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

Permission on this ground was granted on 19 December 2019 following an oral renewal of permission hearing. The legal landscape at that point was one where the Upper Tribunal in Dawson’s had issued its decision (4 October 2019)but the CJEU had not yet issued its decision in WR. The Upper Tribunal’s decision in Dawson’s revolved around the issue of whether control involved physical possession, as HMRC argued, or included de jure or de facto control over the goods (even if the person did not have physical possession) as the taxpayer there argued (to advance their case that HMRC should have assessed a person at an earlier duty point). Pending the CJEU’s decision in WR, the Upper Tribunal in Dawson’s proceeded on the basis of various propositions at [131] (derived from various other authorities before it), which included that an innocent agent of the person with legal or de facto control was not holding but that actual or constructive knowledge of physical possession of duty unpaid excise goods could take someone out of the status of an innocent agent. The Upper Tribunal went on to note that, while none of the authorities had covered the situation where physical possession had not been established, they did require, when seeking to establish that a person without physical possession of goods could be regarded as their holder, establishment of the basis on which it was said that legal or de facto control of the goods was said to arise (at [136]). Thus, the issue of whether there was sufficient control in order to be “holding” had been highlighted as a key factor.

The Upper Tribunal’s analysis in Hartleb above, and its suggestion that the factors explored in Dawson’s relevant to establishing whether someone was liable at an earlier duty point (which included control) were also useful to consider when examining whether someone was “holding” (see [15]), show how the issue of control is one of a number of factors that fall to be considered when looking at whether it is inappropriate to consider someone with physical possession as “holding”.

It is in that context that the FTT’s consideration of sufficiency of control must be assessed. When the factors in Dawson’s are worked through in relation to the facts found and the evidence before the FTT, we are unable to detect any error of law. Mr Ali did not contest that he had physical possession either in relation to the tobacco in the van or the unit (FTT [27]). Physical possession is not of course determinative, but the FTT did not consider that it was.

As regards sufficiency of control it is plain that the FTT rejected Mr Ali’s case that he was simply an employee driver for Palm Palace. The storage unit and the direct debit which paid for it was in his name. He had bought and paid for the goods, and he had not, up until the hearing, put his case in a way that suggested he was acting on behalf of Palm Palace as its employee. (The further Dawson’s questions do not, as HMRC rightly accept, throw light on the question of who was “holding” as between Palm Palace and Mr Ali, as the timing and location were the same as between the two).

It was thus clear 1) that Mr Ali had physical possession of the goods and 2) that there was nothing in the further factual circumstances of the case which the FTT considered to suggest that it was inappropriate to find that he was holding the goods. Those factual circumstances (his rental and his insurance of the storage unit and that he bought and paid for the goods) also distinguish him from the hypothetical delivery driver in the example addressed by the Advocate General in WR and mentioned by the Upper Tribunal in Hartleb (see [19]) in that they point to an assumption of some level of “entrepreneurial risk”.

At the hearing before us Mr Ali said that he could not understand why the rental agreement was in his name and pointed to the bank statements in Palm Palace’s name with the same account number as that which appeared next to his name on the direct debit. Those were however both matters which the FTT mentioned in its decision (at FTT [5(6)] and FTT [9(3)]). Neither would have necessarily meant, when considered with the totality of the evidence, that the FTT ought to have concluded that Palm Palace as opposed to Mr Ali had sufficient control.

We accordingly conclude there was no error of law in the FTT failing to find that Palm Palace, as opposed to Mr Ali, had sufficient control in order to be “holding” for the purposes of Regulation 10. We therefore do not need to address HMRC’s alternative arguments, that there could be more than one person who was a “holder” at any one time or that a person could be liable by virtue of being a person “involved in the holding” under the provision for joint and several liability under paragraph 2 of Regulation 10.