the specified sections, the judgment limits the avenues available to businesses seeking to sustain operations amid regulatory disputes.

Future cases involving HMRC's regulatory decisions will likely reference this judgment to argue against the broad interpretation of ancillary powers. Additionally, the decision may prompt legislative reforms to address gaps in temporary relief mechanisms within the AWRS or similar schemes, ensuring that businesses have clear recourse without overstepping regulatory boundaries.

Complex Concepts Simplified

Controlled Activity

Controlled activity refers to the wholesale sale, offering, or arrangement to sell duty-paid alcoholic liquor. Under ALDA, engaging in such activities without HMRC approval is prohibited.

Fit and Proper Person

A fit and proper person is someone deemed by HMRC to be suitable for conducting wholesale activities involving duty-paid alcohol. This assessment is based on factors like honesty, reliability, and the absence of associations with fraudulent activities.

Alcohol Wholesaler Registration Scheme (AWRS)

The AWRS is a regulatory framework established to ensure that only approved wholesalers can trade in duty-paid alcoholic beverages. It aims to prevent tax fraud and ensure compliance with excise duties.

Judicial Review and FTT Appeals

Judicial review is a process by which courts examine the lawfulness of decisions or actions taken by public bodies like HMRC. In this context, wholesalers appealed HMRC's refusal to grant approval to the FTT (First-tier Tribunal) after seeking judicial review in the High Court.

Section 88C of ALDA

Section 88C of ALDA outlines the conditions under which HMRC can approve an individual or entity to carry out controlled activities. Approval is contingent upon HMRC's satisfaction that the applicant is fit and proper.

Conclusion

The Supreme Court's decision in OWD Ltd v Revenue and Customs significantly constrains HMRC's regulatory flexibility under ALDA and the Commissioners for Revenue and Customs Act 2005. By affirming that HMRC cannot grant temporary approvals in the absence of explicit statutory authorization, the Court upholds the supremacy of clear legislative directives over broad interpretations of ancillary powers.

This judgment serves as a crucial reference point for both regulatory authorities and businesses operating within specialized sectors like alcohol wholesaling. It underscores the necessity for precise legislative frameworks to govern regulatory approvals and highlights the judiciary's role in maintaining the balance between administrative authority and statutory constraints.

Moving forward, stakeholders may advocate for legislative amendments to address the identified gaps, ensuring that businesses retain operational continuity during appeal processes without infringing upon HMRC's defined powers. This case exemplifies the enduring principle that regulatory bodies must operate within the boundaries set by Parliament, ensuring accountability and adherence to the rule of law.