TC09657 - [2025] UKFTT 01208 (TC)

The Appellants say that a customs debt must be communicated to the declarant (as the person liable to pay the duty) within three years of the time the debt was incurred unless the extended time limit in Article 221(4) applies. Where HMRC have communicated a customs debt which arose more than three years ago to a person who is not the declarant, it is now too late for HMRC to notify the declarant (except where the extended time limit in Article 221(4) applies) and there is no mechanism for the Tribunal to impose liability on the declarant even where that person is another Appellant.

Ms Sloane says that each entry of goods is accompanied by its own customs declaration and must be analysed separately. An Appellant appealing a decision/C18 in relation to one importation does not give the Tribunal jurisdiction to impose a liability on it in relation to another importation where it was the declarant, and which is not the subject of its appeal.

The Appellants say that the Tribunal might well find that a decision letter was wrong, and that the decision should have been that a different Appellant was liable for customs duty on a particular importation. However, there is a procedural mechanism for imposing a customs duty liability, which involves the communication of the debt by the authorities, and HMRC cannot ask the Tribunal to do its job for it and potentially circumvent time limits by amending a C18 issued to an Appellant in relation to a different importation to include duty the Tribunal determines HMRC could/should have notified to the Appellant in relation to this importation.

Ms Sloane says that HMRC’s position is plainly incompatible with the scheme of the EU legislation. The clear and detailed sequence under EU law involves a customs debt being incurred with the declarant as the debtor. Each amount of duty is entered by the customs authorities in the accounts, although the authorities do not have to enter an amount in the accounts if they are out of time to communicate the debt to the debtor: Article 217. As soon as the customs amount has been entered into the accounts, it is to be communicated to the debtor in accordance with appropriate procedures: Article 221. There are time limits applicable to communication of the debt, which are set out in Article 221. If there is an appeal, the time limit for communication of the debt is suspended from the time an appeal is lodged, for the duration of the appeal proceedings: Article 221(3). It is a clear requirement of EU law that the amount of duty is to be entered in the accounts before it is communicated to the debtor: Case Belgische Staat v Molenbergnatie NV (Case C-201/04) (“Molenbergnatie”). Once (and only if) a debt has been communicated in accordance with these requirements, the debtor is liable to pay with a certain period: see Article 222 of the Code.

The detailed and coherent scheme of the EU legislation makes it clear, Ms Sloane says, that if it emerges during an appeal that the amount entered into the accounts and communicated to the debtor was too low, the customs authorities must enter the new amount in the accounts and then communicate it to the debtor, subject to time limits (and if they are out of time, they do not need to enter it in the accounts). The time limit for communication is suspended for the duration of the proceedings, so this requirement should not generally be a problem.

HMRC say that they would enter the debt into the accounts following a variation of the C18 by the Tribunal. However, Ms Sloane submits, their proposed sequence is a breach of the clear requirement of the “chronological order” that a customs debt must be entered into the accounts before it is communicated; see Molenbergnatie.

Section 16(5) FA 1994 confers a power to vary or substitute a decision. However, that wording does not assist HMRC. That legislative provision must be read in light of, and compatibly with, the scheme of the EU legislation.

Section 16(5) is different from (and far more limited than) section 84(5) of the Value Added Tax Act 1994 which confers a specific power on the Tribunal, where the Tribunal finds that the amount specified in a VAT assessment is less than it ought to have been, to give a direction specifying the correct amount and that “the assessment shall have effect as an assessment of the amount specified in that direction, and that amount shall be deemed to have been notified to the appellant”. Section 16(5) FA 1994 contains no equivalent which could be applicable to the customs duties in a C18. That absence is not surprising considering the very different requirements of the EU scheme relating to customs duties.

HMRC say that Articles 243(2)(b) and 245 of the Code explicitly provide that all matters concerning appeals (including enforcement) are to be determined by the Member States, and so the Tribunal has power, conferred by section 16(5) FA 1994, to determine that one of the Appellants is liable for a debt attributed by HMRC’s decisions under appeal to another Appellant and vary those decisions accordingly (they say this was belatedly accepted by the Appellants).

There is, they say, no legislation or rule requiring a Tribunal to engage in any notification process. Following a finding that one of the Appellants is liable for a debt attributed by HMRC’s decisions under appeal to another Appellant, the Tribunal has power to vary the decisions, which includes the quantum of the debts to be paid, to reflect the correct amounts owed by each debtor which give rise to the legal obligation to pay.

HMRC say there is no basis (and the Appellants have not argued for one) for reading the power under section 16(5) to exclude variation of the quantification of the debt upwards. Those decisions, if so varied by the Tribunal, give rise to the right to enforce by HMRC.

The requirement to communicate to the debtor “as soon as it has been entered into the accounts”’ (Article 221) does not apply to a subsequent determination by the Tribunal once that original entry and communication has occurred. Such a requirement would be an absurdity. The Appellants are aware of HMRC’s position and have been since this position was pleaded in April 2024; they have a suitable opportunity to challenge HMRC’s position and can put arguments to the Tribunal as to whether the debts should be varied. Procedural fairness cannot require further notification following determination by the Tribunal that the debts are legally due.

HMRC would still enter the debt into the accounts following a variation by the Tribunal, which (in simple terms) means entry into the accounts that HMRC submits to the European Union of debts issued to traders. They would also delete the previous entry in the accounts in relation to the same debt where the incorrect debtor had been named. This regularises the position between the Member State (or former Member State) and the European Union.

HMRC say that the Appellants’ reliance on the suspension of the three-year ordinary time limit in Article 221(3) of the Code is without merit. The Appellants say that this provision exists because of the requirement to communicate the debt after the appeal process, if it is to be increased, and that it would not serve a useful purpose if the Tribunal could simply vary the enforceable debt without the need for a new notification of the debt. Ms McArdle says that this does not follow logically. First, Article 221(3) cannot narrow the very broad nature of Article 243 of the Code permitting Member States to prescribe the form an appeal procedure takes, which must include the powers of the Tribunal on making findings of liability. If the EU legislature intended a fetter on that power (beyond the general principles) it would have expressly said so. Secondly, it may be that in other Member States, there is no power of the equivalent tribunal/court to vary a domestic customs authority’s enforceable decision, or to substitute its own, and consequently the national procedure in those jurisdictions would require the customs authorities to engage in a process of re-notification where the amount of a debt increases. The fact that the suspension of time limits may be of less utility in the UK procedure as it stands today is not a reason to read Article 243 as much more limited than it appears on its face.

When the EC legislature enacted the Code in 1992, it was legislating for the whole of the Community, whose appeal procedures likely varied significantly. The Appellants’ approach takes the incorrect starting point that the EC legislature must have had in mind that there is a need in the UK procedure to perform a re-notification of a debt where it is increased in amount, for which there is no basis.

HMRC do not accept that there was necessarily an equivalent power to section 16(5) allowing variation of HMRC’s decision by the Tribunal in UK procedure, given that FA 1994 came into force in 1994, after the Code. HMRC have been unable to identify the scope of the powers on an appeal prior to FA 1994 coming into force. In summary, they say, the EU legislation permits Member States to prescribe their own procedures, including in relation to variation of decisions and enforcement in appeals concerning customs debts.

The domestic legislature has given the Tribunal very wide powers, including to vary enforceable HMRC decisions. There is no requirement for any further notification of the newly attributed additional debt. No legislation requires such a procedure, and it is contrary to the plain wording of the EU and domestic legislation, which confines the need to engage in a process of communicating the debt to customs authorities, not the Tribunal upon an appeal.

In the alternative, if I conclude that the notification requirement applies in principle, HMRC would say:

The Appellants broadly agree with that proposition.