39(1)On an appeal under paragraph 37(a) that is notified to the tribunal, the tribunal may affirm or cancel HMRC’s decision.
(2)On an appeal under paragraph 37(b) that is notified to the tribunal, the tribunal may—
(a)affirm HMRC’s decision, or
(b)substitute for that decision another decision that HMRC had power to make.
(3)If the tribunal substitutes its decision for HMRC’s, the tribunal may rely on paragraph 18—
(a)to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or
(b)to a different extent, but only if the tribunal thinks that HMRC’s decision in respect of the application of paragraph 18 was flawed.
(4)In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.
(5)In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 38(1)).