UT/2023/000019 - [2024] UKUT 00108 (TCC)

The FTT’s discussion of this issue is at FTT[59]-[63] and FTT[67]-[69].

The FTT made the following findings of fact:

Having made these findings, the FTT’s conclusions were as follows, at FTT[67]-[69]:

Mr Forde made the following points in his written and oral submissions:

While Mr Forde argued this ground eloquently and with conviction, we do not consider that the FTT made any error of law in relation to this issue.

We agree with Mr Forde that in this case it is logical to assume that a release for consumption must have occurred at some stage in the chain of supply before the cigarettes arrived in the Shed, where they came to be held by the Appellant. However, one or more potential earlier duty points only support this ground of appeal if HMRC have established the necessary facts relevant to the assessment of that earlier duty point. In Dawson’s CA, Asplin LJ addressed the opposing views put forward by the parties as to the relevance in this context of the four factors identified by the Upper Tribunal in Dawson’s. She stated as follows (at [74]-[76]):

It is unfortunate that HMRC’s only witness could not provide evidence in relation to the individual who may have been a holder of the cigarettes before the Appellant and who was a subject of the criminal investigation. However, we do not accept that this, or any other aspect of the manner in which HMRC chose to present its case before the FTT, gave rise to any error of law in the FTT’s reasoning or decision on this issue, or prevented the FTT from exercising its “full merits” jurisdiction.

We have reached this conclusion for four reasons.

First, the Appellant appealed to the FTT against the assessment under section 16 FA 1994, and section 16(6) FA 1994 provides that in such an appeal (with certain exceptions which are not relevant here) “it shall…be for the appellant to show that the grounds on which any such appeal is brought have been established”. Therefore, it is clear as a matter of law that if, as in this case, one ground on which the appeal is brought is that there was an earlier duty point which could have been assessed, the burden of proof in relation to that ground is on the appellant, not on HMRC.

Second, a complaint by the Appellant that HMRC possessed or might have possessed information which would have been sufficient to identify the four factors relevant to an earlier duty point could have been dealt with by an application for disclosure before the FTT hearing. The FTT has power under Rule 5(3)(d) of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules to make a direction requiring a person to provide documents, information or submissions, and under Rule 16(1) to require a person to attend as a witness or to answer questions or produce documents. If the Appellant believed that HMRC was failing to disclose relevant information, an application to the tribunal could have been made under these Rules.

Third, the assertion that what really prevented the Appellant from identifying another individual giving rise to an earlier duty point was HMRC’s conduct is not consistent with the FTT’s findings of fact. These included that the evidence volunteered by the Appellant as to the identity of such an individual was “so limited as to be virtually worthless”; that it was improbable that the Appellant would have no information other than a name in all the circumstances, and that HMRC’s investigation was not assisted by the paucity of information given by the Appellant.

Fourth, as Mr Forde himself pointed out, the obligation to assess the first duty point for which sufficient information is available is an obligation on HMRC as a body, not on the HMRC officer who issues the duty assessment. It follows that what mattered was not what Ms Cox knew personally about the investigations into a potential suspect, but what HMRC as a body knew.

The point set out in the preceding paragraph is also material to Mr Forde’s assertion that the FTT’s finding that HMRC had attempted to determine if an earlier duty point could be established could not be reconciled with Ms Cox’s evidence. This is an Edwards v Bairstow (Footnote: ⁴) challenge. While there cannot be an appeal on a pure question of fact which is decided by the FTT, the FTT may arrive at a finding of fact in a way which discloses an error of law. That is clear from Edwards v Bairstow, in which Viscount Simonds referred to making a finding without any evidence or upon a view of the facts which could not be reasonably entertained, and Lord Radcliffe described as errors of law cases where there was no evidence to support a finding, or where the evidence contradicted the finding or where the only reasonable conclusion contradicted the finding. Lord Diplock has described this ground of challenge as “irrationality” (Footnote: ⁵).

The FTT found as fact that HMRC had carried out investigations to determine whether an earlier duty point could be established, but without success. That finding was not irrational, or a finding which was not reasonably available to the FTT. That is because the FTT had much more relevant evidence available to it than Ms Cox’s evidence. In particular, the FTT recorded as follows, at FTT[17]:

The FTT’s finding that HMRC had investigated a possible earlier duty point was, therefore, not one which can be successfully challenged on the basis of Edwards v Bairstow.

We do not need to consider Mr Forde’s argument as to judicial review as a remedy, because it is evident from the FTT’s findings of fact that this was not a case in which HMRC “simply sat back and pointed to the burden being on the taxpayer”, in the language used in B&M.

In relation to the FTT decision in Murphy, we comment on this below in our consideration of fairness and proportionality. In short, we do not consider that it provides any useful guidance of general application.

We therefore dismiss the Appellant’s appeal on the basis of its arguments relating to the existence of an earlier duty point.

As set out above, we deal with the Appellant’s remaining grounds of appeal relatively briefly, since they were not the subject of oral submissions by either counsel.

In Mr Forde’s skeleton argument he submitted that the FTT had erred in finding that the Appellant was “holding” the cigarettes in the Shed for the purposes of Regulation 10 of the HMDP Regulations, because the FTT had failed to take into account the “inescapable inferences” of the Appellant’s agreed basis of plea. He asserted that a number of “agreed facts” flowed from the basis of plea and the circumstances of the search. In particular, he said, since the Appellant had no personal involvement in the purchase, sale, distribution “or otherwise” of the cigarettes, she could not be “holding” those cigarettes.

The FTT’s discussion of this issue is at FTT[64]-[66], which followed a detailed analysis of the relevant authorities, as described above. The FTT referred, correctly, to the guidance in WR on the meaning of “holding” in this context, referring to “physical possession”, which guidance was accepted as binding in Perfect 2022. The FTT found as a fact that the Appellant was in physical possession of the cigarettes for the purposes of Regulation 10: FTT[54]-[55]. The FTT stated, again correctly, that it was irrelevant whether the Appellant had any right or interest in the cigarettes and whether she was or should have been aware of the liability of those goods to excise duty. The FTT considered that this answered the arguments relating to the basis of plea.

We consider that the FTT correctly directed itself as to the law, and made a finding on this issue which was clearly open to it on the facts. Mr Forde’s argument seeks to infer too much from the form of the agreed basis of plea. Indeed, the fact that the plea was based on the Appellant “knowingly” being involved in the “harbouring” of the cigarettes is consistent with the FTT’s finding that she was holding the goods.

This ground asserted that the FTT had erred in relying for its conclusion on Munir, because the facts in that case were materially different, and, in particular, the basis of plea was different.

We need not recite the details of the Court of Appeal’s decision in Munir to dispose of this argument. Mr Forde referred to the statement at FTT[53] that “the Court of Appeal decision in Munir provides a complete answer to the question that the Tribunal is required to determine”. However, that sentence was part of the FTT’s summary of HMRC’s submissions, not a conclusion reached by the FTT. The relevance of Munir to the hearing before the FTT lay in what the Court of Appeal had to say about the evidential value of an admission against interest made as part of a plea in a criminal conviction (which was described as “weighty evidence”), and, in particular, the relevance to liability under section 170 CEMA of a plea that the person in question was “knowingly” involved in fraudulent evasion (Footnote: ⁶). The FTT correctly identified those passages in Munir at FTT[48]-[50], and in this appeal those points were relevant because the admission against interest made by the Appellant was that she had been “knowingly” involved in the relevant offence under section 170(1)(b) CEMA. The FTT had therefore referred to the principles in Munir as relevant to its finding of fact, at FTT[56]-[58], that the Appellant knew that the cigarettes in the Shed were duty unpaid. It was clearly correct to have done so.

The final ground of appeal was that the FTT erred in holding that the assessment against the Appellant did not breach EU law principles of fairness and proportionality, and in relying on Perfect and/or Perfect 2022 for reaching that conclusion. It was also said that the FTT did not accept the relevance to this issue of the FTT decision in Murphy, partly on the basis that it was being appealed, but in the event the appeal has not proceeded.

The FTT dealt with fairness and proportionality at FTT[70]-[78]. It noted that in Perfect, the Court of Appeal stated, at [67], that “there is very considerable force in the argument that, given the policy underlying the [2008] Directive, the imposition of strict liability on a driver in these circumstances does not offend the principles of fairness or proportionality”. The Court of Appeal in Perfect 2022 considered that this view was consistent with the CJEU’s decision in WR.

Insofar as Mr Forde relied in this context on what he asserted was HMRC’s ability to identify an earlier duty point, as discussed above that assertion is inconsistent with the FTT’s findings.

The statement at [67] of Perfect was, of course, made in relation to the circumstances of that case. However, it does indicate that the strict liability imposed by the statute does not of itself offend against the EU principes of fairness and proportionality. In all the circumstances of this case, taking into account the findings of fact made by the FTT and the guidance in Munir as to the evidential weight to be attached to the basis of plea (in the Appellant’s case, being knowingly concerned in the harbouring of the goods with intent to defraud) we are clear that the assessment did not breach the relevant principles.

As to Murphy, the FTT correctly noted that that decision was released prior to the CJEU’s decision in WR, and did not consider Munir, both of which were binding on the FTT, and appeared to be inconsistent with those decisions and with Perfect. We also note that the facts in Murphy were highly unusual (Footnote: ⁷), and, as the FTT found, the relevant guidance as to the applicable principles is contained in Munir, Perfect and Perfect 2022.

The appeal is dismissed.