TC09657 - [2025] UKFTT 01208 (TC)

HMRC say that the starting point here is section 16(6) of FA 1994, which provides:

“(6)

On an appeal under this section the burden of proof as to—

(a)

the matters mentioned in subsection (1)(a) and (b) of section 8 above,

(b)

the question whether any person has acted knowingly in using any substance or liquor in contravention of section 114(2) of the Management Act, and

(c)

the question whether any person had such knowledge or reasonable cause for belief as is required for liability to a penalty to arise under section 22(1), (1AA), (1AB) or (1AC) or 23(1) of the Hydrocarbon Oil Duties Act 1979 (use of fuel substitute or road fuel gas on which duty not paid),

shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established.”

Ms McArdle refers us to the Upper Tribunal decision in Build-A-Bear, which dealt (albeit as a small part of its overall decision) with the question of the burden of proof in customs duty cases. Where it had insufficient records to identify precisely the goods which had been imported under a particular customs duty code, the taxpayer had used various methods to estimate its customs duty liability. The FTT had reached a decision in principle on the correct classification of various items, but it made no decision on the quantum of liability. Instead, it invited the parties to reapply to the Tribunal if, having obtained a decision on the classification of the various items in principle, they were unable to agree on questions of quantum. HMRC said that the FTT had made an error of law in not finding that Build-A-Bear had failed to discharge the burden of proof in relation to those matters for which it could not produce evidence of the goods which were imported and that, if the taxpayer was not in a position to identify the nature of the goods imported under the declarations referred to in these categories, it could call into question the validity of the C18s. As to this, the Upper Tribunal commented:

“244.

Pursuant to s16(6) Finance Act 1994, the burden of proof in customs and excise appeals is on the appellant other than in relation to the specific matters which are set out in subparagraphs (a) to (c) of that sub-section.

245.

The burden is therefore on BAB to show on the balance of probabilities that the assessments contained in the C18s were wrong, in whole or in part.

246.

We therefore agree with Mr Thomas that, to the extent that BAB has failed to provide any evidence of the nature of the goods that were imported under a particular EPU code, the assessment in the relative C18 must stand.

247.

As a matter of principle, however, we do not go any further than that. It is for the FTT in appropriate cases to examine the evidence that is put forward by an appellant to challenge an assessment and to determine if it meets the appropriate standard of proof.”

Ms McArdle says that the question about who the consignor is goes to quantum and Parliament clearly intended that an appellant, who wishes to challenge the quantum of a sum which a decision of HMRC has found it to be liable for, should bear the burden of proof in relation to issues of quantum. Parliament has explicitly provided for a limited number of exceptions to the usual rule that an appellant bears the burden of proof, and the quantum issues which the Appellants raise do not fall into those exceptions. There is no reasonable interpretation of the legislation which indicates otherwise, and Build-A-Bear confirms the position.

In any event, she says, the Appellants plead a positive case (that the calculations are wrong) and so they bear the burden of proof on ordinary principles.

Article 243 of the Code provides for a right of appeal before an independent body in accordance with the provisions in force in Member States and Article 245 clearly leaves “the implementation of the appeals procedure” to Member States. Ms McArdle says that this embraces domestic rules, such as the burden of proof and rules of evidence.

Ms McArdle says that the ECJ/CJEU cases referred to by Ms Sloane essentially say no more than that the national court must adopt a fair procedure and do not disclose any general rule on where the burden of proof lies in customs duty cases.

Starting with Unitrading, this case is dealing with a very specific evidential problem and how Community law requires the courts to address that problem to avoid unfairness. The answer was that the national court should use all procedures available to it to try to make the procedures fair. Ms McArdle says that, to the extent Ms Sloane is suggesting that this discussion stands for the proposition that, where the customs authorities challenge proof of origin, they must provide evidence to have a prima facie case, that is not what this case says at all. Instead, Ms McArdle says that it is talking about how to avoid breaching the principle of effectiveness against the background of a very particular evidential problem. It does not tell us anything about the answer to our preliminary issue.

Turning to Greencarrier, this case is about what, as a matter of EU law, is acceptable in terms of how far sampling evidence can be extrapolated. It tells us that, in principle, there is nothing to prevent the customs authorities using a sampling methodology if the goods are identical. Ms McArdle says that this is not relevant to the question that confronts us. She says that is because the case does not create any general evidential burden or burden of proof for anyone. All it says is that it is perfectly acceptable to use sampling in certain circumstances. Although the Advocate General made some general comments on the burden of proof, Ms McArdle says there is nothing in the Court judgment that confirms whether his opinion was thought to be correct or not.

Ms Sloane’s response to this is to say that EU law, both the Code itself and ECJ/CJEU authorities, establish which party bears the burden of proof on specific issues and FA 1994 cannot override this. In fact, she says, there is no conflict here. The Appellants accept that, if they want to say that a C18 is issued in breach of EU law, they need to establish that. But one must then look at European law to see what it says about each of the relevant issues and the grounds which are raised. The rule there (which applies to the customs authorities as much as anyone else) is that he who asserts must prove, unless there is a specific reversal of the burden.

A general placing of the burden of proof on the Appellants here would, she says, breach the requirements of effectiveness and equivalence with which any UK procedural rules must comply. On equivalence she points out that, even in the context of UK domestic direct tax cases, where the burden of disproving an assessment normally lies on the taxpayer, this is not the case where extended time limits are concerned, where it is well established that the onus in on HMRC to prove that the conditions for the issue of a discovery assessment or an assessment outside the normal 4-year time limit are met.

She also referred us to paragraph 6-06 of Phipson on Evidence (20^th Ed) which states the general rule that the burden of proof lies on the party who substantially asserts the affirmative of an issue. This aligns, she says, with the general rule to be derived from the EU customs duties cases.

As to effectiveness, HMRC’s position could give rise to an unjust and plainly absurd scenario, for example where HMRC raise a demand asserting that some customs declarations 20 years ago were wrong and requiring the taxpayer to disprove or prove the negative in circumstances where records only need to be kept for 3 years.

In her skeleton argument she says that the ordinary position is that HMRC may raise an assessment for customs duties within 3 years of the date upon which the debt was incurred: Article 221(3) of the Code. This dovetails with the requirement for customs traders to retain their records for 3 years.

HMRC are permitted to communicate the “amount” of a customs debt after the expiry of the 3-year limit only where the customs debt is “the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings” (Article 221(4) of the Code).

HMRC allege that the Appellants delivered, or caused to be delivered, to HMRC declarations, false certificates of origin (which City Cycle obtained from the Sri Lankan authorities by making false declarations), which were untrue in a material way. Section 167(3) of the Customs and Excise Management Act 1979 creates a strict liability offence of making, signing or delivering (or causing to be made, signed or delivered) a document which is untrue in any material particular. So, Ms Sloane says, if HMRC can show that the City Cycle certificates of origin were false, the relevant Appellant/s will have committed a (strict liability) criminal offence and HMRC will no longer be bound by the 3-year period for communicating a customs duty liability (in other words, issuing a C18).

Ms Sloane says that, if HMRC want to defend the C18s, then as the CJEU explained in Beemsterboer, the burden is on them to establish a lawful basis for the amounts allegedly due. It is HMRC who assert that the conditions for applying the extended time limit under the Code are met. Under EU law, HMRC therefore bear the legal burden of showing that the conditions are met.

Ms Sloane points us to the opinion of the Advocate General in Beemsterboer and the decisions in Greencarrier and Unitrading, where (she says) the CJEU explained that, whilst it is for the domestic legal system of each Member State to lay down the detailed procedural rules around evidence, they must not render in practice impossible or excessively difficult the exercise of rights conferred by Community law (the principle of effectiveness).

Ms Sloane asks us to note that the Advocate General’s comments in Beemsterboer indicate that the burden of proof lying on the person who asserts a position is an EU law rule, not a matter for the Member State, although in specific circumstances it may be reasonable to reverse the usual rule.

Those comments and those of the Court, says Ms Sloane, show that the burden of proof is not a matter for national legislation. The general rule is that he who asserts must prove for the purposes of the customs duty regime under EU law. And the court is not saying in any of these cases that the customs authorities are free to raise a customs debt and then the debtor bears the burden of proving a negative. The general rule is quite the opposite.

Unitrading, Ms Sloane says, is built on the premise that, where customs authorities are challenging the proof of origin, they are the ones who are asserting goods have a different origin and they must provide the evidence to have at least a prima facie case. Even where they do that, it is important to ensure that the debtor can refute that in compliance with principles of effectiveness and equivalence.

Greencarrier she sees as supporting the idea that there must be an evidential basis for extrapolation put forward by the authorities. The putative debtor must have a right to challenge that, but that is challenging the authority’s evidence, not having to prove a negative.