TC09158 - [2024] UKFTT 00369 (TC)

In relation to the issue of whether there is a concept of “collective knowledge”, in Tooth - where the Supreme Court was considering the meaning of “deliberate” in the context of Schedule 24 of the Finance Act 2007 and a discovery assessment - the Supreme Court considered the operation of s 29(1) of the Taxes Management Act 1970 (‘TMA’), which confers two separate powers; namely:

The Supreme Court held, at [68] and [69], inter alia, that:

“68.

…Moreover, the language and structure of the provision would make no sense if its operation turned on a concept of collective knowledge of the Board, derived from the knowledge of any and all of its officers”

And that:

“68.

…the condition in section 29(5) operates by reference to the state of mind of a particular hypothetical officer of the board dealing with the taxpayer’s case at a particular point in time...”

And, at [69], that:

“69.

…The officer in question needs to know if a discovery has been made in order to know if they have power under section 29(1) to issue an assessment and reference to their own state of mind enables them to know with confidence whether they have that power.”

The case of R (National Association of Health Stores) v Department of Health [2005] EWCA Civ 154 considered “the Carltona principle”, which takes its name from Carltona Ltd v Commissioner for Works [1943] 2 All ER 560, in relation to implied delegation of decision-making functions to civil servants within government departments, at [23] to [38] (Sedley LJ) and [71] to [74] (Keene LJ), as follows:

“23.

The next question is altogether more profound. It is not answered, only broached, by the historic decision of this court in Carltona Ltd v Commissioners of Works [1943] 2 All ER 560. There the court was presented with an attempt to transpose a familiar doctrine of the law of agency – the rule that one who is delegated cannot himself delegate - into the field of public administration, treating the minister as the Crown's delegate…

24.

Carltona, however, establishes only that the act of a duly authorised civil servant is in law the act of his or her minister. It does not decide or even suggest that what the civil servant knows is in law the minister's knowledge, regardless of whether the latter actually knows it.”

Sedley LJ added this, at [71] to [74]:

“71.

I agree and wish to add only a few comments of my own on the issue of the extent of the minister's knowledge, because of its importance in administrative law. It is vital to distinguish between two situations. The first is where a civil servant makes a decision in the name of his government minister, often a Secretary of State, where a statute has vested the decision – making power in the Secretary of State. In such a situation the Carltona case establishes that the civil servant acts, and is entitled to act, in the name of the minister.

72.

The second situation is where a minister is himself actually the decision-maker. Carltona says nothing about the imputing of the knowledge of relevant facts to the minister merely because those facts are known to one or more of his civil servants, no matter how senior. Nor in my judgment does the passage from Lord Diplock's speech in Bushell establish any such proposition. That was a case concerned with whether or not it was unfair for a government minister to receive advice and information from his civil servants without it being disclosed to those who had objected at a public inquiry and without it being tested through the inquiry processes. Bushell was not dealing with whether a government minister is assumed to know what his civil servants know when the issue is whether he has taken relevant matters into consideration in arriving at his own personal decision.

73.

Where the decision is in truth one taken personally by a minister, the normal principles of administrative law will apply, so that on a challenge by way of judicial review the court will consider whether the minister as decision-maker has taken into account irrelevant considerations or failed to take into account relevant ones. Where the decision- maker is in fact a civil servant, the same principles apply to that civil servant's decision, albeit the discussion will nominally refer to "the Secretary of State". This approach accords with the decision of the High Court of Australia in the Peko-Wallsend case…

74.

The implication of Mr Cavanagh's submission, as he frankly acknowledged, is that a minister who personally makes a decision of this kind can do so validly, even though in complete ignorance of an important and highly relevant consideration, so long as his civil servants know about it. I cannot accept that that is the law. To take an example discussed in argument, it would mean that the Secretary of State could personally decide that planning permission should be granted for a major housing development in the approved Green Belt without being aware of the Green Belt status of the land in question. If that were held to be a valid and intra vires decision by him, it would negate basic propositions of English administrative law established well before Associated Provincial Picture Houses Limited v. Wednesbury Corporation [1948] 1 KB 223.”

It is, therefore, clear that there is no doctrine of “collective knowledge”. This has the same effect as express delegation of power: s 13(1) of the Commissioners for Revenue and Customs Act 2005 (‘CRCA’).

Having considered all of the evidence, we find that the visit on 5 December 2012 was conducted by the FIS, at which time Officer Idowu (the assessing officer) formed part of the CITEX/ISBC Team. Officer Idowu did not attend the Appellant’s premises on 5 December 2012 and his involvement in the investigation only began significantly later. We find that the earliest date of his involvement was 6 February 2013. At that stage, the supply chain enquiries had only just begun. The investigative work that took place following on from the visits to third-party hauliers was ongoing until the end of 2013/beginning of 2014. We accept that whilst Officer Idowu may have inferred from the delivery documentation that alcoholic goods had been collected from the Appellant’s premises, this was not ascertained until after Officer Idowu made enquiries on 2 May 2014 with Bassetts & Sons, and with Mr Bentley in particular. It was only as a result of those enquiries that HMRC acquired knowledge of the contents of the load collected from the Appellant’s site on 3 August 2012 (being mixed wines and beers).

We accept that it was reasonable for Officer Idowu to seek further evidence to verify the information provided to him during the investigation. In relation to HMRC’s duty to assess against the earliest duty point which can be established, we accept that it was reasonable for Officer Idowu to make enquiries with the Appellant in order to check for evidence of facts, including any facts on which HMRC might have established an earlier duty point. All of the information gathered pointed towards the Appellant’s premises as being the place from which excise goods were collected.

We are satisfied, from the chronology given, that Officer Idowu did not obtain all of the relevant information until 21 March 2014. Before the Visit to the Appellant’s premises on this date, it is reasonable to believe that Officer Idowu was expecting to identify an earlier duty point. HMRC’s enquiries and investigations would have been based around tracing the whole supply-chain, back to the point of importation (or production). We find that there is considerable force in Mr Carey’s submission that it is the evidence which justified the Assessment which was, in fact, made and not a hypothetical assessment that might have been made. The Assessment was then made in March 2015 and is in time (given the timing of the visit to the Appellant’s premises in 2014 when the last piece of information was communicated to Officer Idowu).

The Assessment is the “assessment of the amount of any duty of excise due”. The application of the time-limit in s12(4)(b) will only arise once an assessment to the amount of duty has been made. It will be a question of fact for the Tribunal, having considered the evidence, as to which facts justified the Assessment that was made from the point of view of the officer who made the Assessment. As established by case law, there is then to consider when the last piece of evidence of sufficient weight in relation to the fact came before the Commissioners. It is at this point when the time-limit in s 12(4)(b) starts to run. The 12-month time-limit for the purposes of s 12(4)(b) did not expire until 21 March 2015. The Assessment was issued on 11 March 2015, within the time-limit.

The Appellant also challenges the Penalty on the same basis as the Assessment. HMRC submit that the Appellant’s position is predicated upon a misunderstanding of when the penalty assessment time-limit commences, and that even if the Assessment is out of time, that does not change liability to excise duty as a matter of fact. The question of liability to a penalty, and the provisions in s 13A(2) FA 1994, were considered in Caerdav Ltd v R & C Comrs [2023] UKUT 179 (TCC), at [146] to [159]. A material question in the respect of whether the Assessment is in time is: when did the last piece of information that was critical to the assessment come to HMRC’s knowledge? The question requires identification of the evidence taken into account by the officer who issues the assessment as the justification for issuing it; or the evidence of which he was aware which ought, rationally, to have compelled him to reach the opinion that an assessment would be justified at some earlier stage. This turns on the subjective state of mind of HMRC officers regarding what they understand the evidence available to them actually shows.

Paragraph 16(4)(a) of Schedule 41 provides that the time-limit operates from the time that the excise assessment has been determined. The Assessment in this appeal is the subject of this appeal and has not, therefore, been finally determined. The Penalty was issued on 23 February 2016 and, consequently, is in time.

We hold that the Assessment and the Penalty were issued in time.