taxation of pension schemes (89)
by Roderick Ramage, solicitor, www.law-office.co.uk
first published by distribution to professional contacts on 16 October 2021
This article is not advice to any person and may not be taken as a definitive statement of the law in general or in any particular case. The author does not accept any responsibility for anything that any person does or does not do as a result of reading it.
2022 is the bicentenary of The New Law Journal, which was
founded in 1822 as The Law Journal By
happy coincidence 1843, the year in which the precursor of Gorge Coode’s tract
(as an introduction to the Appendix annexed to the Report of the Poor Law
Commissioners on Local Taxation) was presented to Parliament, is also the year
in which The Law Times, which in 1965 was amalgamated with the Law Journal to
become the New Law Journal, was founded.
The tract was first published as a separate document in 1845 with a
second edition in 1852.
Your client is being prosecuted for causing death by dangerous
driving contrary to the Road Traffic Act 1988, s1, and, before you can advise
about it, you need to form a view whether the offence has or might have been
committed: do the facts match the law? A
start, whether on paper or in your head, is to make a table with two
columns. In column 1 you list, row by
row, the tests in s 1, noting whether all or only one or some of them must be
satisfied for an offence to be committed.
In this example the tests are:
death of another person;
death caused by driving a mechanically propelled vehicle;
your client driving;
driving dangerously; and
driving on a road or other public place.
In column 2 you put the facts relevant to each test,
whether or not that test is satisfied, and, if not, what further evidence, legal
arguments or definitions are needed.
My aim in this article is show that an analysis of the
underlying principles of legislation can enable the simple list of tests in
this example to be refined to assist in the interpretation of legislation (and
also private documents), if the legislators’ intention is not clear.
In my article Will or Shall?,
published in NLJ on 20 April 1970, I mentioned the four elements of a legal
expression identified by George Coode (1807–1869 of Inner Temple), but only as
a background to his guidance about the use and misuse of the word “shall”. Next I explained the four elements more fully
in my article Effective draftsmanship – part 2, in NLJ on 7 January 2005
and their relevance to the drafting of
private documents as well as legislation.
Now I propose the use of these elements as an aid to interpreting
Commands such as “No Smoking” on a
railway carriage window are clear and effective legal expressions, but normally
the requirements for a legal action are more complicated and need to be placed
in their context. First, when drafting a
provision in a document, one must specify the legal action to be expressed. Secondly one must ask who is the subject of
the legal action, ie the person who is required or permitted to do or forbidden
from doing or is to be submitted to the legal action. Thirdly one must ask in what circumstances
does the legal action apply? Finally one
must ascertain what condition must be satisfied in order that the legal action
can have effect. For example: the words "if the tenant desires to
determine the term hereby granted" describe the circumstance or
background; "and gives to the landlord notice ..." and "and up
to the date of such determination pays the rent" are the conditions that
must be satisfied; and "then ... the present demise ... shall cease and be
void", is the legal action. In this
example there is no legal subject, because the legal action takes place
automatically if the circumstance exists and the conditions are satisfied, and
therefore the legal action can be expressed in the passive voice.
Coode describes these elements as
the legal subject (the person to whom
the legal action applies);
the legal action (the obligation,
discretion or prohibition);
the case (the circumstance in which
the legal action applies); and
the condition (what must be done for
the legal action to come into effect).
I was instructed in a tax appeal, in one aspect of which a study of these
elements might have been decisive. In
the event HMRC conceded the point, so it was not argued before the
Tribunal. It does however illustrate my
proposal that these elements can be used as an aid to interpret legislation.
appeal arose under the Finance Act 2004, sch 36, para 12 and the Registered Pension Schemes (Enhanced
Lifetime Allowance) Regulations 2006, SI 2006/131 reg 12. An individual, the aggregate value of whose
pension rights at 6 April 2006 exceeded or were expected to exceed his lifetime
allowance (and therefore was at risk of a lifetime allowance tax charge of 25%
of the excess or 55% if taken a lump sum) could obtain protection from the tax
by notifying HMRC on or before the closing date (5 April 2009). Regulation 12 provides for the submission of a late notification as follows.
(1) This regulation applies if an individual—
(a) gives a notification to the Revenue and
Customs after the Closing Date,
(b) had a reasonable excuse for not giving the
notification on or before the closing date, and
(c) gives the notification without unreasonable
delay after the reasonable excuse ceased.
(2) If the Revenue and Customs are satisfied
that paragraph (1) applies, they must consider the information provided in the
appellant had made his late notification on 21 September 2017, and HMRC refused
to consider it on the ground that he had failed to satisfy both the reasonable
excuse and the no unreasonable delay tests.
HMRC’s position on the no unreasonable delay test was that, if the
appellant had a reasonable excuse, it ended on 20 April 2016, when he first
knew that he ought to have but had failed to notify HMRC for protection before
the closing date, and that the delay until 21 September 2017, about eighteen
months, was unreasonable. The
appellant’s position was that he had a reasonable excuse, it ended on 30 June
2017, when he first knew that it was possible to make a late notification, and
the delay until 21 September 2017, less than three months, was not
the authorities on which HMRC relied was Twaite
v HMRC  UKFTT 0591 (TCC), in which the relevant passages were these.
48 The reasonable excuse was Close’s failure to
advise Mr Twaite of the need for a notification and so this reasonable excuse
necessarily ended when he was told that the notification had been needed.
49 I do not accept that the reasonable excuse can
only have ceased when Mr Twaite became aware of the possibility of making a
late notification. To do so would be to treat any lack of knowledge of the
ability to make a late notification as a reasonable excuse in its own right.
However, the relevant reasonable excuse is that of the reason for not giving
the notification on or before the closing date; clearly, the absence of
knowledge of the ability to make a late notification cannot be a reason for a
notification not having been given on or before the closing date.
conclusion was reached in Gammell v HMRC  UKFTT v HMRC 0049 (TC), in
which the judge found that the reasonable excuse ended only when the appellant
first knew that he could make a late application and the delay of about three
months was not unreasonable.
the two components of the no unreasonable delay test, namely the end of the
reasonable excuse and unreasonable delay, is a “not altogether precise legal standard”, in
respect of which paragraphs 58 and 59 in Build-a-Bear
Workshop UK Holdings Limited v HMRC 
UKUT 67 (TCC) make it clear that an appellant court should not reverse a judge's decision on an
application of such a standard unless he has erred in principle, which makes it
particularly important to do all that is possible to reduce the uncertainty
about the interpretation and so ensure that standards are not unnecessarily
treated as belonging to this category.
The term “not altogether precise legal standard” appears to have been coined by Lord
Hoffman in Designers Guild Ltd v Russell Williams (Textiles) Ltd  1 WLR
2416, paragraph 7. It can be seen as a
modern reflection of the complaint about equity, which, as John Selden (1584–1654) is
recorded as saying, depends on the length of the chancellor’s foot. One judge
can come to a conclusion on this type of issue, while another can reach the
opposite, and, to the extent that
neither decision is appealable, neither can be said to be legally
It is easy to say
(a) that a law, the effect of which is that a person is barred from the remedy
offered by it if he did not know that he could avail himself of it, is absurd,
as reg 12(1)(c) would be if Twaite is right, and (b) that it must therefore be
must be interpreted under the so called golden rule, which was
defined by Lord Wensleydale in Grey v Pearson  H.L. Cas 61 as follows.
grammatical and ordinary sense of the words is to be adhered to unless that would
lead to some absurdity or some repugnance or inconsistency with the rest of the
instrument, in which case the grammatical and ordinary sense of the words may
be modified so as to avoid the absurdity and inconsistency, but no further.
It is not easy to know with any
certainty how to apply the golden and other rules of interpretation, where the
absurdity or inconsistency etc themselves are also uncertain, and there is no tool (other than the chancellor’s
foot as a measure of reasonableness) by which the court can resolve the
uncertainty of a not altogether precise legal standard.
My proposition is that, when faced
with contradictory interpretations, an approach to resolve or reduce the
inherent uncertainty is to reverse engineer the legislation. The first step is to analyse the entire
provision into its elements in the order, in which Coode wrote that they should
be expressed, which is to start with the case followed by the conditions and
finally legal subject and action, ie moving from the general to the particular,
even though this is not always the order in which legislation is actually
expressed. If the case (the
circumstances, which must exist for the legal action to be capable of having
effect) does not exist it, is irrelevant whether the conditions (what must or
must not be done) have been satisfied.
The next step is to ask whether there is any other circumstance, which
is essential for the legal action to take effect and the absence of which would
prevent it from taking effect, but which is not stated in the leal
expression. The existence of an
essential circumstance in the case and the absence words expressing it provide
a mechanism by which “the words may be modified so as to
avoid the absurdity and inconsistency”.
If an the essential circumstance is missing from the legal expression,
it is because either it was so obvious that it did not need to be said or the
legislature had failed to think through the details of what it intended to
An analysis of reg 12 shows how
this mechanism works. There are two
essential circumstances (the case) in reg 12.
One is that the appellant had failed to notify HMRC on or before the
closing date and the other is that he knows that he can notify HMRC after the
closing date. To say the obvious, a
person cannot do something if he does not know that he can do it. If either of these is absent, it is
impossible for the legal action to take effect. The resolution of the contradiction between
Twaite and Gammell is that the appellant’s knowledge that late notification is
possible is not part of his excuse, but is a circumstance without with the
legal action in impossible.
While much legislation expressly states the necessary
circumstances (case), for example Finance Act 2002 s170(1) starts “This section
applies where ...”, it commonly does
not. For example, nowhere in Part 2 of
the Companies Act 2006 is it stated expressly “if a person wishes to form a
company”. Neither of the circumstances
constituting the case in reg 12 is stated expressly. The first, that the appellant had failed to notify HMRC on or before the
closing date, is implied by sub-paragraph (1)(a). The second, is that he knows that he can
notify HMRC after the closing date, is implied by necessity: it is a
circumstance, like the wish of a company promotor in Part 2 of the Companies
Act 2006, which is so obvious that it does not need to be stated.
“Obviousness”, when matters are
not stated in private documents, is well established, from in , 227, in which MacKinnon LJ observed that, “Prima facie that
which in any contract is left to be implied and need not be expressed is
something so obvious that it goes without saying” to Devani
v Wells  UKSC 4, in which the contract did not identify the event on
which commission would be payable, but it was held that court may imply into a
contract anything so obvious that it goes with saying. That obviousness applies also in legislation
is clear from the way that legislation is often expressed.
I show in the box on this page a
complete analysis of regulation 12 by the four elements identified by Coode.
While, in the appeal used to
illustrate my proposition, it is unknown whether HMRC’s skeleton argument
conceded the not unreasonable delay point because of the Coode analysis or the
Gammell decision, both in my skeleton, or for some other reason, I hope that the key, by which
Coode suggested how the legislature locks its meaning into its words, can be
turned in the other direction to unlock
the legislature’s meaning when it is not clear from the words.
Table analysing reg
12 in SI 2006/131 by the four elements of every legal
expression identified by George Coode in On Legislative Expression
The circumstances in
which the legal action applies.
(a) An individual has failed to give a notification to the Revenue and
Customs on or before the Closing Date, which is implied by sub-paragraph
(b) The individual’s ability to comply with condition 2 below, which is
implied by necessity.
Whatever needs to be
done in order that the legal action can occur.
(a) The individual shows that he had a reasonable excuse for not giving
the notification on or before the Closing Date, which is stated in
(b) The individual gives the notification, which is stated in
(c) The individual gives the notification in condition 2. without
unreasonable delay after the reasonable excuse ceased, which is stated in
(d) The Revenue and Customs are satisfied that the case and the conditions
1, 2 and 3 apply, which is stated in part of sub-paragraph (2).
The person in
respect of whom the legal action occurs.
Identified as “The
Revenue and Customs” in sub-paragraph (2)
What the legal
subject is required or permitted to do or is prohibited from doing.
The Revenue and
Customs must consider the information provided in the notification, which is
stated in part of sub-paragraph (2)
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