TC09625 - [2025] UKFTT 01066 (TC)

The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (“the “Regulations”) implement Council Directive 2008/118/EC (“the 2008 Directive”). By Regulation 5, an excise duty point arises at the time when goods are released for consumption in the UK.

Regulation 6(1) provides (emphasis added):

“ Excise goods are released for consumption in the United Kingdom at the time when the goods -

(a)

…

(b)

are held outside a duty suspension arrangement and UK excise duty on those goods has not been paid, relieved, remitted or deferred under a duty deferment arrangement;…”

Regulation 10(1) provides:

“The person liable to pay the duty when excise goods are released for consumption by virtue of regulation 6(1)(b) (holding of excise goods outside a duty suspension arrangement) is the person holding the excise goods at that time.”

In B & M Retail Ltd v HMRC [2016] UKUT 429 (TCC) (“B&M”), the UT held that even though in principle an earlier release for consumption must have occurred, that did not preclude HMRC assessing a person holding goods in respect of which excise duty had not been paid, and went on to say that the decision as to which of the various holders should be subject to excise duty assessment was at the discretion of HMRC.

However, in Davison & Robinson Ltd v HMRC [2018] UKUT 0437 (TCC) (“Davison”) at [79], HMRC accepted that they were obliged to assess, as a matter of law against “the earliest point in time at which [HMRC] are able to establish, on the evidence before them, that excise goods have been held outside a duty suspension arrangement”. That concession was consistent with the UT’s own analysis that the 2008 Directive required an assessment to be made against the first established excise duty point. The UT also said that if HMRC assessed anyone other than the first holder they could identify, that person could challenge the assessment on appeal to the FTT, see [80] of the judgment. The UT observed at [67] that “clearly, HMRC cannot make an assessment until it has the necessary information on which to establish when, how, where and by whose acts the excise duty point occurred”.

In Dawson’s (Wales) Ltd v HMRC [2019] UKUT 0296 (TCC) (“Dawsons UT”) at [149], the UT set out the factors a person would have to show in order successfully to challenge an assessment on the basis that an earlier duty point could be established against which HMRC should have made an assessment (“the Factors”):

“(1)

Who had physical possession at the time that the alleged earlier excise duty point occurred. For example, the earlier excise duty point might be established immediately before the goods concerned were delivered to the premises of the subsequent holder, by reference to the physical possession of the courier delivering those goods.

(2)

Who is the person alleged to have de facto or legal control over the goods
who it is said should be assessed rather than the subsequent holder…and how that person is said to have such control and the basis on which it was being exercised. For example, the terms of supply to the person alleged to have de facto or legal control might mean that in fact that person never had control of the goods and did not direct their delivery. Control might have been exercised by another entity earlier in the chain of supply in compliance with a request by the person in question to deliver them to the subsequent holder. Alternatively, for example, the terms of supply to the subsequent holder, including where relevant the operation of the Sale of Goods Act or the Convention…might mean that the goods were already under the control of the subsequent holder while in transit to him.

(3)

The time at which the excise duty point arose. Whilst precise temporal
exactitude is not essential…in our view the date of an invoice is not sufficient in itself without establishing who was in possession of the goods at some identified point or points in time. In that context, and as already indicated, the terms of the relevant sale may be relevant, in particular as to when delivery is deemed to have occurred. Copies of CMRs, if they can be obtained, may be relevant.

(4)

Where the goods were being held at the relevant time. In the case of goods
being transported, that could be by reference to the means of transport or the location of that means of transport at some point in time, possibly immediately prior to the delivery of the goods at a particular location. We do not consider that the goods need necessarily to be shown to have been static at a particular place at a single fixed point in time...For example, in the case of means of transport the transport used, the start and/or end points of the
journey and a defined period of time within which it must have occurred might
be identified.”

That decision was appealed to the Court of Appeal. Asplin LJ gave the only judgment with which Arnold and Laing LJJ both agreed; it is published under reference [2023] EWCA Civ 332 (“Dawsons CoA”). Asplin LJ endorsed Factors (1), (3) and (4) at [77] and [94], and at [86] recorded that Factor (2) was not challenged.

Meanwhile, in 2019, a differently constituted Court of Appeal had considered HMRC’s appeal against the UT’s judgment in HMRC v Perfect [2017] UKUT 0476 (TC). The UT had agreed with the FTT that Mr Perfect, a haulier, was not liable to excise duty because he had no actual or constructive knowledge that the load he was carrying was liable to duty which had not been paid. The Court referred to the CJEU the question as to whether a person holding goods (such as a haulier) who had no actual or constructive knowledge that duty was unpaid was nevertheless liable for that duty; in other words, whether there was “strict liability”.

The CJEU anonymised the reference as “WR”, and the Advocate General’s Opinion and the judgment were published asHMRC v WR [2021] C- 279/19 (“WR”). Advocate General Tanchev issued his Opinion on 21 January 2021. At [29] he said (emphasis in original):

“As far as the aims of the Directive are concerned, as I will explain in the section below, the broad wording of the provisions at issue, which concern a series of persons potentially liable for the duties without any order of priority being established, and who are jointly liable, seeks to guarantee that the tax debt is paid effectively and for that purpose someone must be held responsible. The Court has endorsed this view in its case-law.”

At [33] of its judgment, the CJEU said:

“…as the Advocate General observed in point 29 of his Opinion, the intention of the EU legislature was to lay down a broad definition in Article 33(3) of Directive 2008/118 of the category of persons liable to pay excise duty in the event of a movement of excise goods already ‘released for consumption’ in another Member State in order to be delivered or used there, so as to ensure so far as possible, that such duty is collected.”

The CJEU went on to answer the question posed by the Court of Appeal, saying at [36] that Directive 2008/118/EC:

“…must be interpreted as meaning that a person who transports, on behalf of others, excise goods to another Member State, and who is in physical possession of those goods at the moment when they have become chargeable to the corresponding excise duty, is liable for that excise duty, under that provision, even if that person has no right to or interest in those goods and is not aware that they are subject to excise duty or, if so aware, is not aware that they have become chargeable to the corresponding excise duty.”

The Court of Appeal decided it was bound by the CJEU’s judgment. It allowed HMRC’s appeal, and concluded as follows, in HMRC v Perfect [2022] EWCA Civ 330 (“Perfect”):

“22.

…a person need not be aware that excise duty is being evaded to be “holding” or “making … delivery of” goods for the purposes of regulation 13 of the 2010 Regulations or article 33 of the 2008 Directive.

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.”

In Hartleb v HMRC [2024] UKUT 00034 (TCC) (“Hartleb”) (Footnote: ¹) the UT considered an appeal made by the owner of a lorry against an excise duty assessment charged on goods which had been seized from her employee, the lorry driver. The UT said this:

“59.

We accept that if the Appellant were found not to be the holder of the excise goods, revenue loss would be likely as employers might then be able to use their employees as ‘shields’ from liability.

60.

In a case where an employer has de facto and/or legal control over excise goods it would also seem an extraordinary result if it was prevented from being regarded as holder of those excise goods purely on the grounds that its employee was the person in physical possession.”

The UT continued:

“78.

We find the factors identified by the UT in Dawson to be a useful guide in determining who to regard as holder in circumstances where physical possession and de facto and/or legal control are separated as they are in our situation, noting in this regard that the second factor must now be seen in the context of Perfect and WR.

79.

This is notwithstanding the fact that in Dawson the factors were intended to aid identification of an earlier excise duty point in circumstances where an assessment was being challenged on the basis of there being an earlier excise duty point against which the assessment should have been made.

80.

We also take into account the fact that Dawson and the majority of cases considered in it, including Perfect, involve persons arguing that they should not be assessed to duty simply on the basis of having physical possession of excise goods. The Appellant’s position is, in effect, the reverse as she contends that she should not be assessed to duty as she did not have physical possession of the relevant excise goods. Although the situation is the reverse, we consider that the principle of physical possession not being determinative must apply equally.

81.

The approach of the UT and Court of Appeal in Dawson demonstrates that the determination of “holding” is a question of law and fact. Although the initial focus, given the scheme and wording of the legislation together with the case law, is necessarily on the physical location of goods so giving weight to physical possession – that is not the end of the matter and a more detailed consideration of the facts is needed.

82.

Although Asplin LJ was careful to not express a view on the question of whether de facto and/or legal control is sufficient for the purpose of holding, as that issue was not before the court (see [72] of the Court of Appeal judgment), her decision shows that physical possession alone is not necessarily sufficient.

83.

As the UT commented in Dawson it is consistent with the legislation and case law to adopt an approach that establishes first who has physical possession of the goods but then considers whether the circumstances of that possession are such that it is inappropriate for that person to be considered to be “holding” the goods...”

The UT went on to apply the Factors set out in Dawson in order to decide the issue in question, see [87] of the judgment, before saying at [88]:

“It is then necessary for us to consider the circumstances in respect of which the Respondents contend that the Appellant (the person in control) rather than the employee (the person with physical possession) should be regarded as holder and whether those circumstances outweigh the Appellant’s lack of physical possession.”

In Qais Majeed Ali v HMRC [2024] UKUT 176 (TCC) (“Ali”) at [38], the UT held, by reference to Davison, that the FTT had been wrong to decide that HMRC could refuse to assess an insolvent or impecunious holder and instead assess a subsequent holder, saying (emphasis in original) “the correct position is that, if there was someone who HMRC had sufficient information to assess, then HMRC had to assess that person irrespective of the prospects of recovery”.