TC09643 - [2025] UKFTT 01117 (TC)

We gave a summary, ex tempore decision on this issue informing the Appellant that if their argument on the Liability Issue were to fail their appeal in this regard was also refused.

What is required for a best judgment assessment has been repeatedly stated. HMRC are required to exercise their assessment powers by fairly considering all the material placed before them and, on that material, reach a decision which is reasonable and not arbitrary in amount. Errors identified in an assessment which represent an honest and genuine attempt to make a reasoned assessment of the tax/duty payable do not vitiate the assessment as contrary to best judgment.

The line of case law from HMCE v Pegasus Birds Ltd [2004] EWCA Civ 1015 confirms that when faced with a challenge to a best judgment assessment the principal issue for the Tribunal to determine is the correct amount of tax due on the evidence before it and by reference to the burden of proof which rests on the Appellant. An assessment should only be set aside where justice requires it because justice cannot be served by reducing the assessment to the amount the Tribunal finds to be a fair figure. That will be a rare situation and will usually arise only where there is a lack of bona fides on HMRC’s part. As such, the starting point for the Tribunal in any best judgment case will usually be to assess whether, on the evidence, tax is due from the Appellant. If it is, the Tribunal must roll its sleeves up and determine the amount the Appellant has demonstrated is reasonable or uphold HMRC’s assessment.

Strictly, that analysis does not apply here as the Appellant does not challenge that, when it was raised, Assessment 3 was made to best judgment in the sense set out above. It also accepts that if the Liability Issue is as contended for by HMRC (and as we have found) there is RGD properly due. Here, the Appellant contends we are faced with a situation in which, by the language used in the letter Mr Mack conceded the validity of Assessment 3 and purported to reissue it outside the statutory time limits.

In that sense therefore our task is simply to determine the legal effect of the letter dated 21 May 2024. Its relevant terms, as set out in paragraph 24 above are worth repeating:

“HMRC have reviewed the assessment to excise duty … notified to you on 30 March 2023 now [sic] reduce the total of those assessments as follows:

…

These have been reduced as upon review of the case so far, the figures had not been calculated to best judgment based on the figures available.”

As we stated in the hearing, we are sure that Mr Mack is unlikely ever use that same construction of language again. But despite the statement that “the figures had not been calculated to best judgment” we consider that the terms of the letter of 21 May 2024 plainly “reduce” Assessment 3 rather than withdraw it or concede that Assessment 3 was invalid. We do not consider there is any construction of the letter which would justify a conclusion that Assessment 3 had been withdrawn and reissued. On that basis, the proper concession made by the Appellant that Assessment 3 was made to best judgment means that Assessment 3 is valid.

As HMRC acknowledge (see paragraph 25 above) the Assessments require to be reduced to allow for the overpayment of RGD accounted for by the Appellant on MR Spins the parties are content to agree the amendment without the further involvement of the Tribunal.