Marano v Commissioners for His Majesty's Revenue & Customs

Factual and Procedural Background

The appeal concerns the construction of section 103 of the Finance Act 2020 and its effect on whether His Majesty's Revenue and Customs ("HMRC") must prove the involvement of an "officer of the Board" in issuing notices requiring the submission of tax returns under section 8 of the Taxes Management Act 1970 ("TMA 1970") and the validity of penalty assessments under paragraph 18 of Schedule 55 Finance Act 2009 ("Schedule 55").

The dispute arose from penalty assessments made against the Appellant for the late submission of a self-assessment tax return for the 2012/2013 tax year. Notices to file were sent to the Appellant's last known address, but the return was not filed by the due date. HMRC issued a series of penalties including initial, daily, six-month, and twelve-month penalties, as well as a discovery assessment in 2017. The Appellant appealed these penalties and assessments to the First Tier Tribunal (Tax Chamber) ("FTT").

The FTT dismissed the appeal, holding that the notices and penalties were validly issued by HMRC, including through automated computer systems programmed and authorised by HMRC officers. The Appellant then appealed to the Upper Tribunal ("UT"), which considered the evidential basis for officer involvement and the subsequent enactment of section 103 Finance Act 2020, which retrospectively validated automated functions carried out by HMRC.

Legal Issues Presented

1. Whether section 103 Finance Act 2020 removes the requirement for HMRC to prove the involvement of an "officer of the Board" in issuing notices under section 8 TMA 1970.
2. Whether penalty assessments under paragraph 18 of Schedule 55 Finance Act 2009 satisfy the statutory requirements without proof of officer involvement.
3. The proper interpretation and application of section 103 Finance Act 2020, particularly its retrospective effect on automated functions performed by HMRC.
4. Whether the Upper Tribunal erred in its approach to evidential sufficiency concerning officer involvement in issuing notices and penalties.

Arguments of the Parties

Appellant's Arguments

• Section 103 should be interpreted narrowly, akin to section 113(1B) TMA 1970, only authorising computer use for administrative tasks without removing the requirement for officer involvement.
• HMRC must still prove the involvement of an officer of the relevant kind in issuing notices and penalty assessments.
• The term "HMRC" refers specifically to the Commissioners and officers of Revenue and Customs, not to the body as a whole acting independently.
• The Upper Tribunal erred by giving section 103 a broader meaning that removes the evidential burden on HMRC.

Respondent's Arguments (HMRC)

• Section 103 is broadly drafted to validate all functions capable of being done by an officer, including automated processes, without requiring proof of officer involvement each time.
• "HMRC" refers to the body or department as a whole, comprised of Commissioners and officers, and can carry out functions through automated systems legitimately.
• Reliance on section 113(1B) TMA 1970 is misplaced as section 103 is more wide-ranging and supersedes older provisions.
• Section 103 was enacted to resolve uncertainty caused by challenges to the validity of automated notices and penalties issued by HMRC.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
HMRC v Rogers & Shaw [2019] UKUT 406 (TCC), [2020] 4 WLR 23	Requirement that notices must be authorised by an officer of HMRC; evidential burden on HMRC to prove such authorisation.	The UT applied Rogers and Shaw to assess whether sufficient evidence existed of officer involvement in issuing notices and penalties; found evidence insufficient prior to section 103 enactment.
Assem Allam v HMRC [2021] UKUT 291 (TC)	Validity of enquiry notices issued by automated processes.	The UT relied on Assem Allam to support the conclusion that notices issued by HMRC automated systems are valid as if issued by an officer.
PACCAR v Competition Appeal Tribunal and Others [2023] UKSC 28, [2023] 1 WLR 2594	Principles of statutory construction focusing on the purpose and context of legislation.	The court applied PACCAR to interpret section 103 in light of statutory purpose and context, rejecting narrow interpretations that produce absurd or pointless results.
R v McCool [2018] UKSC 23, [2018] 1 WLR 2431	Courts avoid interpretations producing absurd or impracticable results.	Referenced to support broad, purposive interpretation of section 103 avoiding futile or illogical outcomes.

Court's Reasoning and Analysis

The court began by examining the evidential basis for officer involvement in issuing notices and penalties under the pre-section 103 framework, referencing the Upper Tribunal's decision in Rogers and Shaw. It noted that the evidence before the FTT was limited to automated records without direct proof of officer authorisation, which the UT found insufficient.

The court then analysed the legislative purpose and wording of section 103 Finance Act 2020, enacted retrospectively to address the "mischief" of uncertainty surrounding automated functions carried out by HMRC. The section broadly authorises HMRC, as a body distinct from individual officers, to perform any function capable of being done by an officer, including by automated means, with the same legal effect.

The court rejected the Appellant's narrow interpretation that section 103 only permits computer use for administrative tasks without removing the requirement for officer involvement. It emphasized the distinction made in section 103 between HMRC as a corporate body and individual officers, concluding that the statute shifts the focus away from proving individual officer involvement to recognising the validity of actions done by HMRC itself.

The court also considered the transitional provisions protecting prior judgments invalidating acts not done by officers, reinforcing that section 103 was intended to validate automated functions retrospectively and prospectively without the need for repeated proof of officer involvement.

Contemporaneous materials, including ministerial statements and explanatory notes, were found consistent with this broad interpretation, aiming to provide certainty and fairness in the tax system by affirming the legality of HMRC's automated processes.

Applying these principles, the court agreed with the UT that it was no longer necessary for HMRC to prove officer involvement in issuing the notices and penalty assessments in question, provided the notices emanated from HMRC.

Holding and Implications

The court DISMISSED THE APPEAL.

The effect of this decision is that section 103 Finance Act 2020 removes the need for HMRC to prove the involvement of an individual officer in the issuance of statutory notices and penalty assessments when these are carried out by or on behalf of HMRC, including through automated processes. This provides retrospective and prospective validation of such automated functions, thereby resolving previous evidential challenges. The decision does not set new precedent beyond confirming the statutory interpretation of section 103 and its application to the facts of this case. The direct consequence is that the penalties and notices issued to the Appellant by HMRC are valid and enforceable.