© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A5. Transposition and conformity
FORM OF TRANSPOSITION​
​
- Express, specific legislation not necessarily required
"[34] According to the settled case-law of the Court, the transposition of a directive into domestic law does not necessarily require that its provisions be incorporated formally and verbatim in express, specific legislation; a general legal context may be adequate for the purpose provided that it does indeed guarantee the full application of the directive in a sufficiently clear and precise manner (see, by analogy, SALIX Grundstücks-Vermietungsgesellschaft, paragraph 40)." (Slaby C-180/10)
​
- All essential elements must be provided for, not all technical aspects must be regulated exhaustively
"[39] In that respect, it is important to note that, as is apparent from the constitutional traditions common to the Member States, the principle of fiscal legality may be regarded as forming part of the EU legal order as a general principle of law. Although that principle requires, as observed by the Advocate General in point 110 of her Opinion, that any obligation to pay a tax, such as VAT, and all the essential elements defining the substantive features thereof must be provided for by law, that principle does not require every technical aspect of taxation to be regulated exhaustively, as long as the rules established by law enable a taxable person to foresee and calculate the amount of tax due and determine the point at which it becomes payable.
[40] Consequently, the lack of technical rules in the applicable tax legislation that are ancillary to an essential element of the tax does not inherently constitute a breach of the principle of fiscal legality as a general principle of EU law. Similarly, the fact that the applicable tax legislation leaves it to the taxable person to choose from among several possible courses of action in order to be able to qualify for a right cannot be considered inherently contrary to that principle.
[41] When it comes to an essential element of a tax that has been harmonised by the EU legislature, such as VAT, the question of which elements must be specified by law must be examined in the light of the principle of fiscal legality as a general principle of EU law and not on the basis of an interpretation of that principle in national law." (ZwiÄ…zek C-566/17)
​
- Distinction between essential substantive elements and ancillary pre-conditions
"[43] Therefore, as long as the taxable person can establish, on the basis of the applicable tax legislation, the precise scope of the right of deduction, it cannot be considered that his obligation to determine the share of his mixed expenditure that relates to economic transactions is contrary to the principle of fiscal legality. In the common system of VAT, such a requirement is not an essential element that defines one of the substantive features of VAT and which, for that reason, must be expressly provided for by the applicable tax legislation, but, as a pre-condition which the taxable person must satisfy in order to qualify for the right of deduction, is merely an ancillary element." (ZwiÄ…zek C-566/17)
​
OPTIONAL ELEMENTS​
​
- Member state required to make a choice to rely on optional element of Directive
" In this respect, it should be noted that Article 12(1) of the VAT Directive provides for an option and not an obligation for the Member States. It follows that, in order to use the option provided for by that provision, the Member States are required to make a choice to rely on it (see, by analogy, Case C-102/08 SALIX Grundstücks-Vermietungsgesellschaft [2009] ECR I‑4629, paragraphs 51 and 52)." (Slaby C-180/10)
​
GAPS​
​
DUTY OF CONSISTENT INTERPRETATION​
​
- For member states to make provision where Directive contains no express provision
"[35] In that regard, it should be borne in mind that the Sixth Directive does not make express provision for the case where the VAT is mentioned in error on an invoice when it is not due on the basis of a transaction subject to that tax. Accordingly, so long as this lacuna has not been filled by the Community legislature, it is for the Member States to provide a solution (Schmeink & Cofrethand Strobel, paragraphs 48 and 49, and Karageorgou and Others, paragraph 49)."​ (Stadeco C-566/07)
​
National court to interpret national law as far as possible to achieve result sought by Directive
"[37] A preliminary point to note is that the Court has consistently held that when national courts apply domestic law they are bound to interpret that law, so far as possible, in the light of the wording and the purpose of the directive concerned in order to achieve the result sought by the directive and, consequently, comply with the third paragraph of Article 288 TFEU. This obligation to interpret national law in conformity with European Union law is inherent in the system of the Treaty on the Functioning of the European Union, since it permits national courts, for the matters within their jurisdiction, to ensure the full effectiveness of European Union law when they determine the disputes before them (see, inter alia, Case C-282/10 Dominguez [2012] ECR, paragraph 24, and the case-law cited)." (Rusedespred C-138/12)
​
- To depart from previous interpretation where necessary to achieve compatibility
"[49] Second, although the obligation to interpret national law in a manner consistent with EU law cannot serve as the basis for an interpretation of national law contra legem (see, inter alia, judgment of 15 April 2008, Impact, C‑268/06, EU:C:2008:223, paragraph 100 and the case-law cited), national courts must alter their established case-law, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive (judgments of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraph 33; of 17 April 2018, Egenberger, C‑414/16, EU:C:2018:257, paragraph 72; and of 11 September 2018, IR, C‑68/17, EU:C:2018:696, paragraph 64)." (Związek C-566/17)
​
- Including interpretations by higher courts
"[37] This principle obliges the national judge, having exercised the power conferred on him by Article 267 TFEU, to disregard the legal assessments of a higher national court, if he considers, having regard to the interpretation of a provision of EU law provided by the Court, that those assessments are not in conformity with that law (judgment of 11 January 2024, Global Ink Trade, C-537/22, EU:C:2024:6, paragraph 30 and operative part).
[38] This obligation also rests on the national court which has not exercised the power conferred on it by Article 267 TFEU. Indeed, where the Court's case law has already provided a clear answer to a question concerning the interpretation of EU law, that national court must do everything necessary to ensure that this interpretation is implemented (see, to that effect, judgment of 10 March 2022, Grossmania, C-177/20, EU:C:2022:175, paragraph 42 and the case law cited).
​​
- Conforming interpretation may be relied on against a taxable person
"[48] In that regard, it should be borne in mind, first, that the national courts are bound to interpret, where possible, national law in a manner consistent with EU law, and that such an interpretation can, in principle, be relied on against a taxable person by the competent national tax authority (see, to that effect, judgments of 26 September 1996, Arcaro, C‑168/95, EU:C:1996:363, paragraphs 41 and 42; of 5 July 2007, Kofoed, C‑321/05, EU:C:2007:408, paragraph 45; and of 15 September 2011, Franz Mücksch, C‑53/10, EU:C:2011:585, paragraph 34)." (ZwiÄ…zek C-566/17)
​
Conforming construction to achieve consistency with general principles of EU law
"[95] In my judgment the principles of avoidance of non-taxation, avoidance of double taxation and the prevention of the distortion of competition are general principles of the Sixth Directive. One of the objectives of the Directive is the harmonisation of rules on turnover taxes (see the preamble quoted above) and the Directive contains mandatory rules as to which supplies shall be taxable and where those supplies are deemed to take place. It must follow from these provisions that one of the objectives of the directive is to prevent situations arising in which a taxable supply escapes taxation because it is not caught by the legislation of member states. I therefore reject Mr Lasok's submission that VAT is simply a territorial tax and if one member state fails to impose VAT that cannot result in the imposition of VAT by another member state: as I see it, it is a necessary corollary of the principle of non-taxation, as this case shows, that this can occur. Likewise it must follow that, in the absence of an express provision for double taxation, it is not an objective of the Directive to impose double taxation. As to the non-distortion of competition, this is referred to in the preamble of the directive cited above as well as in the Carpaneto case to which Mr Pleming refers. There is thus clear authority for the proposition that VAT should not operate in a way that distorts competition. I am content also to adopt the other reasons which Mr Pleming gives in his submissions summarised in paras 29 to 33 above in support of the principles of avoidance of non-taxation, avoidance of double taxation and the prevention of distortion of competition.
...
[112] It follows from the fact that if ICSIL is correct in its interpretation of para 3(3) of schedule 10A, the VAT treatment of the distribution of the phonecards for Interdirect's services infringes the principles of the Sixth Directive. It further follows that the United Kingdom is acting in a way which is incompatible with its Community obligations if the effect of para 3 of schedule 10A is to relieve any supplier from VAT under the guise of granting relief to a supplier from the double taxation on telecommunications services. Therefore the court is under an obligation to interpret para 3 as far as possible in the light of the wording and purpose of the Sixth Directive and specifically to prevent the non-taxation of the supplies to the UK distributors of ICSIL's phonecards, or other taxpayers in the same position." (HMRC v. IDT Card Services Ireland Ltd [2006] EWCA Civ 29, Arden LJ)
​
Extent of the duty​
​
- Addition to list of state-regulated entities to achieve fiscal neutrality
"[71] It is apparent to me that, when considering whether services are state regulated at [92] to [93], the Court of Appeal is considering whether that service is as a matter of fact regulated by the state (be it at a national, regional or local level) rather than whether services fall within the definition in Note 8. This is because it is self-evident that a typical consumer would not have any awareness of Schedule 9. They would be far more likely to be aware of whether a service is in fact regulated. It is also apparent from the Court of Appeal's earlier discussion of the UT decision which references "system of protections and guarantees which is absent in the case of unregulated services."
[72] Applying the Court of Appeal's reasoning, and my "own experience of the world", I consider that a typical consumer would regard services regulated by CIW as similar to the provision of the same support regulated by an act of any of the legislatures expressly mentioned in Note 8. (Cascade Care Ltd v. HMRC [2025] UKFTT 1332 (TC), Judge Blackwell)
​
- So far as possible/highly muscular approach
"[72] In Marleasing the CJEU held at [8]:
“…in applying national law, whether the provisions in question were adopted before or after the directive, the national court called upon to interpret it is required to do so, as far as possible, in the light of the wording and the purpose of the directive in order to achieve the result pursued by the latter and thereby comply with the third paragraph of Article 189 of the Treaty.”
[73] In Test Claimants in the FII Group Litigation v HMRC [2012] UKSC 19, [2012] 2 AC 337, Lord Sumption said at [176]:
“Marleasing, at any rate as it has been applied in England, is authority for a highly muscular approach to the construction of national legislation so as to bring it into conformity with the directly effective Treaty obligations of the United Kingdom.”
[74] In Wilkinson v Churchill Insurance Co Ltd [2012] EWCA Civ 1166, [2013] 1 All ER 1146 at [50], Aikens LJ said that “the obligation on the English courts to construe domestic legislation consistently with Community law obligations is both broad and far-reaching” and went on to restate the principles which should be applied when considering a conforming construction of a legislative provision which infringes EU law. Those principles were then summarised by Sir Andrew Morritt C in Vodafone 2 v HMRC [2010] Ch 27 at [37]-[32], and that summary was in turn approved by the Supreme Court In Swift v Robertson [2014] UKSC 50; [2014] 1WLR at [21].
[75] The parties agreed that the principles were as set out in the list below; this excludes the citations of authorities within the original judgment, but includes certain linking and clarificatory phrases added by Henderson J (as he then was) in Prudential Assurance Co Ltd v HMRC [2013] EWHC 3249 (Ch) [2014] STC 1236 at [101]:
(1) the obligation is not constrained by conventional rules of construction;
(2) it does not require ambiguity in the legislative language;
(3) is not an exercise in semantics or linguistics;
(4) it permits departure from the strict and literal application of the words which the legislature has elected to use;
(5) it also permits the implication of words necessary to comply with Community law obligations;
(6) the precise form of the words to be implied does not matter;
(7) it is only constrained to the extent that the meaning should “go with the grain of the legislation” and be compatible with the underlying thrust of the legislation being construed;
(8) it must not lead to an interpretation being adopted which is inconsistent with a fundamental or cardinal feature of the national legislation, since this would cross the boundary between interpretation and amendment; and
(9) cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate.
[76] It follows from these principles that Para 4(1) must be read consistently with Articles 73 and 79 of the PVD, so far as that is possible without breaching principles (7) to (9) above." (Talktalk Telcom Limited v. HMRC [2023] UKFTT 12 (TC), Judge Redston)
​
- Application of the HRA 1998 approach to interpretation
"[91] Mr Mantle accepted that the tribunal must apply a domestic rule of interpretation, but submitted that the relevant rule of interpretation was to be found in Vodafone 2 and Robertson. It was founded on the principles of interpretation established in Ghaidan v Godin-Mendoza [2004] UKHL 30 in the context of Convention rights. It arose because of the obligation of member states to implement directives pursuant the EEC Treaty. I agree with Mr Mantle’s submission, which is made good when one considers IDT. Arden LJ considered the principles outlined in Ghaidan, in the context of the European Convention on Human Rights and section 3 Human Rights Act 1998, and the obligation established in Marleasing to construe domestic legislation consistent with obligations under the EEC Treaty. She concluded at [92]:
92. … Section 3 imposes an obligation to interpret legislation compatibly with Convention rights, not a discretion to do so. Accordingly, I consider that the differences in concept between section 3 interpretation and interpretation under the Marleasing principle are more apparent than real. As already stated I consider that the Ghaidan case is a helpful guide when determining the interpretation under the Marleasing principle. I see no reason why the same robust techniques used to make legislation compatible with the ECHR should not equally apply to make domestic legislation comply with the laws of the European Union.
[92] I agree with Mr Mantle that the authorities referred to above establish a rule of construction in the law of England and Wales as to the circumstances in which the Marleasing principle will be applied. It is not necessary to identify any other rule of construction. The Court of Appeal in Ampleaward did not qualify that rule of construction. That case is simply an illustration of the limits of the rule." (Fareham College v. HMR [2023] UKFTT 214 (TC), Judge Cannan - query the basis prior to HRA 1998)
​
- Whether conforming interpretation possible does not depend on what is required (adding words in, deleting etc.) but substance
​
[123] Attaching decisive importance to the precise adjustments required to the language of any particular provision would reduce the exercise envisaged by section 3(1) to a game where the outcome would depend in part on the particular turn of phrase chosen by the draftsman and in part on the skill of the court in devising brief formulae to make the provision compatible with Convention rights. The statute book is the work of many different hands in different parliaments over hundreds of years and, even today, two different draftsmen might choose different language to express the same proposition. In enacting section 3(1), it cannot have been the intention of Parliament to place those asserting their rights at the mercy of the linguistic choices of the individual who happened to draft the provision in question. What matters is not so much the particular phraseology chosen by the draftsman as the substance of the measure which Parliament has enacted in those words. Equally, it cannot have been the intention of Parliament to place a premium on the skill of those called on to think up a neat way round the draftsman's language. Parliament was not out to devise an entertaining parlour game for lawyers, but, so far as possible, to make legislation operate compatibly with Convention rights. This means concentrating on matters of substance, rather than on matters of mere language.
[124] Sometimes it may be possible to isolate a particular phrase which causes the difficulty and to read in words that modify it so as to remove the incompatibility. Or else the court may read in words that qualify the provision as a whole. At other times the appropriate solution may be to read down the provision so that it falls to be given effect in a way that is compatible with the Convention rights in question. In other cases the easiest solution may be to put the offending part of the provision into different words which convey the meaning that will be compatible with those rights. The preferred technique will depend on the particular provision and also, in reality, on the person doing the interpreting. This does not matter since they are simply different means of achieving the same substantive result…” (Ghaidan v. Godin-Menoza [2004] UKHL 30, Lord Rodger with whom Lord Steyn (§37) and Baroness Hale (§145) agreed)
​
- May involve reading in, rewording or deletion
​
“[39] Without in any way suggesting that it is incumbent on he who contends for a conforming interpretation to spell out exactly what it is, for that would be to gainsay the proposition set out in paragraph 37(f), it undoubtedly assists in the consideration of whether or not it is a permissible interpretation to see on paper how it is suggested that it would be effected, whether by interpolation, deletion, rewording or otherwise..." (Vodafone 2 v. HMRC [2009] EWCA Civ 446)
​
- Deleting incompatible condition more likely to accord with Parliamentary intention than limiting scope
​
"[78] The Upper Tribunal saw two main objections to this solution. The first objection, if I understand it correctly, was that Parliament only intended to enact a refund scheme for manufacturers, and it would risk "usurping the function of Parliament for the court to assume that it intended to give refunds to anyone else": see the UT Decision at [76]. The difficulty with this, however, is that Parliament must be taken to have intended to implement Article 27(1)(f) correctly when it enacted section 4 of FA 1995. There is nothing, other than the wording of the section itself, to suggest that Parliament intended to breach its obligations under EU law by confining the scope of the exemption more narrowly than it should have done. Where a mistake of that kind is made by the national legislature, it seems to me to accord better with the presumed intention of Parliament to legislate in accordance with EU law if the framework of a refund system is maintained, but with the offending conditions disapplied, rather than to construe the national legislation in such a way as to confine its scope to only a sub-set of those entitled to benefit from it." (HMRC v. Repertoire Culinaire Limited [2017] EWCA Civ 1845)
​
- Only limit is that it must go with the grain of the legislation and not require choices court not equipped to make
​
"[57] As already touched on, the concept of conforming interpretation is derived from Marleasing. It is uncontroversial that, as the name suggests, it is an exercise undertaken in order to ensure that legislation complies (conforms) with EU law. As applied in this jurisdiction, and as explained in more detail by Sir Andrew Morritt C in Vodafone 2 at [37]-[38], it is an obligation to "construe domestic legislation consistently with Community law obligations" which is "broad and far-reaching", the only constraints being that the meaning given must "go with the grain" and be "compatible with the underlying thrust" of the legislation being construed." (HMRC v. Post Prudential Applicants [2025] EWCA Civ 166)
​
"[38] Counsel for HMRC went on to point out, again without dissent from counsel for V2, that:
"The only constraints on the broad and far-reaching nature of the interpretative obligation are that:
(a) The meaning should "go with the grain of the legislation" and be "compatible with the underlying thrust of the legislation being construed." (Per Lord Nicholls in Ghaidan at 33; Dyson LJ in EB Central Services at 81) An interpretation should not be adopted which is inconsistent with a fundamental or cardinal feature of the legislation since this would cross the boundary between interpretation and amendment; (See Ghaidan per Lord Nicholls at 33; Lord Rodger at 110-113; Arden LJ in IDT Card Services at 82 and 113) and
(b) The exercise of the interpretative obligation cannot require the courts to make decisions for which they are not equipped or give rise to important practical repercussions which the court is not equipped to evaluate. (See Ghaidan per Lord Nicholls at 33; Lord Rodger at 115; Arden L in IDT Card Services at 113.)" (Vodafone 2 v. HMRC [2009] EWCA Civ 446)
​
- Difficulties ascertaining practical repercussions not to be overstated
​
"[89] The Respondents’ next objection was that the conforming interpretation proposed would lead to far-reaching practical repercussions which this Tribunal is not equipped to evaluate, thereby crossing the boundary between interpretation and amendment in the way set out in paragraph 115 of the speech of Lord Rodger of Earlsferry in Ghaidan v Godin-Mendoza [2004] UKHL 30. They argue that the question whether a loss is “deducted” is not straightforward in many cases. For example, the losses at issue in this appeal are subject to a “recapture” mechanism in the Netherlands. If it is known that the losses are to be recaptured in one, two or five years, are those losses “deducted” or not? By contrast, the wording of s403D(1)(c) asks a question about legal possibilities which can be answered in a straightforward way by reference only to the relevant nonUK law.
[90] We reject the Respondents’ argument, that difficulties associated with ascertaining whether a loss has been “deducted” are so complicated as to require specific and expanded legislative provision. That there is no need for such specific and expanded legislative provision is demonstrated by the fact that, when legislating in s30 of Finance Act 2013, Parliament gave no guidance on the meaning of the word “deducted”. Having had the opportunity to consider the matter, Parliament evidently concluded that the interpretation and application of this concept can appropriately be left to the courts." (HMRC v. Volkerrail Plant Ltd [2022] UKUT 78 (TCC), Roth J and Judge Jonathan Richards)
​
- Reading in additional exceptions permitted
​
"[45] In my view section 3 requires the court to subordinate the niceties of the language of section 41(3)(c), and in particular the touchstone of coincidence, to broader considerations of relevance judged by logical and common sense criteria of time and circumstances. After all, it is realistic to proceed on the basis that the legislature would not, if alerted to the problem, have wished to deny the right to an accused to put forward a full and complete defence by advancing truly probative material. It is therefore possible under section 3 to read section 41, and in particular section 41(3)(c), as subject to the implied provision that evidence or questioning which is required to ensure a fair trial under article 6 of the Convention should not be treated as inadmissible. The result of such a reading would be that sometimes logically relevant sexual experiences between a complainant and an accused may be admitted under section 41(3)(c). On the other hand, there will be cases where previous sexual experience between a complainant and an accused will be irrelevant, eg an isolated episode distant in time and circumstances. Where the line is to be drawn must be left to the judgment of trial judges. On this basis a declaration of incompatibility can be avoided. If this approach is adopted, section 41 will have achieved a major part of its objective but its excessive reach will have been attenuated in accordance with the will of Parliament as reflected in section 3 of the 1998 Act. That is the approach which I would adopt." (R v. A [2001] UKHL 25, Lord Steyn)
​​
"[74] The insurers and the SST argued that this is precisely what their interpretation would achieve. But the claimants countered that this interpretation is impermissible because it would be contrary to the "fundamental principle" of section 151(8). The claimants argued that the section creates a "no fault" right of indemnity, whereas the interpretation of the insurers and SST would turn it into a right dependent on establishing fault or applicable only after making other qualitative assessments.
[75] I cannot accept this argument of the claimants. Section 151(8) in fact demands that two pre-conditions be fulfilled before the insurer has the right to an indemnity from the insured. It has to be shown that the insured "caused or permitted[70] the use of the vehicle" and that the use of the vehicle "gave rise to the liability". So I think it cannot be against the fundamental principle of section 151(8) to require further conditions be fulfilled in certain limited circumstances before the insurer can exercise the right (to whatever extent may seem proportionate) against an insured passenger victim." (Churchill Insurance Company Limited v. Fitzgerald & Wilkinson [2012] EWCA Civ 1166
​
"[44] To my mind the extension of the exceptions to the CFC Legislation for which counsel for HMRC contends is as permissible as either of those which found favour in Ghaidan or IDT. It does not alter the impact on other CFCs which are not excepted by any other exception. Certainly it provides an additional exception but, as counsel for HMRC submitted, the grain or thrust of the legislation recognises that the wide net cast by s.747(3) is intended to be narrowed by s.748. Further the terms of various exceptions were not intended to be either mutually exclusive or immutable as the ability to amend the conditions contained in various parts of Schedule 25 and the terms of paragraph (e) show. For my part I would reject this objection to the conforming interpretation put forward by counsel for HMRC." (Vodafone 2 v. HMRC [2009] EWCA Civ 446)​
​
“[114]…As the Ghaidan case shows it is not necessary to find a simple linguistic device for this. It also shows that one of the ways of interpreting a provision "so far as possible" is to write in words. In my judgment the appropriate interpretation is to read in words to widen the disapplication in para 3(3) of the disregard in para 3(2) so that the disapplication applies where the disregard would result in the non-taxation, contrary to the objectives of the Sixth Directive specified in paragraph 95 above, of a taxable supply of goods or services in the United Kingdom. In my judgment it is unnecessary for this court to attempt to splice precise words into the language used by Parliament in schedule 10A as if it were itself the Parliamentary drafter. As the Ghaidan case shows, it is not an objection to interpretation of this nature that it amends the language used by Parliament.” (HMRC v. IDT Card Services Ireland Ltd [2006] EWCA Civ 29, Arden LJ)
​
- Removing judge made gloss on language to avoid breach of EU law, even if a more limited legislative scheme could lawfully have been enacted
"[50] On its face, section 23 of the Inheritance Tax Act does not impose any restriction on the free movement of capital. In particular, it does not discriminate between gifts to charities governed by the law of the United Kingdom and gifts to charities governed by the law of other EU member states or third countries. It is, on its face, entirely compliant with article 56 TEC. That is so even if section 272 of the Inheritance Tax Act and section 989 of the Income Tax Act are taken into account, since those provisions, on their face, are equally non-discriminatory.
[51] The only relevant restriction which existed at any material time, and with which this appeal is concerned, is the restriction imposed by the judicial gloss which was placed on the words now found in section 989 of the Income Tax Act in the case of Dreyfus [1956] AC 39: a restriction which, when incorporated into section 23 of the Inheritance Tax Act, has the effect of confining relief under that provision to trusts governed by the law of a part of the United Kingdom and subject to the jurisdiction of United Kingdom courts. There can be no doubt that the Dreyfus gloss on the language of section 989 of the Income Tax Act, as applied to section 23,is incompatible with article 56 TEC. It is plain that the restriction of relief from inheritance tax to trusts governed by the law of a part of the United Kingdom cannot be justified under EU law.
[52] Article 56 TEC is directly applicable as law in the United Kingdom, and must be given effect in priority to inconsistent national law, whether judicial or legislative in origin. It follows that the Dreyfus gloss on the language of section 989 of the Income Tax Act cannot be applied to section 23 in situations falling within the scope of article 56. The resultant position is as set out in para 49 above: applying section 23 without incorporating the Dreyfus gloss, there is no relevant restriction on the availability of relief beyond the conditions appearing on the face of the provision. That result is in conformity with article 56. Since it is undisputed that the Coulter Trust satisfied those conditions at the relevant time, it follows that it qualifies for the relief.
[53] That is the conclusion which the Court of Appeal should have reached, once it had decided that the Dreyfus gloss on the language of section 989 of the Income Tax Act, if incorporated into section 23 of the Inheritance Tax Act, imposed a restriction which was incompatible with article 56. Having reached that decision, the court could not apply that entirely judge-made restriction, and therefore had to apply section 23 without the gloss placed on the language used in section 989 of the Income Tax Act in the Dreyfus case. It would then have arrived at a result which complied with article 56.
[54] With great respect to the Court of Appeal, it should not have concerned itself with a hypothetical restriction concerned with the existence of mutual assistance agreements, even if it considered that such a restriction might have been justifiable under EU law and might have been imposed by Parliament. The fact was that there was no such restriction in existence. Neither section 23 of the Inheritance Tax Act nor section 989 of the Income Tax Act made relief for trusts in third countries conditional on there being a mutual assistance agreement in place. The fact that such a restriction, if it had existed, might have been in conformity with EU law did not mean that it could be imposed by the court, by means of a purported interpretation of the language used in section 23." (Routier v. HMRC [2019] UKSC 43)
​
- Retrospectivity not a valid objection
​
"[87] That introduces one of the Respondents’ objections to HMRC’s proposed conforming interpretation set out in paragraph 86, namely that it impermissibly brings forward the effect of changes made by s30 of the Finance Act 2013. In the Respondents’ submission, Parliament legislated for those amendments to have effect only for accounting periods commencing on or after 1 April 2013. The Tribunal should not, under the guise of conforming interpretation, give legislation retrospective effect.
[88] We reject that submission. The process by which courts and tribunals interpret statutes inevitably results in what can loosely be termed “retrospective” effect since that process results in the true meaning of the statute being revealed only some time after it was enacted. That effect would be no more pronounced in this case simply because, as events turned out, Parliament chose to legislate in s30 of Finance Act 2013." (HMRC v. Volkerrail Plant Ltd [2022] UKUT 78 (TCC), Roth J and Judge Jonathan Richards)
​
Presumption of compliance​
​
- Presumption that Member State intended to fulfil entirely its obligations under Directive
“[107] There is, however, also another way of answering the critical question, one that I have concluded that I prefer. There is no dispute that the WTR were enacted solely and deliberately for the purpose of implementing the requirements of the Directive; and I agree with Mr Ford and Mr Tolley that the Pfeiffer presumption requires the court to presume that the United Kingdom government intended by the WTR to fulfil entirely the obligations arising under the Directive. That presumption also encompasses an intention to fulfil even those requirements of the Directive which were not apparent at the time of the enactment of the Directive, but which only became clear by later elucidation by the CJEU. Since the enactment of the WTR, the CJEU has explained the true requirements of article 7, an explanation of which the United Kingdom government could not reasonably have been aware when it enacted the WTR.
[108] In fact, however, at least in the case of most types of worker, the WTR do provide for the 'normal remuneration' measure (including by reference to the commission they earn) for the purpose of calculating holiday pay. So far as counsel are aware, there are just two, apparently anomalous, exceptions to that, namely in relation to (i) workers such as Mr Lock employed on terms to which section 221(2) applies, and for whom their commission payments are not taken into account in the calculation; and (ii) workers with non-guaranteed overtime. At least as to the former class, it is by no means clear how apparent the existence of this exception was when the WTR were enacted: it was not until four years later that the point was explained by Evans.
[109] Even given the Pfeiffer presumption, I readily accept, however, that it does not automatically and necessarily follow that a conforming interpretation of implementing domestic legislation will be possible in every case. It is, I consider, still necessary to apply an objective assessment as to whether a legislative choice has been made that is directly at odds with the requirements of the Directive. Mr Ford was, I consider, correct to accept that had the WTR expressly and unambiguously provided that a worker engaged on Mr Lock's terms was not to have commission taken into account when calculating his holiday pay, then Mr Lock would have no case.
[110] In my view, however, that cannot be said in relation to the WTR. Rather, I would regard their provisions as more consistent with the legislature simply not having foreseen the particular problem that was in due course to arise with the subsequent decisions of the CJEU as to the true sense of article 7. I regard the case as in line with the type of circumstances that Arden LJ was considering in the IDT Card Services case, at para 113.
…
[112] I have therefore concluded that this is a case in which the grain or thrust of the WTR can fairly be identified as directed at providing holiday pay for workers measured by reference to criteria required by article 7 as since explained by the CJEU; and that, in line with that grain or thrust, the court can, and should, interpret the WTR as providing that Mr Lock is also entitled to have his holiday pay calculated by reference to his normal remuneration. To do so is to do no more than to interpret the WTR as also requiring his commission earnings to be taken into account when calculating his holiday pay. So to interpret the WTR does of course require the implication into it of words necessary to make that meaning clear. But so to imply such words is not a judicial exercise amounting to the repeal or amendment of the legislation. It is rather an example of the court performing its duty to provide a conforming interpretation to legislation introduced for the purpose of implementing a Directive.” (Lock v. British Gas Trading Ltd [2016] EWCA Civ 983)
​
- Duty on courts to presume that Member State intended to entirely fulfil its obligations
"[47] On the issue of Member States's obligations as a matter of EU law, the ECJ has stated that when an EU Directive imposes obligations on Member States and it is implemented by national legislation, there is a duty on Member States (imposed by what is now Article 4(3) of the Treaty on European Union – the Maastricht Treaty 1992 – "TEU") to take all appropriate measures, whether general or particular, to ensure fulfilment of that obligation. This duty is binding on all the authorities of the Member States, including, in respect of matters within their jurisdiction, their courts.[50] Thus, when a national court has to apply the domestic provisions which have been specifically enacted for the purpose of transposing an EU Directive intended to confer rights on individuals, the national court must presume (in the light of what is now Article 228 of the Treaty on the Functioning of the European Union – the Rome Treaty 1958 - "TFEU") that the Member State, following its exercise of the discretion afforded it under that Article, intended entirely to fulfil the obligations arising from the Directive concerned.[51] Thus, when a national court applies domestic provisions enacted to implement a particular Directive, it must interpret that national law in conformity with Community law. In doing so the court must consider its national law as a whole in order to assess to what extent any particular national law may be applied so as not to produce a result contrary to that sought by the Directive.[52] The national court must, of course, use interpretive methods recognised by its own national law. The court should use such interpretive methods so as, first, to avoid a conflict between the provision of the national law derived from the Directive and any other rules of domestic law; and, secondly, to reduce the scope of the other rule of domestic law in such a way as to be able to achieve the result sought by the Directive.[53]" (Churchill Insurance Company Limited v. Fitzgerald & Wilkinson [2012] EWCA Civ 1166)
​
- Presumption that VAT legislation intended to comply unless some special reason
"[19] As for national law, the zero rated provisions are contained in section 30 of and Schedule 8 to the 1994 Act. The structure of the Schedule is subdivision into Groups, with lists of zero rated Items within each Group. The general presumption is that, when enacting implementing legislation like the 1994 Act, Parliament intended to fulfil the obligations of the UK under the Directive. This means that, unless for some special reason, such as the transitional derogation provisions of Article 28, the presumption does not apply, the 1994 Act must be construed, if it is possible to do so, so as to be compatible with the Directive. The zero rated Items in Group 8 of Schedule 8 must be read in the setting of the corresponding exemptions in the Articles in the Directive." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Mummery LJ)
​
- Preparatory materials admitted to consider whether Parliament intended to be compatible with Directive
"[36] At this point it is relevant to consider the legislative history, as set out in the judgment of Dyson LJ, and the preparatory legislative materials. They are relied on directly in construing the provisions of Group 8 of Schedule 8, as can be done in cases which satisfy the requirements laid down in Pepper v. Hart [1993] AC 593. In this instance the materials have been introduced not to construe the legislation, but to establish the fact that the purpose of the relevant national amending legislation was to make national law compatible with the Directive.
...
[40] These materials establish that the purpose of amending the items in 1990 by the addition of zero rating for storage was the better implementation of the Article 15 mandatory exemptions in the Directive. There was no reference at all in the Committee's report or in the materials submitted to it to the derogation provisions in Article 28 of the Directive.
[41] As counsel for HMRC pointed out, the exemptions introduced in the national legislation would not come within Article 28, as they involved extending the exemptions. They were not simply "maintaining" in national legislation historic zero-rated provisions. If proper account is taken of these materials and of the terms of Article 28 itself, this is not a derogation case free from the principle of compatible construction. On the contrary, this was a case of implementing legislation, which attracts the application of the principle." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Mummery LJ)
​​
"[66] The Chancellor considered that the statements in the Explanatory Memorandum "were too general to be of any help on the point of construction" (para 27). He also said that there was no ambiguity to which the statement in Hansard was relevant and that the statement was in any event insufficiently clear to be of assistance: the phrase "more into line" did not connote complete consistency and articles 14(1)(i) and 15(13) had nothing to do with the storage of cargo or anything else. It seems to me that, having regard to the fact that the reason why HMRC placed the material before the Chancellor was to support the argument that "goods" in item 6 was "cargo" within the meaning of article 15(9), it is not surprising that he made these comments.
[67] But, before us, HMRC relied on this material in order to show that the purpose of the 1990 Order in bringing storage within the purview of item 6 was to implement article 15(9) and (13). In my view, the statements in the Explanatory Memorandum and Hansard show that this is what was intended by the 1990 Order. The Explanatory Memorandum clearly explains that it was decided to zero-rate the storage of goods "having regard to articles 15(8),(9) and (13)". In my judgment, these words show that item 6(b) was being amended in order to bring it into line with the relevant provisions of article 15. I accept that the weight that can be placed on the Hansard statement may be more questionable. But, taking the points made by the Chancellor, I would say that the words "more accurately reflect" and "more into line" used by the Economic Secretary do not suggest that the intention was to bring United Kingdom national law more into line with the Sixth Directive, but still fall short of it. There is no reason to impute such an intention to Parliament. Nor do I agree with the Chancellor that article 15(13) had nothing to do with storage of cargo or anything else. It seems to me that "the supply of services, including transport and ancillary operations….where these are directly connected with the export of goods or import of goods…" (emphasis added) are wide enough to include the storage of cargo to be exported or imported, even though storage is not explicitly mentioned." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Dyson LJ)
​
- No special reason where provision could not have been made under permitted derogation
"[51] The Taxpayers cannot avoid this construction by bringing its case within the derogation provisions of Article 28, which only permitted member states to maintain certain "exemptions with refunds of tax at the preceding stage." The insertion of an exemption for "storage" could not have been made under Article 28, as it only permitted the maintenance of national exemption provisions, not their expansion." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Mummery LJ)
​​
"[69]...The scope of the exemption was enlarged by removing the restriction of supplies to a person in his business capacity who in that capacity belongs in a country other than the United Kingdom. To this extent, in so far as item 11(a) is a derogation, it is not permissible pursuant to article 28(2).
[70] The Chancellor recognised at para 23 of his judgment that "if items 6 and 11(a) exceed the derogation in force on 1 January 1991 they are not deprived of legal effect, but, as an exemption, should be construed strictly and, so far as possible, consistently with Articles 14 and 15". I respectfully agree. In my judgment, article 28(2) is not material to this appeal in so far as it relates to item 11(a). So far as possible, therefore, the item must be interpreted consistently with article 15 and in particular with article 15(13)." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Dyson LJ)
​
- Derogations only permitted for provision in force on 31 December 1975
"[62] The reason why the legislative history is of significance is that the current version of article 28(2) of the Sixth Directive (which was adopted on 19 October 1992) was preceded by the version of article 28(2) which was adopted on 17 May 1977. This earlier version provided: "Reduced rates and exemptions with refund of tax paid at the preceding stage which are in force on 31 December 1975….may be maintained until a date which shall be fixed by the Council…."
[63] Thus, when Parliament amended item 6 with effect from 1 May 1990 to add storage to the zero-rated services, it could not properly have been intending to extend the scope of the derogation permitted to be maintained by article 28(2), because at that time the exemptions permitted by article 28(2) were limited to those in force on 31 December 1975. Such an extension would have placed the United Kingdom in breach of its treaty obligations. There is no warrant for supposing that this is what Parliament intended to do. If Parliament was not intending to extend the derogation, it must have been intending to give effect to article 15(9) and/or (13) of the Sixth Directive. I should point out that unfortunately the earlier version of article 28(2) was not brought to the attention of the Chancellor.
[64] It follows in my view that item 6 in its current form cannot be said to be a purely national measure derogating from the harmonised definitions of standard rated and exempt supplies. The introduction of the reference to storage charges must have been effected in order to make item 6 consistent with the corresponding provision(s) in the Sixth Directive." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Mummery LJ)
​
Identifying the Directive provision with which consistent interpretation to be achieved​
​
- Close match sufficient
"[78] Mr Milne QC submits that, apart from some vague similarity, it is clear that neither item could ever be considered to be equivalent to the articles, since they are in some respects wider, and in other respects narrower than the exempting provisions in article 15. In these circumstances, he argues, it is impossible to reconcile the two and meaningless to say that they should be interpreted in accordance with the Sixth Directive in some respects and not in others.
...
[81] At first sight, these are powerful points. But it is necessary to bear in mind the strength of the interpretative obligation on a national court to seek to construe its domestic legislation in a way which is consistent with a relevant EU Directive. Mummery LJ has referred to Marleasing and Litster. It is well established that, where necessary, the court will supply by implication words in order to satisfy the United Kingdom's treaty obligations, provided that to do so is consistent with the general scheme of the domestic legislation. Litster was concerned with the construction of a regulation which provided that a transfer of an undertaking would not operate to terminate the contract of employment of a person employed by the transferor and that any reference to a person employed in an undertaking was a reference to a person so employed "immediately before the transfer". The House of Lords held that the regulation should be read as if there were inserted after the words "immediately before the transfer" the words "or would have been so employed if he had not been unfairly dismissed in the circumstances described in regulation 8(1)". Such an implication was consistent with the general scheme of the Regulations and was necessary if they were effectively to fulfil the purpose for which they were made of giving effect to the provisions of the Directive: see per Lord Oliver of Aylmerton at [1990] 1 AC 546, 577B-D.
...
[87]...As for the second difference identified by Mr Milne, in my view item 11 can be read down to restrict its scope to services directly connected with the export of goods and the import of goods covered by the provisions of article 7(3) and 16(1) Title A. There seems to be a close match between the respective provisions in relation to export. I would hold that item 11(a) should be read down so as to conform with article 15(13). I do not consider Mr Milne's third difference to be significant. If there are locations over and above those specified in item 11, these can and should be read into the item. That leaves Mr Milne's fourth difference. This is in substance the same as the fourth difference identified by him in relation to item 6(a) and article 15(9). Mutatis mutandis, my answer to the point is the same as I have given at para [85] above." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Dyson LJ)
​
No interpretation against the grain of the UK legislation (contra legem)
​
"[94] The CJEU returned to the limits of Marleasing in case C-268/06 Impact v Minister for Agriculture and Food [2008] 2 CMLR 47 at [100]:
"However, the obligation on a national court to refer to the content of a directive when interpreting and applying the relevant rules of domestic law is limited by general principles of law, particularly those of legal certainty and non-retroactivity, and that obligation cannot serve as the basis for an interpretation of national law contra legem."
[95] The expression "contra legem" means "against the law". In the context of the Marleasing principle, the content of that phrase was explained by Advocate General Bot in Dansk Industri (DI) v Estate of Karsten Eigil Rasmussen (Case C-441/14), [2016] 3 CMLR 27 at [68]:
"The Latin expression 'contra legem' literally means 'against the law'. A contra legem interpretation must, to my mind, be understood as being an interpretation that contradicts the very wording of the national provision at issue. In other words, a national court is confronted by the obstacle of contra legem interpretation when the clear, unequivocal wording of a provision of national law appears to be irreconcilable with the wording of a directive. The Court has acknowledged that contra legem interpretation represents a limit on the obligation of consistent interpretation, since it cannot require national courts to exercise their interpretative competence to such a point that they substitute for the legislative authority."
[96] He distinguished, in this connection, between national law laid down by case law on the one hand, and law enacted by the legislature on the other. He seems to me to have taken the view that to contradict "the very wording" of national legislation would amount to an interpretation contra legem. The court drew that distinction at [34]:
"Accordingly, the national court cannot validly claim in the main proceedings that it is impossible for it to interpret the national provision at issue in a manner that is consistent with EU law by mere reason of the fact that it has consistently interpreted that provision in a manner that is incompatible with EU law."
[97] If a proposed interpretation of national law goes beyond that limit, then the national court may be required to disapply the offending provision: Dansk Industri at [37].
...
[106] HMRC's first suggestion is, in effect, to replace "any member state" with "the United Kingdom". I do not consider that the Marleasing principle entitles a court to adopt an interpretation which is in direct contradiction to the words that Parliament has used. Moreover, section 18 (7) specifically contemplates a "warehousing regime" as including movements between warehouses in different member states. In Advocate Elmer's words, this suggestion invites us to read "A" as "B". HMRC's first suggestion would, in my judgment, be contra legem. I note, however, that this amendment has in fact been made by Parliament (see Taxation (Cross Border Trade) Act 2018 Schedule 8 para 16 (6) (d); but only with effect from 31 December 2020). The suggested conforming construction would have retrospective effect, although Parliament has expressly decided that it should not.
...
[109] In my judgment, although the UK has incorrectly widened the permissible scope of the exemption, the Marleasing principle does not allow that error to be corrected. Any necessary change would have to have been made by legislation." (HMRC v. Ampleaward Limited [2021] EWCA Civ 1459)
​
"[78] Mr Hitchmough said that it was a “fundamental” and “cardinal” feature of Para 4(1) that consideration was deemed to be reduced by the offered discount, irrespective of whether or not the customer made the payment promptly so as to secure that discount. In his submission, any construction of Para 4(1) that stripped it of that feature would “go entirely against the grain of the legislation”. He added that Judge Morgan had come to the same conclusion in Virgin Media FTT when she said at [230]:
“My view is that the thrust of the legislation in this case is (and indeed the intended meaning of Para 4(1) could hardly be clearer) that the consideration on which VAT is to be charged is to be reduced where supplies are made on terms allowing or providing for a discount for prompt payment by the amount of the discount whether or not the discount provided for is in fact paid. To adopt an interpretation (whether by reading in words or otherwise) that the effect of Para 4(1) is that the relevant consideration is reduced only where a discounted sum is in fact paid would, therefore, go against the grain or thrust of the provision Parliament decided to enact.”
[79] Again, we agree with Judge Morgan for the reasons she gave." (Talktalk Telcom Limited v. HMRC [2023] UKFTT 12 (TC), Judge Redston)
​
- Must go with underlying thrust of legislation
“[101] Another element of the contra legem principle reflects the acceptance by the CJEU that, when engaging in a conforming interpretation exercise, a national court may find it impossible to adopt a conforming interpretation when 'the clear unequivocal wording of a provision of national law appears to be irreconcilable with the wording of a directive' (see the Opinion of Advocate General Bot in Dansk, para 68). Mr Cavanagh relied on that in support of his submission that this court is faced by just such a problem. This is a case, he says, in which the WTR adopted a statutory scheme in the shape of the incorporated provisions of the ERA; and the plain meaning of the provision relevant to this case, namely section 221(2), presents an insurmountable barrier to an interpretation of the WTR conforming with article 7.
[102] As it seems to me, if this element of the contra legem principle as explained by the EU cases is applied at anything approaching face value, it would be likely to frustrate the possibility of a conforming interpretation in many cases. For example, I find it difficult to see how the House of Lords could have decided Pickstone as it did had it applied the contra legem principle as so explained. Lord Oliver explained how it was not possible, according to ordinary domestic canons of construction, to interpret the words in question in a conforming way, but he also explained why it was nevertheless appropriate so to interpret them as appropriately modified (see [1989] 1 AC 66, at 126). Pickstone was later rationalised by Lord Rodger in Ghaidan [2004] 2 AC 557, at para 121, as one in which the House had interpreted the critical words in line with the grain of the legislation. In the same case, at paras 29 to 33, Lord Nicholls explained how a conforming interpretation for the purposes of section 3 of the Human Rights Act 1998 may require a departure from the unambiguous meaning the statute might otherwise bear, whilst also explaining how the wide scope for a conforming interpretation is circumscribed by the limits of the grain or underlying thrust of the legislation.
[103] What emerges from Ghaidan and the summary in Vodafone 2, the latter having since been endorsed by the Supreme Court in Swift and Nolan, is that the United Kingdom has dealt with the contra legem principle in a manner that is manifestly more in line with the EU objective of conforming interpretation at member state level than might be the case by anything approaching a rigid application of the principle summarised by Advocate General Bot in Dansk. When faced with the question of whether a conforming interpretation can be adopted, the courts of the United Kingdom do not confine themselves to a consideration of the literal meaning of the language that may appear to stand in their way; they approach the task by reference to the broader considerations of whether a conforming interpretation will be in line with the grain or underlying thrust of the legislation. That is an approach that ought, I would think, to attract nothing but commendation by the CJEU.
[104] I do not, therefore, derive assistance from Mr Cavanagh's contra legem submissions. In my view the critical question comes down to whether the conforming interpretation of the WTR for which Mr Lock contends is or is not within the grain or underlying thrust of that legislation. If it is, I consider it ought to follow that the interpretation favoured by the tribunals below is one this court should uphold. If it is not, a conforming interpretation is not possible.” (Lock v. British Gas Trading Ltd [2016] EWCA Civ 983)
​
- Grain includes underlying policy
​
“[35]…But the social policy underlying the 1988 extension of security of tenure under paragraph 2 to the survivor of couples living together as husband and wife is equally applicable to the survivor of homosexual couples living together in a close and stable relationship. In this circumstance I see no reason to doubt that application of section 3 to paragraph 2 has the effect that paragraph 2 should be read and given effect to as though the survivor of such a homosexual couple were the surviving spouse of the original tenant. Reading paragraph 2 in this way would have the result that cohabiting heterosexual couples and cohabiting heterosexual couples would be treated alike for the purposes of succession as a statutory tenant. This would eliminate the discriminatory effect of paragraph 2 and would do so consistently with the social policy underlying paragraph 2. The precise form of words read in for this purpose is of no significance. It is their substantive effect which matters.” (Ghaidan v. Godin-Menoza [2004] UKHL 30, Lord Nicholls)
​
- May be significant that legislation already recognises some exceptions to general rule
“[44]…Certainly it provides an additional exception but, as counsel for HMRC submitted, the grain or thrust of the legislation recognises that the wide net cast by s.747(3) is intended to be narrowed by s.748. Further the terms of various exceptions were not intended to be either mutually exclusive or immutable as the ability to amend the conditions contained in various parts of Schedule 25 and the terms of paragraph (e) show. For my part I would reject this objection to the conforming interpretation put forward by counsel for HMRC.” (Vodafone 2 v. HMRC [2009] EWCA Civ 446)
​
“[133]…I acknowledge that to disapply the disregard in favour of Customs & Excise in this case would be to apply the disapplication, in the form it is drafted, for a different purpose from that for which it was drafted. In that sense, it does go against the grain of provisions which are based on the principle that VAT is to be levied on the supplier of telecommunications services rather than the supply of the credit vouchers. The presence of paragraph 3(3) does, however, at least demonstrate that the disregard in paragraph 3(2) is not to be universal and that there are intended to be situations, if the result would otherwise be to permit escape from VAT, in which the disregard does not apply.” (HMRC v. IDT Card Services Ireland Ltd [2006] EWCA Civ 29, Pill LJ)
​
- Contra legem refers to the grain rather than the wording of the legislation
"[101] Another element of the contra legem principle reflects the acceptance by the CJEU that, when engaging in a conforming interpretation exercise, a national court may find it impossible to adopt a conforming interpretation when 'the clear unequivocal wording of a provision of national law appears to be irreconcilable with the wording of a directive' (see the Opinion of Advocate General Bot in Dansk, para 68). Mr Cavanagh relied on that in support of his submission that this court is faced by just such a problem. This is a case, he says, in which the WTR adopted a statutory scheme in the shape of the incorporated provisions of the ERA; and the plain meaning of the provision relevant to this case, namely section 221(2), presents an insurmountable barrier to an interpretation of the WTR conforming with article 7.
...
[103] What emerges from Ghaidan and the summary in Vodafone 2, the latter having since been endorsed by the Supreme Court in Swift and Nolan, is that the United Kingdom has dealt with the contra legem principle in a manner that is manifestly more in line with the EU objective of conforming interpretation at member state level than might be the case by anything approaching a rigid application of the principle summarised by Advocate General Bot in Dansk. When faced with the question of whether a conforming interpretation can be adopted, the courts of the United Kingdom do not confine themselves to a consideration of the literal meaning of the language that may appear to stand in their way; they approach the task by reference to the broader considerations of whether a conforming interpretation will be in line with the grain or underlying thrust of the legislation. That is an approach that ought, I would think, to attract nothing but commendation by the CJEU.
[104] I do not, therefore, derive assistance from Mr Cavanagh's contra legem submissions. In my view the critical question comes down to whether the conforming interpretation of the WTR for which Mr Lock contends is or is not within the grain or underlying thrust of that legislation. If it is, I consider it ought to follow that the interpretation favoured by the tribunals below is one this court should uphold. If it is not, a conforming interpretation is not possible." (British Gas Trading Limited v. Lock [2016] EWCA Civ 983)
​
- Contra legem to read VAT exemption as limited in such a way that it would not cover the very thing at which it was directed
"[117] It is our view that to limit the language used by Parliament by imputing any of the proposed formulations posited by HMRC is against the grain and contra legem. It would undermine a policy decision to exempt the provision of deputies for all branches of medical practitioners by legal/natural persons whose supplies of services did not otherwise meet the terms of Item 1 (construed with what is now note 2). As the Appellant contended, we are not being invited to construe words with a range of potential interpretations in a particular way. We are, instead, being asked to interpret words bearing only one meaning as something entirely different.
[118] Further, and by reference to the analysis in Ampleaward, we consider that the construction we are invited to adopt represents an impermissible attempt by HMRC to narrow legislation which was drafted in terms wider than the permissible EU exemption. Even on HMRC's interpretation (i.e. applying only to deputising services) in light of Mainpay and by reference to the provisions of NHSGMPSR, Item 5 applies to a supply of staff. As such we are invited to limit the extent to which Item 5 is non-conforming rather than to apply an interpretation which conforms.
[119] Had we been prepared to adopt the interpretations urged upon us, as noted in Rapid, such interpretation would render Item 5 nugatory. The provision of medical care by any individual on the register of medical practitioners is and was already exempted under Item 1. Item 5 cannot reasonably be a subset of Item 1. The provisions were designed to provide discrete and accretive heads of exemption." (Isle of Wight NHS Trust v. HMRC [2025] UKFTT 114 (TC), Judge Brown KC)
​
Conforming interpretation limited to what is required to remedy the defect
"[128] We accept the submission of [Counsel for HMRC] that the exercise the courts have to undertake is first to identify the manner in which UK domestic legislation is incompatible with EU law. Having done so, the courts can then consider what is required to remedy the defect. The court can then consider whether this can be done by adopting a conforming interpretation, and if so its terms. If it cannot, then the court moves on to consider disapplication, and the effect of the disapplication.
...
[140 In determining whether a conforming interpretation is available, we need to consider whether a muscular approach to interpretation is able to remedy the breach of EU law. In adopting a conforming interpretation, we cannot go beyond what is necessary to remedy the breach (see Re S). The precise form of words does not matter, and we do not need to engage in legislative drafting." (Trustees of the Panico Panayi Accumulation and Maintenance Settlements Numbers 1 to 4 [2024] UKUT 319 (TCC), Rajah J and Judge Aleksander)
​
- Must identify precisely the respect in which UK law is not compliant with EU law
"[134] We find that the imposition of an exit tax under s80 TCGA is not the aspect of UK domestic law that infringes the EU law rights of the Trustees. Rather it is the failure of UK domestic law to provide for deferral of the payment of that liability. The breach (in the case of the Trustees) is in s59B TMA. This is the finding correctly reached by Judge Mosedale in Panayi FTT at [92]. A similar analysis in respect of the corresponding corporation tax provisions applies to Redevco." (Trustees of the Panico Panayi Accumulation and Maintenance Settlements Numbers 1 to 4 [2024] UKUT 319 (TCC), Rajah J and Judge Aleksander)
​
- Construction to make UK law more compliant even if not wholly compliant
"[85] But even if that is wrong, it is an insufficient reason for not interpreting "the storage…of goods carried in a[n]…aircraft" as being a service to meet the direct needs of aircraft cargo in the sense explained by the ERCJ in Berkholz (para [71] above). This interpretation is consistent with and implements article 15(9). It does not involve a fundamental departure from item 6(b) or the domestic legislation as a whole. Mr Milne submits that it is "meaningless" to say that item 6(b) should be interpreted in accordance with article 15(9) in some respects and not in others. I disagree. The interpretative obligation is to construe item 6(b) consistently with article 15(9) so far as possible. Even if the United Kingdom has impermissibly extended the exemption to the provision of storage and handling of goods carried in aircraft used by airlines not operating for reward chiefly on international routes, that is not a reason for not seeking to limit the scope of the breach of its treaty obligations and, so far as possible, construing the item consistently with the article." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Dyson LJ)
​
Conforming interpretation only applies to cases where otherwise there would be a breach
"[114] The proper approach to construction is that legislation should be read and given effect in a particular case according to its ordinary meaning, unless the person who is affected by it can show that this would be incompatible with their Convention rights under the HRA or some provision of EU law as applied to their case. Only then do the special interpretive obligations under section 3(1) of the HRA or under the Marleasing principle come into play to authorise the court to search for a conforming interpretation at variance with the ordinary meaning of the legislation. This means that the same legislative provision might be given a different interpretation in different cases, depending on whether Convention rights or EU law are applicable in the case or not. Although at first glance this might seem odd, in fact it is not. It simply reflects the fact that in the one case circumstances are such that an additional interpretive obligation has to be taken into account, but in the other case no such obligation is in play: see R (Hurst) v London Northern District Coroner [2007] UKHL 13; [2007] 2 AC 189, para 1 (Lord Bingham of Cornhill), paras 9 and 12-15 (Lord Rodger) and para 52 (Lord Brown of Eaton-under-Heywood); and Gingi v Secretary of State for Work and Pensions [2001] EWCA Civ 1685; [2002] 1 CMLR 20, paras 41-47 per Arden LJ (as she then was). If the position were otherwise, Convention rights and rights under EU law would be given disproportionate effect in domestic law, and statutory interpretation would become an exercise in the imaginative construction of theoretical cases in which such rights might be in issue in order to change the interpretation of legislation in cases where they are not." (R (oao Z) v. Hackney LBC [2020] UKSC 40)
​​
"[61] If the other members of the court agree with my conclusion on conforming interpretation then the issue of disapplication does not arise. But in case they do not, and in deference to the arguments of counsel I should make brief reference to the arguments. By paragraph 4 of his order Evans-Lombe J ordered that the CFC Legislation "be disapplied as being contrary to Community law". It is common ground that such order cannot stand because it goes beyond the obligation of a member state and disapplies the CFC Legislation in situations falling outside the scope of Community law, see IRC v Colmer 72 TC 56 paras 34 and 35.
[62] The consequence of disapplication as referred to in paragraph 26 above is that it is necessary to identify those entitled to the community rights to be protected, see Autologic Holdings plc v IRC [2005] STC 1357, 1365 para 17 and Fleming/Conde Nast [2008] 1 WLR 195, 216 para 49. It was clear from the parties' written arguments that there was disagreement as to the extent and nature of the disapplication which would be appropriate. At our request the parties formulated what they submitted was the appropriate form of order on the assumption, in each case, that we had concluded that a conforming interpretation is impossible and on the further assumptions that their arguments on disapplication had or had not been accepted." (Vodafone 2 v. HMRC [2009] EWCA Civ 446)
​
EXAMPLES​
​
Examples (VAT)​
​
- Exclusion from VAT exemption for closely related supplies with income generating purpose/in competition (Article 134) implied
"[96] I do not consider that these points take the arguments any further or establish that implying the words of Article 134(b) into Item 4 would be contra legem. In short, there is nothing in these submissions which causes me to consider that implying the words of Article 134(b) into Item 4 is inconsistent with the words used by Parliament in Item 4. The provision in Article 134(b) clearly goes with the grain of the legislation, which must in any event be construed to be consistent with fiscal neutrality. It is compatible with the underlying thrust of the legislation. There is no distortion and it is not necessary to identify any textual anchor.
[97] I do not consider that HMRC’s interpretation is contra legem. It does not directly contradict the words used by Parliament in Item 4, nor does it require ‘A’ to be read as ‘B’. It simply ensures that the exemption is implemented in a way which is consistent with the purpose of Articles 132 and 134. It cannot be said from the words actually used in Item 4 that Parliament clearly intended to implement the exemption in a way which did not conform with the PVD.
[98] It is clear from Vodafone 2 that the Marleasing principle is broad and far-reaching, and that it permits the implication of words necessary to comply with the UK’s obligation to implement Articles 132 and 134. As the Court of Appeal stated in Vodafone 2, the precise form of the words to be implied does not matter.
[99] I am satisfied that Item 4 should be interpreted as including the exclusion from exemption in Article 134(b). It is not strictly necessary for me to consider whether Item 4 should also be interpreted as including the exclusion from exemption in Article 134(a), because HMRC accept that on the facts of this case the relevant supplies were essential to the transactions exempted.
[100] Contrary to [the taxpayer's] submission, such a conclusion does still leave limits on the interpretative process. In particular, interpretations which do not go with the grain of the legislation, which would be contra legem or which require courts or tribunals to become involved in policy decisions are not permitted. None of those limitations apply in this case." (Fareham College v. HMR [2023] UKFTT 214 (TC), Judge Cannan)
​
- Additional limiting words read into zero-rating (requiring services to meet "direct needs" of aircraft)
"[49] In my judgment, however, the provisions in Article 15 (9) govern the construction of the implementing provision in Item 6(b). If possible, Item 6(b) must be construed compatibly with the Directive requirement of the "direct needs of aircraft or of their cargoes." It can be construed compatibly in accordance with the principles in Litster [1990] 1 AC 456 and Marleasing [1990] ECR 1 4135 by reading into the Item the core concept in Article 15(9) of storage to meet " the direct needs" of aircraft or of their cargoes. In my judgment, HMRC's appeal on this point succeeds. There is nothing in Item 6(b) that is incompatible with that concept of "direct needs". Although the concept has not found verbal expression in the Item, it is possible to read into it that link or connection between the storage and the aircraft.
[50] In a similar way the concept of "direct connection" in Article 15(13) governs the construction of Item 11(a). As with Item 6 (b), it is not a matter of inserting in the implementing provision the very wording of Article 15 to achieve a compatible construction of the Items in the Schedule and the Article 15 provisions. The point is that there is nothing in the Item which makes it impossible to read in the requirement of a direct connection between the storage and the place at which the goods are to be exported or imported." ​(HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Mummery LJ)
​
- Limitation on zero-rating to aircraft "operating for reward chiefly on international routes" read in
"[84] The third difference is of greater significance. The supply of services referred to in article 15(9) is to aircraft used by airlines chiefly operating for reward on international routes. This includes aircraft which operate on domestic routes used by such airlines: see Case C-251/05, Cimber Air A/A v Skatteministeriet [2005] STC 547 para 30. But it does not include the supply of services to aircraft used on domestic routes by airlines which do not chiefly operate for reward on international routes. In my view, however, there can and should be read into item 6(b) the words "used by airlines operating for reward chiefly on international routes" after the word "aircraft". That would not involve a fundamental departure from item 6 and would be consistent with its general scheme." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Dyson LJ)
​
- Scope of services covered by zero-rating broadened
"[83] The first two differences noted by Mr Milne between item 6 and article 15(9) do not seem to me to be of significance in the present context. If there are services (other than those referred to in article 15(6)) to meet the direct needs of aircraft or their cargoes over and above handling and storage, then those additional services can and should be read into item 6. To do so would not involve a fundamental departure from item 6 or the domestic legislation as a whole. It seems to me that the disparity in language is the result of the adoption of different drafting techniques rather than an intended difference of substance. The same point applies to the difference provisions made as to the place where the exempted services are provided. If there are locations over and above those specified in item 6, then these additional locations can and should be read into the item. That would not involve a fundamental departure from item 6 or the domestic legislation as a whole." (HMRC v. EB Central Services Limited [2008] EWCA Civ 486, Dyson LJ)
​
- Zero-rating for food dependent on objective test of whether the "deal" was the purchase of food that could be eaten hot
"[45] My Lord, Briggs LJ, in argument invited Mrs Hall to comment on whether the distinction was to be found in the objective assessment of whether the temperature of the food, enabling consumption of it "hot", was or was not the essential nature of the "deal" between supplier and customer. In other words, was the deal that the supplier was selling and the customer was buying a sandwich which could be eaten "hot" Her answer was, I think, a qualified "yes"...
...
[49] In the end, however, I conclude that this provision can be "read down" in accordance with the Marleasing principle to supply an objective test, as advanced (in the end) by the Respondents, which I have sought to summarise in paragraph 44 and 45 above, with the assistance of Briggs LJ's pithy question. This approach to the matter searches for the assumed common intention of the supplier and the consumer as to whether it is a term of the bargain that the product be supplied in order to be eaten hot. By this entirely objective enquiry, the court derives the terms of the bargain from what each party to the contract says and does (including the presentation of the supply in the shop and in any advertising)." (Sub One Limited v. HMRC [2014] EWCA Civ 773, McCombe, Rimer, Briggs LJJ)
​
- Disapplication of a rule widened to apply wherever applying the rule would result in non-taxation
"[114] Mr Pleming ventured only briefly to submit precisely how para 3 should be interpreted in order to bring it into conformity with Community law. As the Ghaidan case shows it is not necessary to find a simple linguistic device for this. It also shows that one of the ways of interpreting a provision "so far as possible" is to write in words. In my judgment the appropriate interpretation is to read in words to widen the disapplication in para 3(3) of the disregard in para 3(2) so that the disapplication applies where the disregard would result in the non-taxation, contrary to the objectives of the Sixth Directive specified in paragraph 95 above, of a taxable supply of goods or services in the United Kingdom. In my judgment it is unnecessary for this court to attempt to splice precise words into the language used by Parliament in schedule 10A as if it were itself the Parliamentary drafter. As the Ghaidan case shows, it is not an objection to interpretation of this nature that it amends the language used by Parliament. In this respect, I do not find Mr Lasok's citation from the Scotch Whisky case of assistance since the principle there stated was one applicable to the interpretation of European Union legislation (i.e. under the first level of interpretation as I have described above) and not applicable to the interpretation of domestic legislation under the Marleasing principle. The interpretation of para 3(3) of schedule 10A which I prefer gives effect to the wording and purpose of the Sixth Directive because it implements the general principles of VAT law identified above in respect of the harmonised rule relating to the place of supply of telecommunications services, i.e. that such supply should in the case of private consumers be taxed in Ireland but in the case of registered persons such as the United Kingdom distributors be taxed in the place where such persons are established." (HMRC v. IDT Card Services Ireland Ltd [2006] EWCA Civ 29, Arden LJ)
​
. - Even though that it involves extending the disapplication for a different purpose than which it was drafted and taxing someone not intended to be taxed
"[133] There are ways in which words can be read into paragraph 3(3) which would cover the present situation, though Mr Pleming was reluctant to opt for a precise formula. I acknowledge that to disapply the disregard in favour of Customs & Excise in this case would be to apply the disapplication, in the form it is drafted, for a different purpose from that for which it was drafted. In that sense, it does go against the grain of provisions which are based on the principle that VAT is to be levied on the supplier of telecommunications services rather than the supply of the credit vouchers. The presence of paragraph 3(3) does, however, at least demonstrate that the disregard in paragraph 3(2) is not to be universal and that there are intended to be situations, if the result would otherwise be to permit escape from VAT, in which the disregard does not apply.
...
[135] What Customs and Excise's submissions require is a finding that, notwithstanding the wording of paragraph 3 of Schedule 10A, and of the decision to impose the VAT on the supplier of the telecommunications service which led to that wording, the paragraph should be read so as to permit the collection of the tax from distributors in the United Kingdom in present circumstances.
...
[140] Unless domestic provisions in Member States are read subject to the underlying principle that non-taxation is not to be permitted, disharmony resulting from different methods of collection is likely to have significant consequences. They can be avoided if a proviso may be read into measures such as paragraph 3 of Schedule 10A that they are not to be applied in a way which would lead to non-taxation or double taxation. While reading such measures other than literally in a sense may create uncertainty, knowledge that such measures will be read so as to prevent non-taxation works in favour of the principle of certainty. There will be certainty that VAT on services cannot be escaped by arranging the transactions cross borders." (HMRC v. IDT Card Services Ireland Ltd [2006] EWCA Civ 29, Pill LJ)
​
- Addition to list of bodies with power to make legislation
"[79] Here I consider a conforming interpretation is possible, by reading in “(h) an Act or Measure of the National Assembly for Wales” to Note 8. Whilst this is a departure from the strict and literal application of the words, such a highly muscular approach is allowed under a conforming interpretation. It clearly goes with the grain of the legislation, as it is adding an item of the same genus to the list already in Note 8. It is not contra legem, in the sense of contradicting and being irreconcilable with the very wording of the national provision at issue: HMRC v Ampleaward Ltd [2021] EWCA Civ 1459; [2021] STC 2260 at [95]. I note that this is also consistent with the approach of Judge Beare in JD Wetherspoon PLC v HMRC [2025] UKFTT 658 (TC), where he found a conforming interpretation capable of adding the word “cider” to a prescriptive list of other alcoholic beverages.
[80] Cascade say a conforming interpretation would be too far reaching:
“Further, the effect of adding a new type of Act would be potentially farreaching. The definition of 'state-regulated' in Note (8) is used by Item 4 (care or medical or surgical treatment and certain goods) as well as Item 9. If Acts of the Welsh Assembly were added to Note (8), the Welsh Assembly could extend the exemptions simply by choosing to regulate additional services. Whether the Welsh Assembly is to have that power (in the same way as the Scottish Parliament or the Northern Ireland Assembly) is [a] matter of political choice.”
[81] However Parliament chose to give the National Assembly for Wales the power to make such regulation. In those circumstances extending the exemptions to include goods and services so regulated, in the same way that it extends to regulation by the Scottish Parliament or the Northern Ireland Assembly, is not too far reaching." (Cascade Care Ltd v. HMRC [2025] UKFTT 1332 (TC), Judge Blackwell)
​
- Adding cider to a list of alcoholic beverages to ensure fiscal neutrality
"[257] It follows that, since paragraph (12a) specifically mentions alcoholic beverages as a whole, as a generic category of beverages which a Member State is permitted to exclude from the reduced rate, the grain of the paragraph necessarily includes the ability of a Member State to exclude alcoholic beverages as a generic category from the reduced rate. That in turn means that, in circumstances where the national legislation enacted to give effect to the paragraph purports to exclude alcoholic beverages as a whole from the reduced rate but - in breach of the terms of the paragraph and, in the case of certain beverages, in breach of the principle of fiscal neutrality - omits from that exclusion one particular type of alcoholic beverage, the correct conforming interpretation is to add that omitted alcoholic beverage into the exclusion for alcoholic beverages as a whole.
[258] Consequently, the appropriate conforming interpretation in this case is to add a reference to cider into the definition of "alcoholic beverage" in Group 14. In effect, the remedy is identical to the one which arises under the Inco principle as a matter of UK domestic law." (JD Wetherspoon Plc v. HMRC [2025] UKFTT 658 (TC), Judge Beare)
​
Examples where conforming construction not possible (VAT)​
​
- Reduction in consideration "whether or not payment" is reduced could not be read as only applying where payment is reduced
"[78] [The taxpayer] said that it was a “fundamental” and “cardinal” feature of Para 4(1) that consideration was deemed to be reduced by the offered discount, irrespective of whether or not the customer made the payment promptly so as to secure that discount. In his submission, any construction of Para 4(1) that stripped it of that feature would “go entirely against the grain of the legislation”. He added that Judge Morgan had come to the same conclusion in Virgin Media FTT when she said at [230]:
“My view is that the thrust of the legislation in this case is (and indeed the intended meaning of Para 4(1) could hardly be clearer) that the consideration on which VAT is to be charged is to be reduced where supplies are made on terms allowing or providing for a discount for prompt payment by the amount of the discount whether or not the discount provided for is in fact paid. To adopt an interpretation (whether by reading in words or otherwise) that the effect of Para 4(1) is that the relevant consideration is reduced only where a discounted sum is in fact paid would, therefore, go against the grain or thrust of the provision Parliament decided to enact.”
[79] Again, we agree with Judge Morgan for the reasons she gave." (Talktalk Telcom Limited v. HMRC [2023] UKFTT 12 (TC), Judge Redston)
​
- "Any member state" could not be read as "the UK" (direct contradiction)
[106] HMRC's first suggestion is, in effect, to replace "any member state" with "the United Kingdom". I do not consider that the Marleasing principle entitles a court to adopt an interpretation which is in direct contradiction to the words that Parliament has used. Moreover, section 18 (7) specifically contemplates a "warehousing regime" as including movements between warehouses in different member states. In Advocate Elmer's words, this suggestion invites us to read "A" as "B". HMRC's first suggestion would, in my judgment, be contra legem. I note, however, that this amendment has in fact been made by Parliament (see Taxation (Cross Border Trade) Act 2018 Schedule 8 para 16 (6) (d); but only with effect from 31 December 2020). The suggested conforming construction would have retrospective effect, although Parliament has expressly decided that it should not.
...
[109] In my judgment, although the UK has incorrectly widened the permissible scope of the exemption, the Marleasing principle does not allow that error to be corrected. Any necessary change would have to have been made by legislation." (HMRC v. Ampleaward Limited [2021] EWCA Civ 1459)
​
- ZR for prescriptions by UK registered practitioners could not be extended to overseas registered practitioners
"[189] The interpretation put forward by the Appellant, which would involve including certain EEA health professionals within Note 2B, would go against the grain of the VAT legislation and be inconsistent with a fundamental feature of the legislation. Parliament appears to intend not to extend zero-rating to non-UK registered health professionals and to adopt the Appellant’s construction would cross the boundary from permissible interpretation to impermissible amendment.
[190] We are also mindful of the point made at paragraph 38(b) of the judgement in Vodaphone 2, that we should not make a decision which might have practical repercussions we are not equipped to evaluate. The definition of “EEA health professional” has itself been amended from the original version set out in paragraph 88 above to the current version in paragraph 138. It now includes certain nurses, midwives and pharmacists as defined by EU law. UK registered pharmacists are not included in Note 2B at all. If we were to adopt Mr Lall’s suggested amendment, the class of permitted prescribers might change in unpredictable ways with unpredictable consequences. We do not, of course, have to adopt Mr Lall’s precise wording, but this illustrates the point that formulating our own definition, especially without the guidance of a directive as to the objective to be achieved, could have significant practical consequences that we cannot properly evaluate.
[191] We conclude that although the restriction, by Note 2B, to the zero-rating of supplies of medicines to those issued on the prescriptions of UK registered practitioners breaches the principle of fiscal neutrality, we can neither interpret the legislation to conform to EU law, nor prevent HMRC charging VAT by reference to the medicines prescribed by Dr El-Khourabi." (Pearl Chemist Limited v. HMRC [2019] UKFTT 264 (TC), Judge McKeever)
​
Examples (other tax)​
​
- Additional exception to CFC rules read in for companies carrying on genuine activity activities in Member state
[39] Without in any way suggesting that it is incumbent on he who contends for a conforming interpretation to spell out exactly what it is, for that would be to gainsay the proposition set out in paragraph 37(f), it undoubtedly assists in the consideration of whether or not it is a permissible interpretation to see on paper how it is suggested that it would be effected, whether by interpolation, deletion, rewording or otherwise. Counsel for HMRC disclaimed any intention or requirement to produce any precise formulation. He contended that the 'grain' or 'thrust' of the legislation was to cast the initial net wide as in s.747(3) and then narrow it by the overlapping exceptions set out in s.748(1)(a) to (e) and (3). In that context, he submits, all that is required is to introduce an additional exception in respect of a controlled foreign company
"if it is, in that accounting period, actually established in another member state of the EEA and carries on genuine economic activities there."
Such an exception could be an additional lettered paragraph in s.748(1) or an additional alternative in s.748(3) as suggested by Mr Walters. The effect of such an amendment would be to remove from the CFC Legislation the 'hindrance' or 'restriction' with which the Advocate-General and the ECJ were concerned in Cadbury Schweppes. In that event there would be no need for the case by case consideration which was considered to be necessary if the CFC Legislation was to be justified as it stood. Were it considered desirable it would be simple to provide for an exception to the exception in relation to "wholly artificial transactions".
...
[44] To my mind the extension of the exceptions to the CFC Legislation for which counsel for HMRC contends is as permissible as either of those which found favour in Ghaidan or IDT. It does not alter the impact on other CFCs which are not excepted by any other exception. Certainly it provides an additional exception but, as counsel for HMRC submitted, the grain or thrust of the legislation recognises that the wide net cast by s.747(3) is intended to be narrowed by s.748. Further the terms of various exceptions were not intended to be either mutually exclusive or immutable as the ability to amend the conditions contained in various parts of Schedule 25 and the terms of paragraph (e) show. For my part I would reject this objection to the conforming interpretation put forward by counsel for HMRC." ​(Vodafone 2 v. HMRC [2009] EWCA Civ 446)
​
- Right to pay tax in instalments in relation to exit charge tax read in
"[141] We find that it is possible to apply a conforming interpretation to ss59B and 59D TMA. This can be achieved by reading words into those sections to provide that, at a time before the legislation was actually amended to comply with EU law, those provisions should be read in cases where the taxpayer's right of freedom of establishment would otherwise be infringed, as including an option to defer payment of the exit tax in five equal annual instalments, with the first instalment payable on the normal due date for payment, and at yearly intervals thereafter.
[142] Such a conforming interpretation gives effect to the EU law rights of the Trustees and Redevco, and provides the "best fit" with the EU law requirements. To the extent that we have made any choices, those choices were resolved by the application of the principles that apply to a conforming construction. In particular that the construction should not go further than is necessary to give effect to the EU law rights of the Appellants, should go with the grain of UK law, and recognise that the other provisions of UK law continue to apply." (Trustees of the Panico Panayi Accumulation and Maintenance Settlements Numbers 1 to 4 [2024] UKUT 319 (TCC), Rajah J and Judge Aleksander)
​
- Restriction on group relief limited to cases where loss is deducted abroad rather than only deductible
"[91] Finally, we do not accept the Respondents’ further argument that HMRC’s conforming interpretation would go against the grain of the legislation. We recognise, of course, that there is a difference between a loss being “deducted” and being “deductible”. If there were no difference, then HMRC’s proposed interpretation would not affect the meaning of s403D(1)(c) and so would not be a “conforming” interpretation. However, the proposed interpretation retains the essential feature of s403D(1)(c), namely that UK group relief should be restricted where other relief is available for the same loss. It simply targets the denial of UK group relief more proportionately, at situations where there has been an actual use of the losses outside the UK as distinct from a mere theoretical possibility that they could be used in that way.
Accordingly, we would adopt the following conforming interpretation of s403D(1)(c):
(1) The restriction on UK group relief is to be construed as applying only to the extent that the loss is, in any period, deducted against non-UK profits.
Thus, if only £10,000 of a £1m loss can be so deducted, s403D(1)(c) restricts group relief only to the extent of £10,000 and not the full £1m.
(2) The words “deductible from or otherwise allowable against” in s403D(1)(c) are to be construed as meaning “deducted from or otherwise allowed against”." (HMRC v. Volkerrail Plant Ltd [2022] UKUT 78 (TCC), Roth J and Judge Jonathan Richards)
​
- "Any enactment" could not be interpreted as "any enactment made by any legislature anywhere in the world"
"[61] It is well-established that domestic legislation which contravenes EU law must, so far as possible, be interpreted consistently with EU law by reading in words or limiting the scope of the offending provision. Such a conforming interpretation must not, however, go against the grain of the legislation. I agree with Ms Shaw's submissions on this point. Adopting HMRC's interpretation would dramatically increase the category of public service pension schemes and reduce the UK Government's ability to restrict the availability of relief from tax. In my view, interpreting “any enactment” in section 150(3)(a) FA 2004 to mean any enactment made by any legislature anywhere in the world would go too far and cross the boundary between interpretation and amendment." (BAV-TMW v. HMRC [2019] UKFTT 129 (TC), Judge Sinfield)
​
Examples (other)​
​
- Definition of cancellation period reworded to ensure right to cancel even if notice not given by vendor
"[31] On behalf of the intervener, the Office of Fair Trading, Ms Ford suggested that there were two possible means of achieving a conforming/purposive construction of the regulations which would fulfil the Directive's objective. The first would be to read the word "within" where it appears in regulation 7(1) and regulation 8(1) as meaning "at any time prior to the expiration of". This, she submitted, would have the effect that a consumer would have the right to cancel at any time before the end of the cancellation period which would either expire 7 days after the consumer received notice of the right to cancel or, in the event that no such notice was served, would not expire at all so that the consumer could cancel at any time.
[32] The second possibility advanced by Ms Ford was to interpret "cancellation period" in regulation 2(1) so as to permit the words, "the period of 7 days starting with the date of receipt by the consumer of a notice of the right to cancel" as meaning, "the period commencing from when the trader is required to give the consumer a written notice of his right to cancel pursuant to regulation 7(2) and expiring 7 days after the date of receipt by the consumer of a notice of the right to cancel".
[33] Either of these interpretations is feasible and both would achieve the object of advancing and being in conformity with the obvious purpose of the Directive. But the first interpretation has much to commend it, not least because it is a simple and tenable reading of the actual wording of the 2008 Regulations. I would therefore hold that this is the interpretation to be preferred." (Robertson v. Swift [2014] UKSC 50)
​
- Spouse interpreted to include homosexual couple in long term relationship to avoid discrimination
"[28] For the reasons which Lord Nicholls has given in his speech, I am satisfied that treating the survivors of long-term homosexual partnerships less favourably than the survivors of long-term heterosexual partnerships for purposes of the Rent Act 1977 violates their right under article 14 in relation to article 8(1) of the Convention. Nor, in respectful disagreement with Lord Millett on this particular point, can I discern any principle underlying the Act as a whole, or Schedule 1 in particular, which requires that only the survivor of a long-term heterosexual relationship should be treated as a statutory tenant. All that seems to have happened is that, when Schedule 1 was amended in 1988, Parliament chose to extend the concept of "spouse" to someone who had lived with the original tenant in a long-term heterosexual relationship, but did not go any further. As was recognised in Fitzpatrick v Sterling Housing Association Ltd, society has moved on since 1988. In this particular context, even if there once was, there is no longer any reason in principle for not including within the concept of "spouse" someone who had lived with the original tenant in an equivalent long-term, but homosexual, relationship. To interpret para 2 so as to include such a person would, of course, involve extending the reach of para 2(2), but it would not contradict any cardinal principle of the Rent Act. On the contrary, it would simply be a modest development of the extension of the concept of "spouse" which Parliament itself made when it enacted para 2(2) in 1988. The position might well have been different if Parliament had not enacted para 2(2) and had continued to confine the right to succeed to the husband or wife of the original tenant. But that bridge was crossed in 1988. So the fact that the partners in a homosexual relationship are not, and indeed cannot be, married is not to be regarded as a critical factor limiting the way that para 2(2) may be interpreted under section 3(1) of the 1998 Act. Nor is there any reason to fear that the proposed interpretation would entail far-reaching practical repercussions which the House is not in a position to evaluate. Certainly, counsel for the Secretary of State, who made submissions in favour of interpreting para 2(2) in this way, did not foresee any such problems.
[29] Accordingly, in reliance on section 3(1) of the 1998 Act I would interpret para 2(2) as providing that, for the purposes of para 2, a person, whether of the same or of the opposite sex, who was living with the original tenant in a long-term relationship shall be treated as the spouse of the original tenant. By this means it is possible to read and give effect to para 2 in a way which is compatible with the respondent's article 8(1) and 14 Convention rights." (Ghaidan v. Godin-Menoza [2004] UKHL 30)
​
- Transfer of employment applied to employees and, with implied words, persons who would have been employed but for unfair dismissal
"Pickstone v. Freemans Plc. [1989] A.C. 66, has established that the greater flexibility available to the court in applying a purposive construction to legislation designed to give effect to the United Kingdom's Treaty obligations to the Community enables the court, where necessary, to supply by implication words appropriate to comply with those obligations: see particularly the speech of Lord Templeman, at pp. 120-121. Having regard to the manifest purpose of the Regulations, I do not, for my part, feel inhibited from making such an implication in the instant case. The provision in regulation 8(1) that a dismissal by reason of a transfer is to be treated as an unfair dismissal, is merely a different way of saying that the transfer is not to "constitute a ground for dismissal" as contemplated by article 4 of the Directive and there is no good reason for denying to it the same effect as that attributed to that article. In effect this involves reading regulation 5(3) as if there were inserted after the words "immediately before the transfer" the words "or would have been so employed if he had not been unfairly dismissed in the circumstances described in regulation 8(1)." For my part, I would make such an implication which is entirely consistent with the general scheme of the Regulations and which is necessary if they are effectively to fulfil the purpose for which they were made of giving effect to the provisions of the Directive." (Litster v. Forth Dry Dock & Engineering Co Ltd [1990] 1 A.C. 546 at 577)
​
- Right of insurer to recover quantum of liability from insured who is also victim subject to additional limitation/made discretionary
"[75]...Section 151(8) in fact demands that two pre-conditions be fulfilled before the insurer has the right to an indemnity from the insured. It has to be shown that the insured "caused or permitted[70] the use of the vehicle" and that the use of the vehicle "gave rise to the liability". So I think it cannot be against the fundamental principle of section 151(8) to require further conditions be fulfilled in certain limited circumstances before the insurer can exercise the right (to whatever extent may seem proportionate) against an insured passenger victim.
Accordingly, I would prefer the interpretation advanced by the insurers and the SST. I would interpret section 151(8)(b) as notionally including the words added in bold italics:
"Where an insurer becomes liable under this section to pay an amount in respect of a liability of a person who is not insured in a policy…he is entitled to recover the amount from…any person who-
……
(b) caused or permitted the use of the vehicle which gave rise to the liability, [save that where the person insured by the policy may be entitled to the benefit of any judgment to which this section refers, any recovery by the insurer in respect of that judgment must be proportionate and determined on the basis of the circumstances of the case]"." (Churchill Insurance Company Limited v. Fitzgerald & Wilkinson [2012] EWCA Civ 1166 - words read in within the [ ])
​
- Treatment of chief constable as employer extended to disciplinary panel to allow equality claims
"[33] The way to resolve the problem is to interpret section 42(1) of the 2010 Act as applying to the exercise of disciplinary functions by misconduct panels in relation to police constables. This runs with the grain of the legislation, and is warranted under EU law, as given domestic effect by the 1972 Act, in accordance with such cases as Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990] ECR I-4135. In particular, section 42(1) can be interpreted conformably with the Directive if it is read as if certain additional words (italicised in the following version) were present:
“(1) For the purposes of this Part, holding the office of constable is to be treated as employment -
(a) by the chief officer, in respect of any act done by the chief officer [or (so far as such acts fall within the scope of the Framework Directive) by persons conducting a misconduct meeting or misconduct hearing] in relation to a constable or appointment to the office of constable;
(b) by the responsible authority, in respect of any act done by the authority in relation to a constable or appointment to the office of constable.”
So interpreted, the Act overrides, by force of statute, any bar to the bringing of complaints under the Directive against the chief officer which might otherwise arise by reason of any judicial immunity attaching to the panel under the common law.
[34] It should be emphasised that this conforming interpretation has to be understood broadly: the court is not amending the legislation, and the italicised words are not to be treated as though they had been enacted. The expressions “misconduct meeting” and “misconduct hearing”, for example, have not been defined by reference to the relevant regulations. Nor is the use of those expressions intended to exclude the adoption of a similar approach in relation to other types of panel if that is necessary in order to comply with the Directive. The italicised words are merely intended to indicate how section 42(1) should be interpreted in a case such as the present, in order to avoid a violation of EU law." (P v. Commissioner of Police [2017] UKSC 65)
​
- Express exception to prohibition on discrimination could not be read down
"[26] It is not until we get to regulation 5 that the application or non-application of Part 5 is carved up, i.e. it is modified rather than applied or disapplied wholesale. Under regulation 5 (but not regulations 3 and 4), Part 5 is applied differentially, so that some parts apply and others do not. And regulation 5 is dealing expressly with circumstances in which (by virtue of regulation 3 or 4) the whole of Part 5 would otherwise apply.
[27] Regulation 5 creates a limited exception in the case of payment, or offered payment, of nationality-based differential rates.
...
[36] Parliament chose, in section 81, to empower the Secretary of State to decide whether and to what extent Part 5 should apply in relation to work on ships, work on hovercraft and seafarers. In our judgment, the Secretary of State then decided to apply or disapply the whole of Part 5 of the 2010 Act as provided for in regulations 3 and 4 of the 2011 Regulations and to disapply part, but not all, of Part 5, in the circumstances provided for in regulation 5.
[37] We consider that we cannot escape from that conclusion by invocation of a beneficent policy-driven construction, whether by applying the Marleasing principle or by invoking other general principles of interpretation such as the need for there to be a remedy where a wrong needs righting, or preservation of the a right to work. It would strain the language of section 81, read with the 2011 Regulations, too far to do so.
...
[39] It is, in our judgment, an uncomfortable but inescapable proposition that the 2011 Regulations permit an offshore employment service provider to discriminate, on United Kingdom soil, on the ground of any of the protected characteristics in the 2010 Act, when recruiting in this country personnel to serve on its clients’ foreign flagged ships sailing outside United Kingdom waters." (Walker v. Wallem Shipmanagement Limited [2020] UKEAT 236, Kerr J)
​​
"[31]...Where, however, legislation specifically provides for an exception to rights that would otherwise ensure protections consistent with those provided under a relevant directive, an attempt to interpret the provision in question so as to avoid that exception would cross the line, notwithstanding a more general legislative intent to achieve harmony with the directive; see Walker v Wallem Shipmanagement Ltd [2020] 2 CMLR 25 EAT." (British Airways plc v. Rollett [2024] EAT 131, Eady J)
​