TC09158 - [2024] UKFTT 00369 (TC)

Mr Boyle submits that the Appellant is a recycling company that has never traded in alcohol. He further submits that the Appellant’s premises are in a secure location, with one way ‘in’ and ‘out’, and that all commercial vehicles entering its premises are weighed, and a record is kept. In this respect, his submissions are that the third parties referred to by HMRC are not recorded, or listed in the Appellant’s visitor book. The third-party statements obtained by HMRC are further submitted by Mr Boyle to be at odds with the layout of the Appellant’s premises. Furthermore, it is submitted on behalf of the Appellant that the documentation relied on by HMRC (as obtained from the third parties) is not consistent with the Appellant’s own documentation as the Appellant uses formal references made up of a combination of numbers and letters (in its invoices and delivery notes).

HMRC acknowledge that: (i) the sale and movement of alcohol may not typically be indicative of the Appellant’s ordinary trading; and (ii) the Appellant has evidenced a log of entries to its premises on or about the relevant dates, but Mr Carey submits that the clear and overwhelming inference that can be made from the third-party evidence is that there was alcohol being collected from the Appellant’s premises. The evidence obtained from the hauliers demonstrated, in HMRC’s view, that the hauliers were told to collect the Goods from the Appellant’s premises. The clear and overwhelming inference was that alcohol was being collected from the Appellant’s premises, and that someone at the Appellant’s premises must, therefore, have been engaging in the facilitation of the collection of the alcohol. The explanation given by the hauliers was considered to be clear and unequivocal, and the drivers had identified the Appellant’s address.

Ultimately, Mr Carey submits that the Appellant is liable to the excise assessment because it was “holding” the goods within the meaning of the Excise Duty Regulations, and as a person who handled the goods (i.e., for the purposes of para. 4 of Schedule 41), and that the Appellant was able to control access to its premises upon which the collections took place.

During the appeal hearing, Mr Carey submitted that three separate arms-length entities who collected the alcohol could not each have come up with the same factual matrix, particularly in light of the vehicle tracking information held in respect of one of the hauliers (Customs Haulage). In his view, the more likely explanation was that the Appellant had an employee who was facilitating the collection. He further submitted that the purpose of the Excise Directive was to cast a wide net, which would encourage the collection of duty.

We have considered the authorities to which we were referred:

The Appellant’s appeal was previously stayed pending the outcome of the decision of the Upper Tribunal in B & M Retail Ltd v HMRC [2016] UKUT 429 (TCC) (‘B & M Retail’). In B & M Retail, the Upper Tribunal decided that a person holding excise duty goods in respect of which duty had not been paid could be assessed under reg. 6(1)(b) of the Excise Goods Regulations. This was notwithstanding the fact that, in principle, an earlier release for consumption had occurred. Since the decision in B & M Retail, the Upper Tribunal has handed down the decision in Davison & Robinson, which we consider later.

Where HMRC assess the person holding duty unpaid goods, a challenge to the assessment on the basis that there was an earlier excise duty point can only be successful if it can be established:

The case of Dawson’s concerned a wholesaler of alcoholic drinks. HMRC assessed that it owed around £3,700,000 of excise duty on the basis that there was insufficient evidence that excise duty had been paid on certain supplies of good made and physically held by it. HMRC traced the supply chain back from Dawson’s supplies to missing, de-registered or hijacked companies. Dawson’s was assessed because HMRC had no evidence that excise duty was paid on the goods and could not establish that any of the companies appearing further back in the supply chain took physical possession of the goods. The Upper Tribunal held that the starting point in determining who is ‘holding’ the goods at the relevant time must be the person who has physical possession of them. Once the physical holder of the goods is identified, the correct approach is to then consider whether the circumstances of that possession are such that it is inappropriate for that person to be considered to be holding the goods. The Court of Appeal held, at [76], that:

“... Anyone in physical possession of excise goods who was assessed for excise duty would immediately point to the chain of supply and contend that there must have been an earlier release for consumption and a person in de facto or legal control of the goods before them and, accordingly, that they were not liable”.

The Upper Tribunal, therefore, held that it is possible for a person with control over the goods, as opposed to physical possession, to be treated as ‘holding’ them. This is as a result of an absence of an earlier duty point. The Upper Tribunal however found that it was up to the person assessed to establish that a person earlier in the supply chain had been holding the goods and should be assessed instead. The Upper Tribunal stated that in the absence of any evidence that establishes an earlier duty point, the person holding the goods at the time that it is established that the goods are being held at a specific location, but are no longer held pursuant to a duty suspension arrangement, is chargeable to the unpaid duty.

The Upper Tribunal had earlier ruled, in Davison & Robinson, that HMRC has no discretion as to who to assess where there have been multiple holders of the goods and excise duty has not been paid. All that HMRC are required to do is to assess the person they find to be holding the goods in question, if that is the only excise duty point which can be established. The case presented on behalf of the Appellant in Davison & Robinson was that B & M Retail was wrongly decided. Further, and alternatively, the appellant argued that the issue of whether there could be more than one excise duty point should be referred to the Court of Justice of the European Union (‘CJEU’).

In Perfect v HMRC [2020] STC 705 (‘Perfect’), Mr Perfect was stopped by UK Border Force at Dover Docks driving a lorry containing pallets of beer, in respect of which excise duty had not been paid. Mr Perfect knew that he was carrying beer, but did not know (i) who owned the lorry; (ii) that duty had not been paid; and (iii) that the documentation which accompanied the load related to a previous consignment. The lorry and the goods were seized. Although HMRC accepted that the evidence did not show that Mr Perfect was actively involved in the attempts to smuggle goods into the UK, or that he deliberately attempted to evade excise duty, he was assessed for excise duty on the basis that he was holding the goods.

Both the FtT and the Upper Tribunal had found that Mr Perfect could not be held liable for the unpaid excise duty on the goods. On appeal to the Court of Appeal, the court accepted that where the driver is the only identifiable person who can be assessed, the opportunity for smuggling and fraud would be manifestly greater if the courts and tribunals conclude that he cannot be assessed if he was unaware that the goods were liable to duty. The court further held that the natural meaning of the words “holding” or “making delivery” do not impute any requirement for the person to be aware of the tax status of the goods. At [22] (Newey LJ with whom Baker and Snowden LJJ agreed), the court found that ‘knowledge’ or ‘means of knowledge’ is irrelevant to liability. The court, therefore, approved the conclusions of the Upper Tribunal, in Davison & Robinson Ltd. The court further commented that the EU principles of proportionality and fairness do not exclude the imposition of strict liability. The Court of Appeal in Perfect concluded thus:

“23.

It follows that the fact that Mr Perfect had neither actual nor constructive knowledge of the smuggling of the beer he was carrying cannot exempt him from liability from excise duty.”

The case was referred to the CJEU’, given the fundamental importance of proportionality in EU law. In WR, the CJEU considered the concept of who ‘holds’ goods. The court held, at [24], that:

“The concept of a person who ‘holds’ goods refers, in everyday language, to a person who is in physical possession of those goods. In that regard, the question whether the person concerned has a right to or any interest in the goods which that person holds is irrelevant.”

And at [27] to [31]:

“27.

…the person liable to pay the excise duty is, in accordance with Article 8(1)(b) of that directive, ‘the person holding [those] ... goods and any other person involved in the holding of the excise goods’.

28.

However, like Article 33(3) of Directive 2008/118, Article 8(1)(b) of that directive does not contain any express definition of the concept of ‘holding’ and does not require the person concerned to be the holder of a right or to have any interest in relation to the goods which that person holds, or that that person be aware or that he should reasonably have been aware that the excise duty is chargeable under that provision.

29.

By contrast, in a situation different from that referred to in Article 33(3) of Directive 2008/118, that is to say, in the case of an irregularity during a movement of excise goods under a duty suspension arrangement, within the meaning of Article 4(7) of that directive, Article 8(1)(a)(ii) of that directive provides for liability to pay the excise duty on the part of any person who participated in the irregular departure of those goods from the duty suspension arrangement and who, furthermore, ‘was aware or who should reasonably have been aware of the irregular nature of the departure’. The EU legislature did not restate this second condition, which can be regarded as requiring an element of intention, either in Article 33(3) or, moreover, in Article 8(1)(b) of that directive (see, by analogy, judgment of 17 October 2019, Comida paralela 12, C-579/18, EU:C:2019:875, paragraph 39).

30.

It follows that, where, in Directive 2008/118, the EU legislature intended that an intentional element be taken into account for the purpose of determining the person liable to pay the excise duty, it has laid down an express provision to that effect in that directive.

31.

Furthermore, an interpretation limiting the status of person liable to pay the excise duty as being ‘the person ... holding the goods intended for delivery’, within the meaning of Article 33(3) of Directive 2008/118, to those persons who are aware or should reasonably have been aware that excise duty has become chargeable would not be consistent with the objectives pursued by Directive 2008/118, which include the prevention of possible tax evasion, avoidance and abuse (see, to that effect, judgment of 29 June 2017, Commission v Portugal, C-126/15, EU:C:2017:504, paragraph 59).”

And also, at [34]:

“34.

However, to impose an additional condition requiring that the ‘person ... holding the goods intended for delivery’, within the meaning of Article 33(3) of Directive 2008/118, is aware or should reasonably have been aware that excise duty is chargeable would make it difficult, in practice, to collect that duty from the person with whom the competent national authorities are in direct contact and who, in many situations, is the only person from whom those authorities can, in practice, demand payment of that duty.”

The agreement between the United Kingdom and the EU setting out the arrangements for the UK’s withdrawal from the EU (‘the Withdrawal Agreement’) Treaty Series No. 3 (2020) provides for judgments of the CJEU handed down after 31 December 2020 to have “binding force in their entirety on and in the United Kingdom if given in respect of references made by the United Kingdom before the end of 2020.

In the context of excise assessments, the Court of Appeal noted in Perfect, at [66] – [67], (and repeated at [10] of the Court of Appeal’s further judgment in the case following a CJEU reference at [2022] 1 WLR 3180) that:

“66.

We agree that the underlying policy of the 2008 Directive is, as identified by the Upper Tribunal in B & M, that it is the obligation of every member state to ensure that duty is paid on goods that are found to have been released for consumption. It would be a distortion of the internal market were member states not to take steps to ensure that goods in respect of which excise duty should have been paid cannot circulate freely within the single market alongside goods on which duty has been paid. ...

67.

This policy is, to our eyes, reflected in the terms of the Directive and the Regulations. ... Although fairness and proportionality are, of course, cornerstones of EU law, as they are of the common law, they do not invariably exclude the imposition of strict liability. We consider that there is very considerable force in the argument that, given the policy underlying the Directive, the imposition of strict liability on a driver in these circumstances does not offend the principles of fairness or proportionality.”

The objective (legitimate aim) of the HMRC’s powers to issue assessments is to secure the payment of excise duty which is owed. The use of such powers is appropriate to achieving that aim where a person holding goods is assessed at the first assessable duty point. The evidence obtained from the third-party hauliers was that on 3 August 2012, Wayne Bentley, working for Bassett & Sons Ltd., collected 26 pallets of alcohol from the Appellant. On 15 August 2012, Dean West, employed by Custom Haulage Ltd, collected 26 pallets of mixed beer from the Appellant’s premises. Over and above the documentation provided from the hauliers was vehicle tracking information, which supported the claimed collection at the Appellant’s premises on that date. We accept that the reasonable inference that can be drawn from the evidence was that the Appellant had involvement/held excise goods.

Whilst we have considered Mr Boyle’s evidence that the third-party hauliers are not recorded in the Appellant’s visitor log, we find that the Appellant has not been able to point to any other entities higher up in any supply-chain in relation to the duty point. More importantly, despite referring to other tenants on site, and the failure of HMRC to speak to those tenants, the Appellant has not conducted any enquiries of its own in this respect. We accept that a conversation relating to excise goods would have been a sensitive one to have with the tenants. However, the incontrovertible fact in this appeal is that the Appellant’s premises have been identified by separate entities as the place from which excise goods were collected, and this has resulted in the Assessments.

We find that the Appellant’s entire case rested on the business model being contrary to the suggestion that the Appellant would have any involvement in alcohol. There was no suggestion, on behalf of the Appellant, that CJM could be regarded as holding the excise goods as CJM’s involvement appears to have predated the arrival of the Goods at Freedom Farm (even if only for a matter of hours). The issue of whether CJM had control of the Goods, in the sense that they were able to direct where the Goods were going to be collected and delivered, was not one that was explored, or suggested, before us. We are satisfied that supply-chain investigations were conducted by HMRC and the third-party hauliers (including CJM) pointed to the Appellant’s premises as being where the Goods were delivered/collected, and that is the duty point that has been identified by HMRC.

We acknowledge that what the Appellant has been required to prove is a negative, as the Goods were never found in the Appellant’s physical possession and the holding/movement of alcohol is contrary to the Appellant’s business model. The Appellant however has control over its premises. We find that despite referring to various employees who worked for the Appellant at the relevant time of HMRC’s enquiries/investigation, the Appellant has not called any evidence from its employees in relation to the events that took place on site on the dates that alcohol was said to be collected from its premises. Mr Boyle explained that he spends time working from his office on site. Whilst the entrance to the Appellant’s premises is visible from the office window, his desk faces away from that window and he would not have had any way of knowing everything that was taking place outside at all times.

We accept that the Appellant’s environmental permit regulates waste operations on its site and requires records to be kept of the acceptance and despatch of waste. We, however, find that there is considerable force in Mr Carey’s submission that it is not to be expected that such records would document the entry and despatch of vehicles which were not transporting waste to the Appellant’s site. The weighbridge tickets and the environmental permit are, therefore, irrelevant to the assessments under appeal, which relate to consignments of alcohol which may have been destined for various cash and carries.

Having considered the authorities and the evidence, we hold that the Appellant is liable for the unpaid duty because it was holding (within the meaning of the Excise Duty Regulations) the Goods collected from its premises. Furthermore, we find that the Appellant was able to control access to its premises, upon which the collections took place.

The Assessment was made under s 12(1A) FA 94, which provides that an assessment may be made where it appears (to the Commissioners) that the amount due can be ascertained (by the Commissioners). No goods have ever been found and the exact quantity of those goods has not been ascertained. Mr Boyle submits that duty cannot be calculated because the Goods, and quantity, have not been identified.

Mr Carey submits that all that is required is that an assessment is made to the best of their ability, and that HMRC have taken into account the handwritten logs that the Appellant has provided. The conclusion reached, however, is that these do very little to suggest the Assessment is wrong given that there are multiple entities who identified the Appellant’s address as the collection address. He adds that there has been no attempt by the Appellant to make enquiries of its own, or any attempt to call any witnesses who may have been working on the relevant dates to give evidence. Mr Carey submits that best judgment only arises if the Assessment was made randomly, arbitrarily, capriciously or maliciously. In Van Boeckel, Woolf J (as he then was) said this in respect of assessments, at p. 296:

“If they do make investigations then they have got to take into account material disclosed by those investigations.”

Woolf J drew three conclusions in relation to the obligation that is upon HMRC. Firstly, there must be some material before HMRC on which they can base their judgment. Secondly, HMRC are not required to do the work for the taxpayer in order to form a conclusion as to the amount of tax due. Thirdly, HMRC are required to exercise their powers in such a way that they make a value judgment on the material which is before them. Carnwath LJ cited the same passages in Rahman where he said this, at p 835:

“…the tribunal should not treat an assessment as invalid merely because it disagrees as to how the judgment should have been exercised. A much stronger finding is required; for example, that the assessment has been reached ‘dishonestly or vindictively or capriciously’; or is a ‘spurious estimate or guess in which all elements of judgment is missing; or is ‘wholly unreasonable’. In substance those tests are indistinguishable from the familiar Wednesbury principles (see Associated Provincial Picture Houses ltd v Wednesbury Corp [1948] 1 KB 223). Short of such a finding, there is no justification for setting aside the assessment.”

The threshold for making a “best judgment” assessment is therefore a low one. The correct test is whether there has been an honest and genuine attempt to make a reasoned assessment: Pegasus Birds, at [22] (per Carnwath LJ). This does not translate to meaning that whether an assessment could be said to be “wholly unreasonable” is irrelevant to determining that question: Pegasus Birds, at [77] (per Chadwick LJ). HMRC only need to consider the information before them in a fair way and come to a decision which is reasonable (and not arbitrary) as to the amount of tax due. In Corneill v HMRC [2007] EWHC 715 (Ch), at [32] and [33], Mann J found, in respect of a similar provision requiring the liability to be ascertained, that it was appropriate to draw inferences from the available evidence.

When considering circumstantial evidence, the Tribunal is required to assess the evidence as a whole: Davis & Dan Ltd v HMRC [2016] EWCA Civ 142; [2016] STC 1236 (Arden LJ at [57] to [60]). We have found that the documents relied on by HMRC name the collection point as the Appellant’s premises, and the delivery or end user are cash and carries. Whilst Mr Boyle challenged the documents, the challenge did not extend to the descriptions contained in the documents. One of the documents states: “26 Pallets Lager”. The documentary evidence was coupled with statements obtained from the drivers of the hauliers in question, which supported the conclusion that the Appellant’s premises had been used as a collection point. The evidence, when taken as a whole, strongly suggested that the duty point first arose when goods were collected from the Appellant’s premises.

The calculation of the Assessment was, ultimately, based on the conclusion that there were two full loads of beer (26 pallets) collected from the Appellant’s premises. In this case, the best evidence available is from the hauliers who noted the collection address as being from the Appellant. Officer Idowu’s calculation was based on a standard load of an average quantity and strength of beer, which provided the Appellant with the benefit of the doubt, given that the proportion of wine (which attracts a higher rate of duty) in the load collected on 3 August 2012 was unknown. We are satisfied that Officer Idowu made a reasonable calculation of the amount of duty due. The duty due has, therefore, been ascertained for the purposes of s 12(1A) FA 94, and paras. 9 and 10 of Schedule 41.