UT/2023/000029 - [2024] UKUT 00079 (TCC)

At all material times, the Appellant (TK) was authorised by the Respondents (HMRC) to operate the Inward Processing (IP) procedure and claimed Inward Processing Relief (IPR) under the suspension system in relation to components used by TK in manufacturing civil and military aircraft. As part of its obligations under the IP regime, TK submitted a Bill of Discharge (BoD) to HMRC each quarter in the form of a spreadsheet. Each of the relevant BoD spreadsheets contained around 100,000–200,000 data points.

In 2017, HMRC issued a C18 Post Clearance Demand Note requiring TK to pay £8,889,275.43, comprised of (i) £2,409,009.91 in respect of customs duty; and (ii) £6,480,265.52 in respect of import VAT for the period March 2014 to December 2014. The basis of the demand was that HMRC considered that TK’s quarterly BoDs for 2014 contained errors which breached the relevant IP requirements, such that TK was not entitled to the IPR claimed for that period. TK agreed that its BoDs contained some errors and also some data that was inconsistent with information in HMRC’s Management Support System (MSS) database but maintained that the overwhelming majority of entries were accurate, and that the identified errors were immaterial or de minimis. HMRC did not accept that: its position was (and remains) that a single defect on a BoD means that customs duty and import VAT liabilities arise in respect of all the imports covered by the quarterly BoD in question.

TK appealed to the First-tier Tribunal (Tax Chamber) (the FTT). By the time of the hearing before the FTT in November 2021, HMRC had accepted that the quantum of the Demand should be reduced to £7,739,730.55, comprising (i) customs duty of £2,016,400.94; and (ii) import VAT of £5,723,329.61.

In its decision [2022] UKFTT 00443 (TC) (the FTT Decision), the FTT dismissed TK’s appeal. In summary, the FTT held that any error, including a minor and immaterial error, or any mismatch between the BoD and the MSS, can give rise to a customs debt. The FTT also held that a single error in an import or disposal line of one import entry on a BoD means that customs duty and import VAT are due on all the goods covered by that BoD. The FTT based its conclusions on its interpretation of the decision of the Court of Justice of the European Union (CJEU) in Case C-262/10 Döhler Neuenkirchen EU:C:2012:559, which we discuss further below.

TK now appeals to the Upper Tribunal (Tax and Chancery Chamber) (UT) against the Decision on the grounds that the FTT erred in respect of both of those findings, and that in any event it did not give sufficient reasons for its conclusions.