TC09657 - [2025] UKFTT 01208 (TC)

These proceedings concern appeals (the “Appeals”) relating to Post Clearance Demand Notes (“C18s”) issued by HMRC in 2017 that imposed additional customs duty, VAT and anti-dumping duty (“ADD”) on the Appellants in respect of importations of bicycles between 2007 and 2012 (the “Relevant Period”). The sums at issue exceed £23 million.

The C18s relate to roughly 1,300 consignments of bicycles imported into the UK during the Relevant Period. The bicycles were imported from Sri Lanka and at least some were processed (to some extent at least) by City Cycle Industries (“City Cycle”), which was the subject of an investigation, and subsequent report, by the European Anti-Fraud Office (“OLAF”). In its report issued in December 2014 (the “OLAF Report”), OLAF alleged that bicycles exported from Sri Lanka by City Cycle originated from China, rather than Sri Lanka. The primary issue in the Appeals is whether the origin of the bicycles to which the C18s relate is Sri Lanka (as the Appellants contend) or China (as HMRC contend).

I am not concerned with the overall merits of the Appeals. My task is to decide the following two questions of law, which Judge Citron directed should be dealt with as preliminary issues, as follows:

I refer to the first question (in [3](1) above) as the “debtor issue” and the second (in [3](2)] as the “burden of proof issue”.

Before turning to the preliminary issues themselves, I need to say something about the way these proceedings have evolved. In their application for a preliminary issues hearing, sent the Tribunal on 31 October 2024, the Appellants asked the Tribunal to direct that two issues be dealt with on a preliminary basis:

In their skeleton argument for the case management hearing (“CMH”) before Judge Citron on 24 January 2025, the Appellants developed these themes, and formulated the preliminary issues as follows:

The Appellants’ skeleton argument for the CMH expanded on these questions by explaining that in many cases there was no evidence as to the identity of the manufacturer of a bicycle and that this gave rise to a legal issue. The Appellants understood HMRC’s case to be that, in the absence of evidence, the assessment is nevertheless valid, as the burden of proof was on the Appellants to prove that City Cycle was not the manufacturer of the bicycles. The Appellants contended that, in the absence of evidence, there was no valid basis for the assessment. As for the second issue, the Appellants said that they had provided evidence that import entries had been included on C18s where the recipient of the C18 was not the entity which was the declarant. The import paperwork showed (they said) that another entity was the declarant.

HMRC objected to the preliminary issues being dealt with in advance of the substantive hearing. They said that the Tribunal should be cautious in dealing with issues on a preliminary basis and in any event they described the Appellants’ issues as ones of quantum and said that, so far as both questions were concerned, the Tribunal has power to vary any decision and to substitute their own decision for any decision questioned on appeal. On that basis, HMRC submitted, the Tribunal could vary the quantum of the debt if the Appellants, on whom the burden of proof lay, could establish errors in HMRC’s calculations and, so far the second issue is concerned, the Tribunal had power to vary the C18s if they contain an error as to the correct declarant.

The CMH duly took place on 24 January 2025 and on 19 February 2025 the Tribunal approved the preliminary issues, as set out above.

HMRC and the Appellants approach the preliminary issues in very different ways. Put very broadly, HMRC’s position in its submissions for the CMH (and which it continues to endorse) is that the Finance Act 1994 (“FA 1994”) gives the power to the Tribunal to vary customs demands and puts the burden of proof on all issues firmly on the Appellants. The Appellants’ approach is very different, focusing instead on the EU customs duty framework, within and subject to which (they say) the FA 1994 provisions must operate.

HMRC complain that the Appellants’ submissions raise points which go far beyond the preliminary issues approved by Judge Citron. Ms McArdle says that Ms Sloane’s submissions on the burden of proof issue go way beyond what was authorised to be determined as a preliminary issue. In effect, she submits, Ms Sloane has introduced a new issue, about how the extended time limit in Article 221(4) of the Community Customs Code, Council Regulation (EEC) No. 2913/92 (“the Code”), operates. On the debtor issue, the Appellants say that the question is asking whether the Tribunal can determine that a different Appellant is the true debtor in a way which makes it liable for the debt. HMRC say that the question is just asking whether the Tribunal can determine that another Appellant is the true debtor and questions of liability/enforcement (Can HMRC do anything with/about the decision?) are a separate issue for another day. In addition to these disagreements over exactly what the preliminary issues are, HMRC say that the Appellants did not properly set out their arguments in advance of the hearing.

Looking at the submissions for the CMH, it is clear to me that, when posing the burden of proof question, Judge Citron was perfectly well aware of the context in which that question was being asked. It was being asked as part of an exercise to determine whether there was a lawful basis for the issue of C18s in relation to bicycles where the manufacturer could not be identified. The Appellants had identified why the burden of proof issue was being raised. It was not being raised in the abstract, divorced from any underlying legal question. As far as the debtor issue is concerned, the question being asked related to the power of the Tribunal to vary C18s if they contain an error, because they had been issued to a person other than the declarant.

Clearly, Judge Citron thought that it was appropriate to direct that these two issues be dealt with on a preliminary basis, and it is inconceivable that he did not clearly understand the context in which those questions were being asked and the differing approaches of HMRC and the Appellants.

Although they developed their position in relation to the preliminary issues in greater detail before me, there is nothing in their skeleton for the CMH which suggests to me that the Appellants are now saying something radically different from, and not trailed in, their submissions for the CMH or in their skeleton for this hearing.

Turning to the Appellants’ skeleton (dated 26 June 2025) prepared for this hearing, relevant background facts are identified, and, so far as the debtor issue is concerned, the skeleton points to the definition of declarant in the Code and article 201 of the Code. At paragraph 49 it describes HMRC’s submission that, if a C18 has been issued to the wrong person, the Tribunal can vary the decisions accordingly as a radical proposition, which would involve the Tribunal not simply amending a decision issued to an appellant; it would in substance and effect be purporting to issue a fresh liability decision against a third-party, in breach of the requirements of the Code on the notification of the debt and the EU law principle of legal certainty.

Turning to the burden of proof issue, at paragraph 52, the Appellants’ skeleton says that “It is HMRC who assert that the conditions for applying the extended time limit under CCC/UCC are met. Under EU law, HMRC therefore bear the legal burden of showing that the conditions are met.” At paragraph 55 the Skeleton suggests that the answer to the burden of proof question is that “the legal burden of proof is on HMRC to show that the conditions for applying the extended time limit are met” in relation to each declaration. Although not expanded as comprehensively as those arguments were before me, I consider that the skeleton perfectly adequately identifies the points which the Appellants proposed to make and, both from that skeleton and from the discussions at and preceding the CMH, none of this should have been a surprise to HMRC. Indeed, in HMRC’s skeleton (dated 9 July 2025), HMRC refer to the EU authorities cited by the Appellants in their skeleton. They say that these cases are irrelevant, but clearly HMRC were aware of the points and authorities being raised.

Nevertheless, consistent with the approach they took at the CMH. HMRC’s skeleton dealt with both preliminary issues as effectively domestic law issues to which FA 1994 provides a complete answer. HMRC’s skeleton did not engage with the EU law points identified by the Appellants in their skeletons both for this hearing and the CMH. That meant that, when she came to reply to Ms Sloane‘s submissions, Ms McArdle was to some extent starting on the back foot. To remedy this, I invited HMRC to make written submissions on the debtor issue after the hearing and gave the Appellants an opportunity to respond to those submissions. Whilst the parties were working on these written submissions, I drafted my decision in relation to the burden of proof issue and sent it to them under embargo inviting a full range of comments, not limited to the usual topographical corrections. I have taken all these written submissions into account in drafting this decision. To the extent they were “blindsided” by anything the Appellants said (which they should not have been if they had properly reflected on the Appellants’ submissions), I consider that those steps were more than sufficient to give HMRC a full opportunity to respond to the points made by the Appellants. 

As if all this were not enough, an issue arose towards the end of the written submissions as to whether a C18 is a purely administrative document giving no right of appeal, which now appears to be HMRC’s position even though they sent the C18s out under cover of letters which specifically stated that the relevant Appellant had a right of appeal. The Appellants say that the Appeals always challenged HMRC’s decisions and the C18s, HMRC have always understood this and indeed (in their skeleton for the CMH) HMRC said that “the Tribunal has the power to vary the C18s”, rather suggesting that the C18s were documents of substance. It is not clear to me what (if anything) turns on this issue. HMRC do not seem to be suggesting that the Appeals are somehow invalid or that these proceedings are a house built on sand. Given that, and that this is not an identified preliminary issue, I propose to say no more about it. If it turns out that I have used infelicitous language in describing what it is that the Appellants are appealing against, I can only apologise.