TC09158 - [2024] UKFTT 00369 (TC)

The Assessment was raised on 15 March 2015, within one year of the evidence sufficient in the assessing officer’s opinion to justify making the Assessment. It is the evidence which justified the Assessment which was, in fact, made, and not the hypothetical assessment that might have been made, which is significant: DCM (Optical Holdings) Ltd v R & C Comrs [2022] 1 WLR 4815 (‘DCM’). More investigative work was required to be undertaken before an assessment could be raised because of the requirement that HMRC assess the first duty point: Davison & Robinson Ltd v R & C Comrs [2018] UKUT 437 (TCC) (‘Davison & Robinson’). When the first visit took place in 2012, HMRC had done little more than try to identify matters relevant to the Assessment, without yet having sufficient evidence to actually make an assessment:

The witness statements provided by the drivers who collected the Goods from the Appellant’s premises provided sufficient evidence such that HMRC could proceed to make the Assessment when they did. That was not until after Officer Idowu had visited the Appellant’s premises in 2014 (i.e., the Visit), at which time Mr Boyle’s denial that alcohol had been collected was considered to be at odds with the supply chain enquiries that had been carried out. The inconsistency provided sufficient evidence to justify making the Assessment: Rasul v HMRC [2017] STC 2261; [2017] UKUT 357 (TCC) (‘Rasul’). “Reasonableness” must be assessed against the very significant complexity around tracing supply chains where fraud is inherent in the movement.

Even if HMRC are wrong about the preceding arguments, the Assessment is still valid and in time. This is because the first visit in 2012 was conducted by the FIS. The assessing officer was working in a different team at the time and he did not obtain all of the relevant information until 21 March 2014. There is no doctrine of “collective knowledge” and the fact that information may have been held by other officers at another time is not relevant: R & C Comrs v Tooth [2021] UKSC 17 (‘Tooth’), at [68] to [70] (albeit in a different context). Time does not begin to run until the information was made known to the assessing officer.

Even if the FtT finds that the Assessment is time-barred, that does not have the effect of vitiating the Penalty as there is liability to excise duty as a matter of fact. This is because liability to a penalty does not depend upon the Appellant’s liability to the Assessment. The Appellant’s position is predicated on a misunderstanding of when the penalty assessment time-limit starts.

The time-limit in para. 16(4) of Schedule 41 operates from the time that the Assessment has been determined. The Assessment has not been determined because it is subject to an appeal. Therefore, the Penalty issued on 23 February 2016 is in time.

HMRC ascertained the amount of tax unpaid by reason of the relevant act or failure on 16 March 2015 (pursuant to para. 16(4)(b) of Schedule 41) and the Penalty on 23 February 2016 is within the time-limit of one year: Euro Wines (C &C) Ltd v R & C Comrs [2018] EWCA Civ 46 (‘Euro Wines’), at [3].

The Appellant is liable to the Assessment because it held the Goods within the meaning of reg. 6(1)(b) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (“the Excise Goods Regulations”): Dawson’s (Wales) Ltd v R & C Comrs [2023] 4 WLR 35 (‘Dawson’s’), at [76]. The word “held” must be given an ordinary and natural meaning, with an eye to preventing fraud. It does not require one to have been “caught red-handed”. The Appellant is liable for the unpaid excise duty because it held the alcohol which was, in fact, collected from its premises: R & C Comrs v Perfect [2022] EWCA Civ 330 (‘Perfect’), at [22]. “Knowledge”, or “means of knowledge”, is irrelevant to whether an individual is liable or not.

It is clear that someone at the Appellant’s premises was exercising a degree of control over the collection and movement of the Goods: R & C Comrs v WR Case C-279/19 (‘WR’), at [24], [27] – [29]. The Appellant was also able to control access to its premises, where collection took place: Van De Water v Staatssecretaris van Fianciën [2001] All ER (D) 53 and Hughes v HMRC [2022] UKFTT 00400 (TC). The purpose of the Excise Directive is to cast a wide net.

There is no requirement for HMRC to have precise details of the loads that have been assessed. All that is required is that HMRC make an assessment to the best of their ability (similar to a best judgment assessment). HMRC regularly make assessments to their best judgment based on the information known to them: Van Boeckel v C & E Comrs [1981] STC 290 (‘Van Boeckel’), at 292 to 203 (Woolf J); and Pegasus Birds [2004] STC 1509 (‘Pegasus Birds’). ‘Best judgment’ only arises as an issue if the Assessment was made randomly, arbitrarily, capriciously, maliciously, etc.: Rahman (t/a Khayan Restaurant) v C & E Comrs (No. 1) [1998] SCT 826 (Carnwath J).

HMRC’s calculations were predicated on a sound and reasonable basis; namely, standard loads of an average quantity and strength of beer. This has resulted in a more favourable calculation for the Appellant given that wine, attracting a higher duty rate, was included in the loads. It is appropriate to draw inferences from the available evidence in order for the liability to be ascertained: Thomas Corneill v HMRC [2007] EWHC 715 (Ch) (‘Corneill’), at [32] to [33] (Mr Justice Mann) (in respect of a similar provision). An error in the calculation of an assessment does not call into question the officer’s judgment. There is a distinction between the best judgment issue and the quantum issue. An assessment based on a flawed calculation is still capable of being held to have been made to the best of the officer’s judgment. The bar for an assessment to fall on the grounds of not being to best judgment is a high one to overcome. The best evidence available is from the hauliers who noted the collection address as being the Appellant’s premises.

HMRC have expressly taken into account the handwritten logs that the Appellant has provided. The Appellant has failed to make enquiries of its own. The Appellant has, further, failed to call any witnesses who were, or may have been, working on the relevant dates.

The burden of proof is upon HMRC to show that the Appellant is liable to a penalty. If the Assessment is valid, the burden of proof is discharged in respect of the Penalty. In the event that para. 4 to Schedule 41 is satisfied, a person is liable to a penalty. There is a legitimate aim that those who are involved in alcohol fraud are liable to a penalty. The Appellant is attempting to launch an attack on the penalty regime.

The conclusion was reached that there was insufficient evidence to uphold a deliberate penalty. Reductions are available where a taxpayer makes disclosure to HMRC, and where “special reduction” applies.

There is no evidence to suggest that the Goods were destroyed or irretrievably lost, as opposed to being used on the open market. Being irretrievably lost is not the same as being used: General Transport SPA v R & C Comrs [2020] EWCA Civ 405, at [54]. The Appellant has not adduced any evidence to show that the Goods were “unusable”.

The Goods were liable to forfeiture since the excise duty had not been paid and were being held outside a duty suspension arrangement. In those circumstances, a penalty can be charged and it follows that there was no bar to the destruction, in the absence of a challenge or an unsuccessful challenge, by way of condemnation proceedings.

HMRC are out of time in raising the Assessment and HMRC are not able to raise the Penalty where a valid assessment has not been raised.

The Penalty was raised more than one year after the day on which evidence of facts sufficient to allow an assessment to be made came to the knowledge of an officer. The Appellant cannot be held responsible for HMRC’s poor record-keeping following the first visit on 5 December 2012. The conclusion reached during the first visit was that there was no evidence of any smuggling activity on the Appellant’s site. HMRC have not established any change of circumstances that occurred after the first visit on 5 December 2012 and the Visit in 2014.

The documents relied on by HMRC are third-party invoices and delivery notes. Informal and vague referencing on documents calls the legitimacy and validity of the paperwork HMRC rely on into question. Furthermore, the information included in the documents is inconsistent and incomplete. The Appellant uses formal references made up of numbers and letters.

HMRC are also relying on various third-party witnesses whose statements include limited information which is at odds with the Appellant’s premises and activities. There is no evidence that the Goods were collected from the Appellant’s premises, or that the third parties entered the Appellant’s premises.

The Appellant is a recycling company and has never traded in alcohol. All vehicles entering the Appellant’s premises are weighed and a record is kept. The third parties referred to by HMRC are not listed in the Appellant’s visitor book as they did not enter, or leave, the Appellant’s premises. Furthermore, the premises are in a secure location, with only one way in and out.

HMRC have not provided sufficient evidence detailing the Goods themselves, or sufficient evidence in relation to collections from the Appellant’s premises. They have further failed to properly consider the evidence and information provided to them by the Appellant, supporting the fact that the Appellant does not have any connection to the alleged transportation of alcohol.

HMRC do not have sufficient evidence to show that the Appellant acted in a deliberate manner and it is not clear what HMRC are alleging.

The Appellant denies that it: (i) has been involved in the trade or transportation of any alcoholic beverages; (ii) held the Goods at the time that they were released for consumption; or (iii) held the Goods outside a duty suspension arrangement.

The case of Davidson & Robinson does not apply to the Appellant’s circumstances.