The Supreme Court held that HMRC could not allow three duty-paid alcohol wholesalers to keep trading while they appealed refusals of approval under the Alcohol Wholesaler Registration Scheme. HMRC had already decided that the wholesalers were not fit and proper, even for a limited time and even with conditions. Neither section 88C of the Alcoholic Liquor Duties Act 1979 nor HMRC’s ancillary powers allowed that conclusion to be put aside temporarily because an appeal was pending or because the businesses might suffer hardship.
Why approval mattered
The Finance Act 2015 introduced the Alcohol Wholesaler Registration Scheme. A person in the United Kingdom may not sell duty-paid alcoholic liquor wholesale — a “controlled activity” — except with HMRC approval under section 88C of the Alcoholic Liquor Duties Act 1979. Approval may be given only if HMRC are satisfied that the person is a fit and proper person to carry on the activity. It may be limited in time and made subject to conditions. Approved persons go on a register, and buying controlled liquor wholesale from someone who is not approved can be a criminal offence.
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The scheme was meant to close a gap. Dealers in duty-suspended alcohol already needed approval, but alcohol on which duty should have been paid was entering the supply chain without that duty, and there had been no equivalent requirement for duty-paid wholesale.
OWD, Hollandwest and Budge Brands were already in that trade. They applied for approval so they could continue. HMRC refused because they were not satisfied that the wholesalers were fit and proper. Each appealed to the First-tier Tribunal. For this type of decision, classed as an “ancillary matter” under the Finance Act 1994, the Tribunal cannot substitute its own decision. If satisfied that HMRC could not reasonably have reached the decision, it may bring the decision to an end, require a review, or declare it unreasonable and give directions. It has no power to suspend the refusal while the appeal is heard. That differs from certain duty, assessment and penalty appeals, where payment or security can be relaxed because of hardship.
The wholesalers asked HMRC to let them keep trading until the Tribunal decided the appeals. HMRC refused. Judicial review in the High Court failed. The Court of Appeal gave them a limited success, on terms they did not accept. Both sides appealed.
What the Court of Appeal had held
The Court of Appeal thought section 88C could support time-limited approval pending an appeal. It rejected a separate argument that HMRC’s general management powers under section 9 of the 2005 Act permitted trading. This produced appeals by both sides.
No temporary approval once HMRC are not satisfied
Lady Black, with whom Lord Reed, Lord Sumption and Lord Briggs agreed, accepted that fitness is not all or nothing. HMRC may approve for a limited period or on conditions if those limits allow them to be satisfied that the person is fit and proper. The wholesalers’ argument failed because of the decisions actually made. HMRC were addressing a case in which they had already concluded that no time limit or conditions would make the wholesalers fit and proper. A pending appeal, hardship, or the risk that a business would fail could not alter that assessment. Section 88C operates through HMRC being satisfied of fitness. The impact of refusal on the person or the business is not material to that evaluation.
An earlier practice of allowing a winding-down period after revocation did not prove a power to approve trading pending appeal. Lady Black treated it as a looser reading, later put on a different footing by prescribing certain stock-disposal sales as excluded sales. It could not enlarge section 88C.
Section 9 cannot fill the gap
Lady Black also rejected section 9. Approval must be given under section 88C. If HMRC are not satisfied of fitness, they may not approve under that section, and without that approval the controlled activity may not be carried on. Using section 9 to approve someone they considered unfit would undermine a scheme built on approving only fit and proper persons. Putting that person on the register would hold them out as approved despite the opposite view. A note that the approval was temporary, and that HMRC did not consider the person fit and proper, was not a realistic solution.
HMRC’s role in reviews and appeals did not justify the power either. For some other decisions, Parliament provided a hardship route so an appeal could proceed. For ancillary decisions such as these, neither the Finance Act 1994 nor the Tribunal rules give HMRC or the Tribunal power to suspend the consequences pending appeal. Following the approach in R (Wilkinson) v Inland Revenue Comrs, Lady Black held that a general ancillary power should not be read as conferring a temporary approval which Parliament could have granted but did not. The Finance Act 2015 itself applied the prohibition on trading from disposal of the application by HMRC, not from the end of an appeal.
The form of any High Court order
The Supreme Court refused permission to appeal against the Court of Appeal’s limits on injunctive relief, and did not revisit the finding that the evidence fell short. The remaining question was what order the High Court could make if a case for relief were established. Both sides suggested orders requiring provisional approval and registration, exclusion of sales from the regime, or action under section 9 or section 8 of the Human Rights Act 1998.
Lady Black declined to decide. An order to approve under section 88C would require HMRC to be satisfied when they were not. A mandatory injunction ordinarily compels someone to do something within their powers which they should have done. Here there was nothing HMRC could properly do within their functions. An injunction solving the problem would look like an inherent power to override an Act of Parliament. The parties’ agreement had closed off argument on that point, and the evidence did not justify relief in any event.
Lord Hughes, with whom Lord Sumption agreed, shared the conclusions on sections 88C and 9. He added that, although not for decision, it was difficult to see a High Court power to preserve trading in these circumstances. He considered that article 6, read with article 13, could be breached if the statutory appeal were rendered illusory, including where an existing trader was forced out of business before a good appeal could be heard. The courts could not invent a remedy the statutes did not contain, and section 8 of the Human Rights Act 1998 could not supply one where section 6(2) meant there was no unlawfulness. He suggested that those responsible for the legislation might urgently consider amendment, such as a limited power to stay a decision pending appeal.
Verdict: The Supreme Court unanimously allowed HMRC’s appeal under section 88C and dismissed the wholesalers’ appeal under section 9. Neither power authorised temporary trading pending appeal in these circumstances. The Court left open what order the High Court might make if an effective appeal would otherwise be impossible.
