In a recent article for the British Tax Review (see here for Peacock, ‘The “Margin of Appreciation” Afforded in the Tax Tribunals: is there any Limit to Judicial Deference?’ (2017) BTR 404), Jonathan Peacock QC explores recent caselaw where taxpayers have sought to challenge actions by HMRC where a “margin of appreciation” is present. In other words, those cases where the challenge directed itself towards policy choices made by the government or Parliament. In his article he concludes that:

“challenges to primary legislation are almost certain to fail; challenges to operational decisions made by HMRC might succeed…[and importantly] the taxpayer needs to point to some other cardinal principle offended by the actions of HMRC which the courts can balance against the incredible weight on the other side of the balance”

Peacock is absolutely correct. Challenges to policy choices by government or Parliament face an almost insurmountable hurdle in the tax arena, where it is orthodox for the courts to respect those choices (an interesting exercise would be to compare this to for instance challenges to immigration policy choices). This deference is entirely understandable and there are good reasons to support it – there are difficult policy choices which need to be made in respect of tax for which our politicians are ultimately accountable and these are made with the benefit of the best available evidence. Judges simply are not institutionally competent to lightly second guess in such instances. At the same time, one does query the degree to which there is genuine scrutiny of legislation as it passes through the House of Commons and or serious deliberation over the way in which policy choices are formulated in legislation – the recent case of Vrang should give pause for thought on whether the implications of policy choices are fully appreciated by those responsible for their promulgation.

Peacock is right too to point out that taxpayer challenges will be more successful if they point to some particular choice made by HMRC in the operation of the particular legislation, rather than being directed to the legislation itself. This is something that I have raised here on this blog in the context of the current lot of challenges to Accelerated Payment Notices (see here and the links therein). Taxpayers should try to argue for instance that, even though the express statutory conditions attached to the discretionary power to issue an APN may have been satisfied in the case, there may be some other implied condition which has not (see here), or that HMRC failed to take into account a relevant consideration (or took into account an irrelevant consideration) when exercising the power (see here), or that the exercise of the power in the circumstances breached some important constitutional principle, such as access to justice (see here). Even then, taxpayers must still overcome the hurdle that courts in practice will in turn give a “margin of appreciation” (in Peacock’s words) to actions taken by HMRC pursuant to its discretionary powers (see here).

The article is a thoroughly enjoyable read and to be recommended both for its substance and also because it displays Peacock’s unrivalled ability to distill complex issues into simple, discrete points.