UT (Tax & Chancery) UT/2023/000087 - [2025] UKUT 00176 (TCC)

This is an appeal against a decision of the First-tier Tribunal Tax Chamber (“the FTT”) released on 13 February 2023. It concerns customs duties on the importation from the United States of seven civil aircraft by the appellant between June 2016 and February 2017 and, in particular, the operation of end-use relief and the appellant’s authorisation for end-use relief. The appellant’s principal contention is that the FTT was wrong to hold that its application for authorisation could not be backdated to cover the seven importations. The appellant imported the aircraft for use in its business as a cargo airline.

At the time of the importations, civil aircraft were relieved from customs duty where they were registered with the Civil Aviation Authority and delivered to the operator if the importer was authorised for that end-use. In the absence of end-use relief, duty was chargeable at 2.7%. There was also a relief for aircraft parts that were incorporated into aircraft. We refer to these reliefs for brevity as “end-use relief”.

The appellant had been authorised for end-use relief in relation to civil aircraft and aircraft parts between 8 March 2002 and 6 March 2015. At the time of the importation of the seven aircraft the appellant did not hold authorisation for end-use. The appellant had applied to renew its end-use authorisation on 30 March 2015 (“the 2015 Application”) but, in circumstances described by the FTT, no decision was ever made by HMRC on that application. A further application for end-use authorisation was made by the appellant on 4 April 2017 including an application for that authorisation to operate retroactively (“the 2017 Application”).

HMRC refused the 2017 Application and that decision was confirmed on a statutory review (“the Decision”). The effect of the Decision was that a sum of approximately £3m remained due by way of customs duty on the importation of the aircraft. The appellant appealed the following matters to the FTT pursuant to section 16(4) Finance Act 1994 (“FA 1994”):

The FTT made careful and detailed findings of fact and law on the appeals. Many of those findings are no longer relevant to the issues in this appeal. In short, the FTT allowed the appeal against the Decision on the ground that in certain respects HMRC’s decision to refuse the 2017 Application could not reasonably have been arrived at. The FTT therefore required HMRC to conduct a further review of the Decision in accordance with directions which it gave for the purposes of the further review. The FTT also decided that the appeals against the post-clearance demand and the refusal to repay on the grounds of equity should be dismissed, unless HMRC were to make a decision on the further review granting authorisation with retroactive effect to the date on which the aircraft were imported.

There is no challenge from HMRC to the FTT’s decision to allow the appeal against the Decision. The appellant does however challenge the directions given to HMRC by the FTT for the purposes of conducting its further review. The principal issues on this appeal arise in connection with those directions. The appellant does not challenge the FTT’s decision in relation to the post-clearance demand or in relation to the refusal of its application for repayment on the grounds of equity.

Following the FTT’s decision, HMRC conducted a further review pursuant to the FTT’s directions. In a decision sent to the appellant on 23 January 2024, HMRC granted authorisation for end-use for civil aircraft. Authorisation was granted retroactively but only with effect from 4 April 2017, the date of the 2017 Application. The authorisation therefore did not apply to the seven aircraft imported by the appellant. The appellant has appealed that decision to the FTT and that appeal is presently stayed pending the outcome of this appeal.

The issues on this appeal are considerably narrower than the issues before the FTT. It is now common ground that the appellant was entitled to end-use authorisation, retroactive until at least 4 April 2017. It is also common ground that the aircraft had in fact been put to the prescribed end-use. The overarching issue between the parties is whether the FTT erred in law in construing the relevant provisions in relation to the retroactive effect of authorisations and in the directions it gave as to the basis on which HMRC should conduct the further review. In short, HMRC refused in the Decision to grant any authorisation, whether retroactive to 6 March 2015 or otherwise. There was an issue before the FTT as to whether HMRC could in any event grant such retroactive authorisation. HMRC’s position was that they could not do so, based on their understanding of changes to the legislative framework when the Community Customs Code was replaced by the Union Customs Code with effect from 1 May 2016.

We have included the relevant EU law provisions referenced below as an appendix to this decision. In the following section we provide a broad overview of those provisions and the legislative framework.