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UT (Tax & Chancery) UT/2023/000087 - [2025] UKUT 00176 (TCC)
Fecha: 05-Mar-2025
The FTT’s decision and the grounds of appeal
The FTT’s decision and the grounds of appeal
It is not necessary for us to refer extensively to the reasoning of the FTT. The appellant has rightly described the issues before the FTT as “both myriad and complex”. Many of those issues are no longer live issues between the parties, in this appeal at least. At this stage, we can simply record the FTT’s principal findings in so far as they are relevant to this appeal.
The FTT found at [50(1)] and [88] that HMRC’s Decision had been unreasonable in that it failed to take into account a proposal by the appellant at the time of the 2017 Application that authorisation should be subject to a condition that the appellant would not use the end-use procedure in relation to parts either retroactively or for a period of 12 months from the date the authorisation was granted. This proposal had been made to answer failures by the appellant in relation to end-use for civil aircraft parts referred to above. In the circumstances, the FTT directed HMRC to undertake a further review of their decision to refuse authorisation.
The FTT found at [103] that the 2017 Application did not qualify as a renewal of an authorisation for the purposes of Article 172(3) UCC DA. That was because the FTT had found at [95] that a UCC authorisation was different in kind from a CCC authorisation:
In my view the “UCC authorisation vs CCC authorisation” point turns on the meaning of the phrase, “renewal of an authorisation.” I understand HMRC’s essential argument to be – to renew an authorisation means to grant a new authorisation of the same kind as the old one; and UCC authorisations are different from CCC authorisations. In my view, this is the correct reading of this phrase: the requirements for end-use authorisation under the CCC were similar in many ways to, but materially different from, the requirements for end-use authorisation under the UCC. Consistent with this (and as mentioned previously), although recital (1) to the UCC refers to itself as the CCC “recast”, it also states that this was as a result of a number of amendments having to be made to the CCC.
…
It follows that, in response to agreed issue 2c, the appellant’s 2017 application for end-use authorisation did not qualify as a renewal application under article 172.3 DA.
The FTT also found at [102] that in any event the 2017 Application did not concern “the same kind of operation and goods” as the expired CCC authorisation. Article 172(3) UCC DA was therefore not engaged:
Having concluded that the appellant’s application did not fall within article 172.3, as it did not concern “renewal of an authorisation”, it is strictly unnecessary to consider whether the 2017 application concerned the “same kind of operation and goods” as the appellant’s “old” authorisation. However, as the point was argued at the hearing, my view, in brief, is that whilst the 2017 application and the “old” authorisation concerned the same kind of goods, they did not concern the same kind of operations: the geographical scope of end-use operations in the former (“Intra EU, Trans Continental (EU-USA & EU-BAH)”) was materially different to that of the latter (East Midlands Airport – see [65] above).
The FTT then considered whether there were any circumstances which could be considered “exceptional circumstances” within Article 172(2) UCC DA to justify retroactive authorisation. It identified the circumstances relied on by the appellant as constituting exceptional circumstances at [109] but held that only item 5 could amount to an exceptional circumstance:
The appellant submitted that the circumstances of its 2017 application for end-use authorisation were “exceptional” because of:
the nature of the relief for aircraft;
the changes of law in relation to the relief for aircraft;
the different application of the law by different member states;
the end-use authorisation application made by the appellant on 30 March 2015;
HMRC’s failure to make a decision on that application;
the proposal made by the appellant (in its 5 May 2017 letter); and
proposals made by the appellant subsequent to HMRC’s decision.
The starting point for this analysis is that article 172.2 DA comes into play only where the customs authority has decided to grant an authorisation – in this case, the authorisation sought by the appellant on 4 April 2017 – with retroactive effect. Hence, when analysing article 172.2 DA, that has to be taken as a “given”. The question is whether the retroactive effect must be granted from (no earlier than) 4 April 2017 (per article 172.1 DA), or whether it may be granted from as far back as 4 April 2016 (per article 172.2 DA). This depends on whether there are exceptional circumstances or not.
Items (1), (2), (3) of the appellant’s list above are, like the circumstances discussed in Unipack, descriptions of customs legislation with which the appellant (like everyone else in its circumstances) was required to comply: although Unipack is not binding on me, I have had regard to it and consider it correct in finding that such things are not “exceptional circumstances” in the context of allowing a further one year of retroactive effect. As the European court said, such an interpretation would set non-compliant operators at an advantage over compliant ones.
I cannot see that items (4) and (6) of the appellant’s list answer to the expression, “exceptional circumstance”; and item (7), even if it did, post-dates HMRC’s decision.
Item (5) of the appellant’s list is the only one capable of answering to the expression, “exceptional circumstances”.
The FTT declined to make a finding as to whether item (5) amounted to exceptional circumstances for the reasons given at [114]:
However, in my view, it is outside the scope of the tribunal’s s16(4) FA 1994 jurisdiction for me to make a findings as to whether or not this circumstance is “exceptional” – that is a matter for HMRC’s administrative discretion, subject to the tribunal’s supervisory jurisdiction, if, upon a further reviewed ordered by the tribunal, HMRC were to decide to grant authorisation (and so come to consider whether it should have retroactive effect). The most I can do is decide, having made full findings of fact, whether no reasonable panel of commissioners could conclude that item (5) of the appellant’s list comprises exceptional circumstances.
Finally, so far as relevant to this appeal, the appellant argued before the FTT that even if HMRC’s arguments on Article 172 were correct, it was unlawful for HMRC to treat the appellant differently from taxpayers in materially similar circumstances without objective justification. The FTT rejected that argument at [101]:
Leaving to one side the point that the immediate issue here is the interpretation of customs legislation, rather than the susceptibility of an administrative act to judicial review, it has not been shown here that HMRC have treated the appellant differently to other operators in their application of the customs legislation at issue; indeed, on the interpretation of “renewal of an authorisation” which I prefer for the reasons above, no such different treatment would seem likely, given that there was a coherent regime for transitioning from CCC authorisations to UCC authorisations.
When the FTT came to give directions for the further review, it did so in the following terms:
ORDER OF THE TRIBUNAL PURSUANT TO S16(4)(B) FINANCE ACT 1994
HMRC are required to conduct, in accordance with the following directions, a further review of their decision on the appellant’s 4 April 2017 application for end-use authorisation.
HMRC are directed, when conducting their further review, to have regard to relevant findings of fact and analysis of law in this decision, being:
as regards findings of fact: [25-34], [35(6)], [53-55], [58-59], [61-66], [68], [70-79], [115] and [122] above; the agreed facts; and Appendix 2 below; and
as regards analysis of law: [35(3)], [40-50], [80-87], [92-103] and [105-113] above.
HMRC were therefore directed to take into account the following matters:
The FTT’s conclusion of law at [95] and [103] that the 2017 Application did not qualify as the renewal of an authorisation.
The FTT’s conclusion at [102] that the 2017 Application did not concern “the same kind of operation and goods” as the expired CCC authorisation.
The FTT’s conclusions at [109] – [113] as to what matters could and could not amount to exceptional circumstances for the purposes of Article 172(2) UCC DA.
For the reasons given at [101] set out above, the FTT did not direct HMRC to take into account in the further review that it must treat the 2017 Application consistently with its treatment of other end-use applications at the same time and consistently with guidance as it stood at the time the 2017 Application was made.
The Upper Tribunal granted the appellant permission to appeal on four grounds. There was a fifth ground for which the appellant did not seek permission because the further review effectively rendered it academic. Two of the remaining four grounds can be taken together. We therefore address three grounds of appeal in which the appellant alleges that the FTT erred in law as follows:
In concluding at FTT [102] and [103] and in directing at FTT [145(2)] that the appellant’s 2017 Application did not qualify as the “renewal of an authorisation for the same kind of operation and goods” within Article 172(3) UCC DA.
In limiting the scope of what could amount to exceptional circumstances for the purposes of Article 172(2) UCC DA.
In failing to direct that on the further review HMRC must treat the 2017 Application consistently with the way it treated other end use applications in 2017 and deal with it on the basis of any guidance as it stood at that time.
We address each ground of appeal in the discussion below.