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

Having identified the above error, the question that then arises is whether the error is material so as to warrant setting aside the FTT decision and either remaking it ourselves or remitting it to the FTT. As set out by the Court of Appeal in Degorce v HMRC [2017] EWCA Civ 1427 at [95]the tribunal does not need to be persuaded that the error, had it not been made, would have led to a different outcome. It is enough, for the error to be considered material, if the decision might be different.

For the reasons explained below, while we disagree with certain of the points HMRC advance, we ultimately agree with them that the outcome would not have been different even if the error the FTT made had been corrected. The error was not therefore material and the FTT decision should not be set aside.

HMRC submit that their ability to assess against an earlier duty point is dependent on the availability of evidence to establish “how, when, where and by whose acts the excise duty point occurred” (Davison [67]) but that they were unable to establish these matters. They do not accept the invoices were genuine or that the purported seller “The Price 30” existed as a legal entity (because of various discrepancies: VAT was charged but there was no VAT number, the prices were less than duty owed, there was inconsistent adding up). Also, they point to the fact that the invoices only covered 185kg out of 515kg of tobacco and the branding was consistent with a smuggled product.

HMRC accept that, whilst the shop at the address (30 Queensway) had a sign saying “The Price”, there was no evidence of a legal entity called “The Price 30” and there was no good evidence that “The Price 30” corresponded to an identifiable earlier tenant. We probed with Mr Davies whether he was right to say the relevant questions (“how, when, where and by whose acts…”) were not answered. Mr Ali’s evidence was to the effect he bought and received tobacco at a specified address, and the invoices he provided specified dates. There was nothing in his account to suggest that whoever he had bought the tobacco from had not themselves been in possession and control of the tobacco when he bought it from them. Also, some of the criticisms HMRC made of the invoices (that the amounts were higher than the duty) went to whether the tobacco was duty unpaid, and whether Mr Ali knew or ought to have known that. Those points were not necessarily inconsistent though with the invoices constituting evidence that Mr Ali had bought the tobacco.

In his oral submissions Mr Davies’ reiterated that the fundamental difficulty for Mr Ali was the lack of evidence (in regard to a matter in relation to which he bore the burden of proof) as to the identity of the person said to be liable by reference to an earlier duty point. There was no evidence as to who or what “The Price 30” was. Without that, Mr Davies submitted, “The Price 30” was just “a collection of words”. The question of establishing the identity of that person was a necessary precursor to asking whether they had physical possession, and whether they had legal or de facto control.

We considered the findings of the FTT and the documentary evidence that was before it which, as well as the invoices Mr Ali showed, included the notebook evidence of the HMRC officer who visited the address where Mr Ali said he had bought the tobacco. We also queried with Mr Davies various issues around HMRC’s view that the person they visited at the address (and who told HMRC the previous occupant had gone away) was not the person who Mr Ali bought the tobacco from. The officer’s notes had indicated that the person they had visited in 2017 had gone on to deny there was tobacco on the premises when asked, yet upon a search immediately after they said that tobacco was then found under the counter. Taking HMRC’s account at face value, that raised questions as to the reliability of the evidence from that person around the previous occupant having gone away, although, as Mr Davies fairly pointed out, it is well established that, even if a person had not told the truth in one respect, that did not necessarily mean that all of their account was to be rejected. The HMRC officer had also noted the invoices at the premises looked to be of a different type to the ones Mr Ali had produced. However, given some time had passed between those invoice dates in 2016 and the visit in 2017, that difference in type of invoice did not necessarily mean the receipts had not been given by the occupant HMRC visited.

Standing back however, we would agree with Mr Davies’ point that, even taking such matters into account, Mr Ali has not produced any evidence which identifies the person who was holding the tobacco according to his account and the invoices he provided. Furthermore, it could not be overlooked that the remainder (and indeed the clear majority) of the tobacco was not accounted for by those invoices, which only covered 185kg of the 515kg seized. Also, those invoices did not necessarily resolve the question of the timing of the duty point (as pointed out by the Upper Tribunal in Dawsons, invoices could not be conclusive on timing when one does not know who was in possession of goods at time). Even if the invoices were evidence of some kind of transaction having taken place relating to some of the tobacco, they did not resolve the question of the nature of who or what “The Price 30” was and so the identity of a person who was liable by reference to an earlier duty point.

We have also considered whether this is the sort of error of law where, if the FTT had been aware of the correct position following Davison, it would have approached its fact-finding differently. But, even under the law as understood at the time under B&M, if Mr Ali had wanted to argue that he should not be liable because HMRC could have pursued someone else who was liable prior to him, then it was for him to identify that someone. Davison just confirmed, in the light of the acceptance HMRC gave, that HMRC had to then go after that person; they could not pick and choose between that person and a later holder. This only serves to reinforce our view that, although we have identified an error of law, it is not a case where the FTT decision should be set aside. We are satisfied that, even if the error were corrected and the FTT had considered only whether an identified person could be assessed rather than taking into account the recoverability of any assessment against such person, it would have to reach the conclusion that HMRC were unable to assess anyone else This is because Mr Ali had not produced any (let alone sufficient) evidence to identify anyone else who might be liable, and (as Dawson’s makes clear) a person who asserts that there is an earlier duty point HMRC can assess must be able to identify the person it is said HMRC can assess.

Having considered the FTT’s findings and the evidence before it, we cannot see that there is anything which suggests Mr Ali could have shown the FTT that HMRC had evidence which would have allowed them to identify an earlier person who should be assessed. While Mr Ali showed a picture on his phone taken from an internet search of a shop fascia showing “The Price 30” and it is not in dispute that there was or may still be such a fascia at the address HMRC visited, this does not address the difficulty of establishing the identity of the particular person whom HMRC could have assessed instead of Mr Ali.

In conclusion, although we have identified an error of law, we come to the view that it is immaterial and does not warrant setting the FTT decision aside.