QB-2020-004171 - [2025] EWHC 2773 (KB)

The following summary of the facts is based primarily on the pleadings and the various witness statements in connection with the strike out /summary judgment application of HMRC

From July 2011, C2 was a partner in a brewery partnership with Mr Ian Burgess operating at 374 Helmsley Place, Hackney, London E8 3SB. C1 was not officially connected with the partnership due to his criminal history. In 2004, he was convicted for conspiracy to supply Class A drugs and a confiscation order amounting to £2,137,500 was made.

Following a disagreement, Mr Burgess retired as a partner. The brewery moved to 365-366 Warburton Street (“the Premises”). In 2012, C1 entered into partnership with C2, trading as London Fields Brewery (“LFB”). Thereafter, the brewing business was operated through an incorporated company, London Fields Craft Products Limited (“LFCP”) which employed and was responsible for the payroll of staff.

On 9 March 2012, provoked by Mr Burgess, there was an unannounced visit at the Premises. He saw C1 who informed him that brewing operations had not yet commenced. Mr Ansah, an HMRC Higher Assurance Officer in the Customs, International Trade and Excise Department, saw C1, who told Mr Ansah that brewing operations had not yet commenced. Mr Ansah told him that he could not brew beer without being registered as a producer at the Premises.

On about 15 March 2012, C2 contacted the National Registration Unit (“the NRU”) of the Defendant, requesting that the licence granted to produce at Helmsley Place be amended to permit brewing to take place at the Premises, and in the alternative requesting a brewing licence in her own right. In a response by Fiona McKirdy, who worked at the NRU, C2 was informed that (i) brewing could not take place at an unregistered address, (ii) the old licence would need to be cancelled before she could apply for a licence in her own name, (iii) Beer Duty could no longer be paid as the registration number for the partnership could not be used, and (iv) the partners’ permission was required in order to cancel the registration of the partnership.

The Claimants claim that in about April 2012, another employee of the Defendant within the NRU, Fiona Renton, informed C1 and C2 that they had oral permission to re-commence brewing pending the re-consideration of a further brewing licence. They claim that this was repeated by Mr Ansah in April 2013 and by Mr Snazel during a visit which took place on 6 August 2013: see Re-Re-Amended Particulars of Claim (“RRAmPoC) para. 18. These communications are denied: see Re-Re-Amended Defence (RRAmD) para. 41. There is no written record of these communications.

On 15 May 2012, an application was made for registration as beer producer at the Premises by LFCP, but referred to it as a partnership rather than as a limited company. C1 and C2 were said to be partners. The intended date for production was given as 1 June 2012 and the VAT number was said to be pending.

On 7 June 2012, Ms Renton sought clarification as to whether the information on the form was correct, and, if the applicant was a limited company and asking for the names of the directors. She also asked if a VAT registration number was now available.

The Claimants say that on 27 July 2012, C1 replied providing the VAT number and confirming that LFCP was a limited company. This response did not register with HMRC and a telephone call was made by an NRU officer on 24 August 2012 to the brewery. It became apparent from that call that the brewery was operating or trading. The NRU officer stated that the brewery was not registered and not submitting Beer Duty returns.

On 17 October 2012, Mr Ansah carried out a further visit to the premises. He there met C1 who confirmed that commercial brewing had begun at the premises in April/May 2012. There was a call between C1 and Ms McKirdy, who worked with Mr Ansah. She said that a problem arose from the fact that the first application referred to the applicant as a partnership as opposed to a limited company. C1 said that he had been given verbal consent to brew while waiting for registration to be completed. Ms McKirdy denied that that was the case. Mr Ansah instructed C1 to stop brewing while inquiries were made. On the same day, C1 emailed to confirm that he was director of LFCP, a limited company trading as London Fields Brewery, and that that company, not a partnership, was seeking registration.

On 19 October 2012, having spoken with the policy department, Mr Ansah called C1 to let him know that beer production at the premises could be resumed whilst the application was progressed, but that a further meeting was required in relation to the non-submission of Beer Duty returns.

Thereafter, there were steps to obtain further information to enable the NRU to assess the application. In particular:

In July 2014, Mr Parkinson, an Alcohol Approval Officer in the HMRC Customs International Trade and Excise (‘CITEX’) team, received a referral from another CITEX officer who, when reviewing another trader, noted that the trader received supplies from LFB. Mr Parkinson’s desktop checks confirmed that LFB was not registered as a beer producer and that no Income Tax, Pay As You Earn (‘PAYE’) or National Insurance Contributions (‘NICs’) had been paid since August 2012.

This resulted in a further visit to the Premises, on 6 August 2014, by Mr Parkinson, accompanied by Mr Ansah, Mr Snazel and other officers, to establish whether beer was being brewed and, if so, how excise duty was being accounted for. It is common ground that no duty relating to the brewing had been paid since brewing operations started at the Premises in early – mid 2012.

During this visit, when asked to explain the position C1 attributed: - (i) his non-compliance with PAYE, VAT and company accounts duties to failures by his accountants, and (ii) his failure to provide the requested beer production records to the malfunctioning brewery management system. Following discussions with the officers C1 and C2 indicated that they would submit a further application for Registration.

It is the Claimants’ case that C1 informed the officers that he was willing to pay the excise duty but had been unable to do so due to not being registered. There is no record of any attempt being made to actually make any payments of excise duty nor is there any evidence or suggestion that any attempt was ever made to make any payments of PAYE or VAT (apart from minimal amounts assessed by the Defendant referred to below), nor any evidence that they were in a position to do so.

There was a discussion about HMRC seizing the beer, but they did not do so in light of the error in the First Application and a concern as to the ownership of the beer. There was concern that a seizure would be susceptible to a successful court challenge. Mr Parkinson suggested that C1 ought to submit a fresh application.

By letter dated 11 August 2014, in anticipation of a further application being submitted, and in the context of significant outstanding duty/tax/VAT liabilities, Mr Parkinson requested information and business records (including information relevant to the applicant’s ‘due diligence’ activities). The Claimants claim that the letter went beyond the information required under the Regulations and that a longer time ought to have been allowed for a response than a week from 15 August 2014. HMRC’s case is that in circumstances of non-compliance with VAT/PAYE/NIC requirements and confusion about the identity of the applicant, it was legitimate to seek information beyond that provided in the Regulations.

The Claimants’ case is that Mr Parkinson had no intention of granting the application for a licence and his attitude towards the registration process and the time given to comply was deliberately negative in the hope that the information would not be available in his chosen timescale. HMRC denies that a final decision had been made to reject the second application or that Mr Parkinson adopted a negative malicious or otherwise improper approach to considering it.

On 12 August 2014 a registration application on behalf of LFB (again identifying the applicant status as a partnership) was sent by C2 to Mr Parkinson by e-mail (“the Second Application”).

On 27 August 2014, Mr Parkinson (responding to an e-mail from C1 to the NRU of 22 August 2014):-

On 28 August 2014, C1 confirmed that LFCP, as opposed to a partnership was the applicant. He repeated his request for assistance in paying the outstanding Beer Duty and referred to the fact that NRU and Mr Ansah had advised that it was not possible without registration: see RRAmPoC para. 44. The case of HMRC is that C1 was responsible for the outstanding Beer Duty by reason of his failure (i) to submit accurate monthly Beer Duty returns as required by the Beer, and/or (ii) to provide beer production data requested by HMRC since 2012 to enable an excise assessment to take place.

By e-mail correspondence on 30 September 2014, C1 confirmed that the applicant for the brewing licence was LFCP. On 3 October 2014, in light of this, Mr Parkinson requested a fresh application with the correct applicant and VAT number for LFCP (not LFB). He also asked for the provision of corporation tax accounts and any management accounts covering 2012 - 2014.

In September 2014, the brewery business was referred to Mr Ian Muldoon (of the Defendant’s criminal investigation team). This referral was made in the context of, amongst other matters, the Claimants’ accepted failure since commencing production at the Premises to (i) submit accurate monthly Beer Duty returns as required by the Beer Regulations (a duty applicable with or without registration), and/or (ii) to provide beer production data requested by the Defendant since 2012 to enable an excise assessment to take place.

At or about the time the brewery was referred to Mr Muldoon: -

On 6 October 2014 a meeting took place between Ms. Denise Laker (in the Defendant’s civil VAT department), Mr Thomas (Civil Income and Corporation Tax department), C1 and the latter’s then-accountant Mr Matthews. This meeting was undertaken in the course of civil steps being taken to recover/facilitate the payment of outstanding/future VAT.

On 8 October 2014, Ms. Laker e-mailed Mr Parkinson and Mr Muldoon confirmed that, in the context of the civil recovery steps being taken she had agreed with C1, to give the business more time “to get everything in order”.

On 31 October 2014, C1 sent the Defendant a further registration application, made on behalf of LFCP (‘the Third Application’). By a letter dated 4 November 2014 Mr Parkinson, informed C1 that the Third Application contained an incorrect VAT number (which was accepted) and asked that a further amended application form with LFCP’s correct information be submitted.

On 5 November 2014 a further application for registration made on behalf of LFCP was sent to Mr Parkinson with the correct VAT number (‘the Fourth Application’).