Whitter's appeal was dismissed unanimously on both grounds.
Statutory construction / irrationality
Whitter argued that the section 66 discretion, absent specific restriction, must be an unfettered discretion. Contrary to the appellant's argument, it is doubtful that any of HMRC's discretions, however drafted, are truly 'unfettered' because every such discretion must be exercised lawfully and in accordance with the principles of administrative law, including procedural fairness, and in a manner that is not 'irrational' in the administrative law sense. The appellant suggested that HMRC's behaviour in this instance was irrational, in that the impact of HMRC's actions on the engineering company's business was a relevant consideration which, if properly taken into account by HMRC, would have led them not to cancel the registration and it was therefore irrational for HMRC to ignore a relevant consideration. The Supreme Court rejected this argument, with Lord Carnwath (who gave the only judgment) saying he felt this approach "overlooks the basic principle that any statutory discretion must be exercised consistently with the objects and scope of the statutory scheme". He cited with approval the Court of Appeal's analysis of the statutory scheme as highly prescriptive, with narrowly defined conditions allowing no element of discretion in the conditions themselves.
Lord Carnwath agreed with the Court of Appeal that the limited discretion in section 66 itself did not extend to matters “which do not relate, directly or indirectly, to the requirements for registration for gross payment, and to the objective of securing compliance with those requirements”. There was therefore no requirement to give consideration to the impact on the taxpayer's business when exercising the Section 66 discretion.
Proportionality
Whitter had also argued that the cancellation of the registration amounted to an interference with the possessions represented by either (a) the entitlement to the full contract price or (b) the bundle of rights inherent in registration, and is therefore caught by A1P1. It had been common ground before the Court of Appeal that both constituted possessions for the purposes of A1P1. However, A1P1 allows member states a wide margin of appreciation for the enforcement of tax, and the exercise of the section 66 power within the scope of the statutory framework was seen to be well within that margin. Registration was a privilege subject to stringent conditions and the cancellation was not therefore disproportionate.
