TC09584 - [2025] UKFTT 00866 (TC)

Sections 78 and 139 of the Customs and Excise Management Act 1978 provide that a person entering the UK may be required to answer questions about their baggage and produce items for examination. In circumstances where items chargeable with duty or tax are found concealed, they are liable to forfeiture, and as such may be seized or detained. 

Sections 8(1) and (4) of the FA94 provide as follows:

“8 Penalty for evasion of excise duty

(1)

Subject to the following provisions of this section, in any case where -

(a)

any person engages in conduct for the purpose of evading any duty of excise, and

(b)

his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person shall be liable to a penalty of an amount equal to the amount of duty evaded or, as the case may be, sought to be evaded.

…

(4)

Where a person is liable to a penalty under this section –

(a)

the Commissioners or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and

(b)

an appeal tribunal, on an appeal relating to a penalty reduced by the Commissioners under this subsection, may cancel the whole or any part of the reduction made by the Commissioners.”

Section 8 of FA94 was repealed by paragraph 21(d)(i) of Schedule 40 of the Finance Act 2008 with the exception of the dishonesty penalty, which was preserved by the Schedule 41 (Appointed Day and Transitional Provisions) Order 2009.

Sections 25(1) and 29(1)(a) of FA03 provide as follows:

“25  Penalty for evasion

(1)

In any case where –

(a)

a person engages in any conduct for the purposes of evading any relevant tax or duty, and

(b)

his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person is liable to a penalty of an amount equal to the amount of the tax or duty evaded or, as the case may be, sought to be evaded.

…

29   Reduction of penalty under section 25 or 26

(1)

Where a person is liable to a penalty under section 25 or 26 –

(a)

the Commissioners (whether originally or on review) or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and

(b)

the Commissioners on a review, or an appeal tribunal on an appeal, relating to a penalty reduced by the Commissioners under this subsection may cancel the whole or any part of the reduction previously made by the Commissioners.

(2)

In exercising their powers under subsection (1), neither the Commissioners nor an appeal tribunal are entitled to take into account any of the matters specified in subsection (3).

(3)

Those matters are –

(a)

the insufficiency of the funds available to any person for paying any relevant tax or duty or the amount of the penalty,

(b)

the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss or any relevant tax or duty,

(c)

the fact that the person liable to the penalty, or a person acting on his behalf, has acted in good faith.”

Section 31(2) FA03 provides that a demand notice under section 25 may not be given more than two years after HMRC have identified the evasion of duty.

The Travellers’ Allowance Order 1994, as amended, provides for the limits for the importation of relevant goods from third countries (whereby a “third country” is defined in relation to relief from excise duties as a place to which Council Directive 92/12/EEC of 25 February 1992 does not apply). The limit for cigarettes is 200.

The test for dishonesty has been clarified by the Supreme Court in Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67 (“Ivey), unifying the principles for civil and criminal cases. Lord Hughes (with whom Lord Neuberger, Lady Hale, Lord Kerr and Lord Thomas agreed) stated as follows at [74]:

“[74] These several considerations provide convincing grounds for holding that the second leg of the test propounded in Ghosh does not correctly represent the law and that directions based upon it ought no longer to be given. The test of dishonesty is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan and by Lord Hoffmann in Barlow Clowes: see para 62 above. When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”