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earlier duty point
earlier duty point
The position in law
The obligation on HMRC to assess by reference to the earliest duty point which they can establish is not set out explicitly in the Directive or the domestic legislation. Section 12(1A) FA 1994 provides as follows:
(1A) Subject to subsection (4) below, where it appears to the Commissioners—
that any person is a person from whom any amount has become due in respect of any duty of excise; and
that the amount due can be ascertained by the Commissioners,
the Commissioners may assess the amount of duty due from that person and notify that amount to that person or his representative.
Although section 12 states that in the relevant circumstances HMRC “may” assess a person, it is clear that in view of the policy objective underlying the Directive, which is that excise duty must be collected where due, HMRC must assess the person who they find to be holding the relevant goods if that is the only duty point which can be established (Footnote: 1).
As we have mentioned above, a duty point arises when excise goods are released for consumption in the UK. Because a “release for consumption” arises from the holding outside a suspension arrangement of goods which are liable to duty without the duty having been paid, it follows that there can be more than one such release in respect of the same goods. However, there can only be one assessable duty point.
What if HMRC seek to assess a holder of duty unpaid goods in a situation where a prior event must have occurred which would entitle HMRC to assess another person, but either the identity of that person or the circumstances of the earlier event cannot be established? In Davison, the Upper Tribunal said this about such a situation (at [79]-[80]):
In this regard, Mr Beal [counsel for HMRC] accepted in argument that, as a matter of law and not merely as a matter of HMRC’s discretion, HMRC was obliged to assess against the earliest point in time at which they are able to establish, on the evidence before them, that excise goods have been held outside a duty suspension arrangement. In B & M the Upper Tribunal appeared to have proceeded on the basis that the question as to who should be assessed where there had been a series of circumstances which could have led to an assessment was purely a matter of HMRC’s discretion, which could only be challenged through the medium of judicial review: see [150] to [153] of the decision.
We accept that the position is as accepted by Mr Beal. It is consistent with our analysis that the Directive requires an assessment to be made against the first established excise duty point.
In Dawson’s (Wales) Ltd v HMRC [2023] EWCA Civ 332 (“Dawson’s CA”), Asplin LJ stated as follows, at [3]:
It is now common ground that the Respondents, the Commissioners for His Majesty's Revenue and Customs ("HMRC"), are required, as a matter of law, to assess the first "holder" of the excise goods, within the meaning the Excise Directive and the HMDP Regulations, whose identity it can establish.
As to the information necessary for HMRC to make an assessment, at [67] the Upper Tribunal in Davison commented as follows:
…the need to ensure that unpaid excise duty is collected when goods have been released for consumption requires HMRC, as the Upper Tribunal found in B &M, to make an assessment once it has established that an excise duty point has occurred. Clearly, HMRC cannot make an assessment until it has the necessary information on which to establish when, how, where and by whose acts the excise duty point occurred. Therefore, in the absence of any relevant information in relation to any prior release for consumption, HMRC must assess the person who it finds to be holding the goods in question, since that is the only excise duty point which HMRC is able to establish.
In Dawson’s CA, the Court of Appeal referred to this passage and endorsed it: [84]. At [84]-[94] the Court accepted the Upper Tribunal’s observations in Dawson’s (Footnote: 2) that where an assessment is challenged on the basis that an earlier duty point arose, it will be necessary to establish the following four factors (in summary):
Who had physical possession at the time the alleged earlier duty point arose.
Who is the person alleged to have de facto or legal control over the goods, how did control exist and on what basis was it being exercised (Footnote: 3).
The time when the excise duty point arose.
Where the goods were being held at the relevant time.
The burden of proving that an earlier duty point can be established lies on the person seeking to resist the assessment (in this case the Appellant). Of course, it is possible that HMRC are better placed to look into evidence regarding the four factors. The Upper Tribunal recognised the concern to which this could give rise in B&M, at [153]:
B & M are, it appears, troubled in this case that HMRC are not following their own stated policy in certain respects:…B & M wish to be satisfied that there are not in fact earlier points in the supply chain where an excise duty point could clearly be established on the evidence, or might be if such an investigation were in their view more vigorously pursued. We would be inclined to agree that it would not be in the interests of justice that HMRC should simply be able to sit back and say that the burden is on the taxpayer to provide the evidence to displace its liability, when the evidence that HMRC do actually have is in fact sufficient to demonstrate, objectively, that an earlier excise duty point could be established. We are in no position, however, to say whether that is the position in the present case, and any concerns of that nature would anyway have to be pursued through the medium of judicial review.