R v IRC ex parte National Federation of Self-Employed and Small Businesses

Facts

Casual workers in the newspaper printing industry in Fleet Street had for years given false names to their employers and avoided paying tax on their earnings. Employers had paid them without deducting tax. The Inland Revenue Commissioners reached an arrangement that it would not investigate or collect tax for the past if the workers filed accurate returns for the future. The National Federation of Self-Employed and Small Businesses, which represented taxpayers who complied with their obligations, sought judicial review of the arrangement, claiming that it was unlawful and asking for an order requiring the Commissioners to assess and collect the tax.

Issue

Whether the Federation had a sufficient interest, within section 31 of the Supreme Court Act 1981 and the rules of court, to seek judicial review of the Commissioners' decision about another group of taxpayers; and whether the Commissioners had acted unlawfully.

Held

The Commissioners' appeal was allowed. The Federation had no sufficient interest to challenge the arrangement made with other taxpayers, because the duty of the Commissioners was owed to the Crown, not to other taxpayers, and the Federation had not shown that the Commissioners had acted unlawfully. Sufficient interest was a mixed question which cannot be separated from the legal and factual context of the complaint.

Ratio

• Sufficient interest is not a mere preliminary hurdle: at the leave stage it excludes busybodies, but at the full hearing the question must be decided in the legal and factual context of the complaint, including the statute under which the public body acts, and in light of the merits.
• A taxpayer does not have a sufficient interest to challenge the way the Revenue has dealt with another taxpayer, because the statutory scheme of confidentiality and of the Commissioners' managerial discretion treats such matters as being between the Revenue and the individual.

The judgments

Key reasoning

• The Commissioners have a discretion in the care and management of taxes, which allows them to compromise or forgo collection where a practical judgment is needed, and the court will interfere only if they act outside it.
• A taxpayer has no interest in the tax assessed on another, since the system of assessment is a matter between the Revenue and the individual and is confidential.
• The Federation had not made out a case that the arrangement was unlawful; once the merits were examined, there was no arguable ground to justify giving the Federation the right to proceed.

Obiter

• Statements that standing should be approached generously in cases where there is a serious allegation of unlawful conduct by a public body, so that a public-spirited person or group would not be shut out, and that in some contexts a sufficient interest may be shown by a body with a genuine concern for legality.

Where it fits in the module

On Senior Courts Act 1981, s 31(3), the FHS debate asks what sufficient interest means and who should be allowed to challenge public decisions. NFSE is the starting point, usually read with R v Secretary of State for Foreign Affairs, ex p World Development Movement [1995] 1 WLR 386, R v HM Inspectorate of Pollution, ex p Greenpeace (No 2) [1994] 4 All ER 329 and Walton v Scottish Ministers [2012] UKSC 44. Candidates need to say whether the courts have moved from the Lord Wilberforce approach of tying standing to the merits to one that protects the public interest in legality, whether the Lord Diplock concern about lacunae should prevail, and how the constitutional role of the courts is affected by letting pressure groups sue.

Criticisms

• Tying standing to the merits means that the question is not answered before the case is argued, which makes the filter at the permission stage unpredictable and wastes costs when cases proceed on an uncertain basis.
• The decision leaves the lawfulness of an alleged arrangement to forgo tax unreviewed because no one has standing, which creates the lacuna in accountability that Lord Diplock warned of, since only the Revenue and the individual could challenge it.
• Treating the Revenue's duty as owed to the Crown and confidential as between the Revenue and each taxpayer applies a private-law model of the relationship, which does not reflect the public interest in the equal application of tax law.
• The mixed question approach gives courts discretion to restrict or widen standing, with little guidance on how generous to be in different contexts, and later courts have used the flexibility in different directions.