UT/2019/000009 - [2024] UKUT 00176 (TCC)

We have already addressed the relevant case-law on prior excise duty points. The authorities consistently refer to the question of whether HMRC can assess excise duty not whether they can recover it. However, by disposing of the prior excise duty point issue by reference to a trader no longer being in business, it would appear, as Mr Ali’s ground identifies, that the FTT confused recoverability with the ability to assess and thus erred in law.

Mr Davies’ first line of response was that the FTT had made no error. HMRC’s case had always been that there was no-one to assess, not that there was someone, but that recovery could not be made against them. The FTT, he submits, well understood that. Its reasoning in FTT [32], that HMRC was not precluded from assessing Mr Ali because it was unable to assess any person involved in an earlier duty point, did not follow from the FTT’s statement in the preceding paragraph that the only trader which could be identified was one that was no longer in business. That statement was simply describing the evidence that was before the FTT, and the two paragraphs were to be read disjunctively.

We reject that interpretation. The plain reading of these two paragraphs is that the FTT considered that, for there to be an earlier duty point established that would assist Mr Ali’s case, HMRC would have needed to be able to assess the earlier person liable. However, it also considered HMRC would not be able to assess a person who was no longer in business. It is not clear to us why HMRC would be unable (as opposed to unwilling) to assess against a person who was no longer in business. The question whether a person is still in business is different from the question whether a person is still in existence. Putting that to one side, however, what is clear is that the FTT considered that the question whether a person was still in business was relevant to the question whether there was an earlier duty point against which HMRC could assess. We can understand how the FTT might have concluded that the fact that an entity was no longer in business might be relevant in the light of the authorities in this area post B&M but prior to Davison. In circumstances where it was considered HMRC had a discretion as to whom to pursue, rather than an obligation to pursue the first duty point they could identify, one could see how the FTT might think that the low prospects of recovery when pursuing a trader who was no longer in business would be a relevant factor.

However, given the subsequent clarification of HMRC’s position in Davison, it was an error to assume that considerations relating to recoverability were at all relevant. The correct position is that, if there was someone who HMRC had sufficient information to assess, then HMRC had to assess that person irrespective of the prospects of recovery.

Accordingly, while the FTT was correct to consider HMRC’s ability to assess was key, it erred in considering that an ability to assess depended on whether a trader was still in business. The fact a trader was no longer in business or lacking in resources would not prevent an assessment being made, although it might well affect the prospects of recovery in respect of any such assessment depending on the resources of the company.

That error of law arose, in our view, in the light of the FTT’s decision not taking account of Davison and of the acceptance HMRC gave there (that was noted by the Upper Tribunal) that the question of whether HMRC should pursue a person liable at an earlier duty point was not one of discretion. The FTT cannot however be criticised for that error. Davison came out after the hearing had taken place and there is no indication that either party then drew the decision to the FTT’s attention.

HMRC also argue the FTT’s findings did not amount to a finding that “The Price 30” actually existed or that it held tobacco so that it could have been assessed for duty. We agree. The FTT did not make any definitive finding that “The Price 30” was an identifiable person. Its reasoning was to the effect that, even if there was such a person, that would not help Mr Ali because HMRC would not be assessing it because it was no longer in business. (That does not of course detract from there being the error identified in Ground 1 regarding considering recovery rather than ability to assess as the guiding principle.)