[2025] UKUT 00315 (TCC)

We do not accept Mr Thornton’s submissions. We are satisfied that the FTT did not err in law in deciding that the condition found at paragraph 7.4 of EN 207 requiring an S8 document showing status 60 to be provided was a valid, lawful condition of a drawback claim for excise duty. Further the FTT did not err in deciding that HMRC was entitled to take this into account and acted reasonably in not waiving the condition and refusing the claim on this basis.

The Appellant takes issue with the FTT noting at [131] its acceptance of being in breach of the paragraph 7.4 condition because its primary argument was that the condition was void or ultra vires because providing evidence of export in a S8 document with status 60 was impossible. The FTT’s own notes of the hearing, which it disclosed following the application to it for permission to appeal, record Mr Thornton, for the Appellant, saying the following:

“Evidence was actually or effectively impossible…evidence is that it realistically was not an exercise that could be complied with. Primary submission for such movement [is that] it was an ultra vires condition or didn’t apply to movements of that kind.”

The FTT’s hearing notes are consistent with the Mr Thornton’s skeleton argument. In the skeleton he made the primary submission that the condition relating to production of the S8 in paragraph 7.4 EN207 was invalid but alternatively it should be waived as unfair and should not apply to the Appellant’s movements of goods.

At [131] of the Decision the FTT recorded the factual submission of the Appellant that it was impossible to meet the condition. Thereafter, the FTT considered the secondary argument as to the reasonableness of HMRC relying on the failure to meet the condition in the circumstances of this case. However, the FTT does not appear to have addressed the Appellant’s primary argument as to the validity of the condition.

The FTT’s hearing notes do not necessarily support its finding at [131] that the Appellant accepted that para 7.4 was breached (and HMRC agree that the notes reflect that part of the Appellant’s submissions). It appears that the Appellant did not dispute that it was a condition, but the Appellant primarily argued that it was an invalid condition. Alternatively, the Appellant argued that it was an unreasonable condition and thus open to challenge.

Nevertheless, even though there may be merit to the Appellant’s sub-ground of appeal – that the FTT did not consider the primary argument on the validity of the paragraph 7.4 condition – we are satisfied it does not give rise to a material error by the FTT.

Any error by the FTT in not addressing the validity argument could not be material because we are not satisfied that the condition in paragraph 7.4 of EN207 requiring the production of an S8 document with status 60 was invalid nor ultra vires. We accept, contrary to HMRC’s submission, that the FTT, and the UT, may have jurisdiction to consider whether a condition in a public notice such as EN207 is valid or enforceable as the FTT did in Global Foods. Likewise, for the reasons set out in relation to the cross-appeal it is within the FTT’s and UT’s jurisdiction to consider on an appeal whether HMRC acted reasonably in relying on a breach of a condition in a public notice. In short, this is because an appeal to the FTT and UT pursuant to section 13A(2) and 16(5) FA 94 also incorporates the jurisdiction and powers in section 16(4) to consider the reasonableness of HMRC’s decision to deny drawback on the basis of refusal to waive the strict conditions for it.

Paragraph 7.4 of EN 207 is a condition with the force of law by virtue of Regs. 7(1)(b) and 10 EGDR imposing evidential requirements, even expressly stating as much in the words in the 2021 edition: “This paragraph contains requirements that have force of law under regulations 7(1) and 10 of the EGDR. In particular it imposes additional conditions on your claim for drawback…”.

As the FTT stated at [68] “… in order to represent a condition which must be met, thereby restricting the basis on which a claim may be made, the conditions must be clear and precise, and not impossible or excessively difficult to meet”. This reflects that the law concerning excise duty, and the embedded right to claim drawback was derived from EU law – latterly, Excise Directive 118/2008/EC. Accordingly, the validity of conditions imposed by EN207 are subject to the principle of effectiveness.

It is not in dispute that neither a CHIEF S8 document nor CDS equivalent were produced by the Appellant, as found by the FTT at [49]. There is no challenge to the finding of the FTT at [53] that it was unclear from the correspondence whether an S8 showing the required status 60 could be obtained using RoRo transport but, the correspondence did show that using an alternative method such as an inventory port to export instead would still cause that document to be produced. At [170] the FTT referred to the decision of the Review Officer to the effect that there were three options for replacing an S8 document showing status 60. The FTT also found that none of those options were available to DFUK after the export had already occurred. At [171] the FTT referenced the evidence of Mr Thornton that the change had taken many by surprise and there appeared to be no publicity of the changes in HMRC’s systems and no change to the guidance given to claimants to reflect that changed framework.

Nonetheless the FTT correctly found in this regard at [171] that it would not have been impossible or excessively difficult to obtain a S8 document (or substitute evidence) if the Appellant had researched the position prior to export:

“171.

In cross examination of Mr Thornton HMRC sought to establish that the failure to obtain a CHIEF S8 was a failing of his, that he had not sufficiently researched how the necessary evidence could have been obtained, principally through use of a method of movement other than the one selected. Mr Thornton openly accepted that he had been unaware that S8s were not issued post 31 December 2020 in respect of roll-on-roll-off ferry movements…”

Thus, the evidence of Mr Thornton and the finding of the FTT was not that it was excessively difficult or impossible to obtain the relevant documents required by paragraph 7.4 of EN207. Instead, the FTT’s finding was that Mr Thornton, as the Appellant’s agent, had not conducted sufficient research on the alternative evidence that would suffice, or how to obtain the S8 document with status 60 through using a different type of export movement. It was not disputed that there were alternative movement methods for the export of the goods other than RoRo, such as an inventory port, through which the relevant documents could have been obtained. There was no finding that the Appellant could not reasonably have discovered the correct position before making the export, even if the position was not widely known or made publicly available by HMRC. Mr Thornton’s own witness statement explained at [24] that he discovered the position through his own research on 12 April 2021 that RoRo no longer caused an S8 document showing status 60 to be produced.

The Appellant bore the burden of proof on the issue of whether it was impossible or excessively difficult to comply with the condition in paragraph 7.4 EN207. Given Mr Thornton’s evidence, which included an acceptance that through other available types of movement such evidence could be obtained, there was no proper basis to allege impossibility or excessive difficulty such as to render the condition invalid or ineffective. During the hearing before the UT, Mr Thornton sought to submit that there would likewise be practical problems obtaining the alternative export evidence from the CDS as is provided as the equivalent condition in the 2021 edition of paragraph 7.4 EN207. However, there was no evidence before the FTT nor finding made by it regarding this evidence being impossible or impractical to obtain. Nor was there any application to admit fresh evidence on appeal to the UT.

Therefore, even if the FTT had fallen into error in finding that the Appellant conceded that it had breached a valid or lawful condition, this was the only conclusion open to it in law because the condition in paragraph 7.4 was valid and enforceable. The FTT could not find otherwise, properly directing itself.

Thereafter, the FTT carefully considered the secondary argument as to the reasonableness of the condition itself and of HMRC relying on the condition in refusing the drawback claim at [167]-[174]. No challenge is made to the FTT’s conclusion at [172]-[173] that despite its sympathies, the FTT could not find that the condition was unreasonable nor that HMRC had failed to take into account relevant evidence as to the difficulties faced by exporters nor taken into account of irrelevant evidence. The FTT’s decision that it was not unreasonable for HMRC to refuse to waive the condition in light of all the circumstances contained no error of law.

Therefore, even if there was any error in relation to any failure to rule on all aspects of the Appellant’s submissions, it is immaterial and not a basis to overturn the Decision. There was no material error of law in the FTT’s Decision to uphold the refusal of the claim for excise duty drawback on this ground.

This ground of appeal is dismissed.

The FTT made a number of criticisms of, and found flaws in, the reasons relied upon for refusing the drawback claim in HMRC’s original and review decisions.

At [100]-[102] of the Decision it rejected HMRC’s reliance on the Appellant’s failure to notify a change of status in relation to the goods as a ground for refusing the claim:

“100.

Viewing the terms of the NOI form (EX75) we do not consider that there was a change in the information required which, in this regard, required further notification to HMRC. Accordingly, the fact that a proportion of the goods were exported on 8 April 2021 cannot, of itself, justify a refusal of either the whole claim or that part of the claim relating to the goods exported on that date.

101.

Our view in this regard is reinforced by the terms of paragraph 12.2 EN 207 (2021) which clearly envisages that a pre-Brexit NOI may have been completed for a post Brexit export to an EU country; it reminds claimants that they must have the correct supporting documentation but does not advise that they must notify a change in status.

102.

There is no part of the claim which is only affected by the position taken by HMRC on this issue.”

At [107]-[108] the FTT rejected HMRC’s reliance on a failure to notify a reduction in the quantity of the goods exported or the value of a claim as a ground for refusing the claim:

“107.

Given the terms of paragraph 12.1 EN 207 we consider that there is also a general waiver of the requirement to notify a reduction in the quantity of goods exported where the claimant themselves made the reduction in claim value. As such, we conclude that there was no failure to meet the conditions required for drawback by virtue of the errors identified in paragraph 44. above.

108.

HMRC were therefore not entitled to refuse the entire claim on the basis of those errors. There is no part of the claim which is only affected by the position taken by HMRC on this issue.”

At [109]-[111] the FTT rejected HMRC’s reliance on the claim being made in respect of goods, 112 cases of vodka, in respect of which no duty had been paid:

“109.

HMRC contend that because one of the SAADs for the December 2019 dispatched included 112 cases of vodka the Appellant has failed to comply with the requirement that the goods were duty paid. During the hearing Ms McArdle indicated, in a response to a question put to her by us, that the Appellant should have made clear in the claim itself that the supporting documentation also demonstrated that further goods not part of the claim had been dispatched so as to ensure the claim was compliant.

110.

The Appellant contends that there is no legal requirement to so notify HMRC. It is submitted that the claim cannot be said to be inaccurate because additional goods were dispatched at the same time.

111.

We agree with the Appellant. The drawback claim was made in respect only of goods which on which duty had been paid (i.e. excluding the 112 cases of vodka) and in respect of which a NOI had been given. There is no requirement or condition within EGDR or EN 207 which precludes a movement including other goods and therefore there can have been no failure to meet such a condition.”

At [154] the FTT went on to state, “The basis of on which HMRC refused the full drawback claim is not entirely clear to us despite careful consideration of the Original Decision and the Review.”

At [156]-[158] it reiterated its interpretation of the correspondence and findings at [30] and [74] that HMRC had waived the time limit to make the drawback claim and found it was unreasonable for HMRC to reject the entire claim on that basis:

“156.

HMRC contend that the claim was rejected because various conditions had not been met and that the terms of the 27 December 2019 email required those conditions to be met before the time limit would be waived.

157.

On the basis that we have found that there was a waiver of the time limit condition we consider that rejection of the claim in its entirety is unreasonable. Exercising our full appellate jurisdiction we have already allowed the appeal in respect of those parts of the claim which are unaffected by the Appellant’s failure to ensure that the duty stamps were obliterated in accordance with the DSR and the failure to provide evidence of export.

158.

Given the terms of paragraph 12.1 EN 207 which confirm that where a claimant fails to meet the prescribed conditions for part of a claim the claim will be reduced, and the compliant part paid, we also consider that the total refusal of the claim was unreasonable.”

The Court of Appeal in GB Housley v HMRC [2016] EWCA Civ 1299 (“GB Housley”) overturned the UT and discharged a VAT assessment. The UT had found that HMRC had failed to exercise their discretion as to whether to accept alternative evidence under Regulation 29(2) of the VAT Regulations 1995 but nonetheless it remitted the decision to HMRC giving them a further opportunity to exercise their discretion on receipt of further material from the taxpayer. The Court of Appeal found that the UT’s directions had wrongly preserved the existence of what had been found to be a flawed assessment; it wrongly placed the burden of challenging any revised assessment on the taxpayer, without affording the taxpayer the opportunity to raise the time bar possibly available to challenge any new assessment raised by HMRC. It also wrongly enabled HMRC to support the correctness of their earlier decision by reference to subsequent factual materials, which was not in itself legitimate. The taxpayer’s appeal was thus allowed, and the assessment discharged.

At [77] and [79] of GB Housley the Court of Appeal stated that the tribunal should remit decisions to HMRC where they had been found to be flawed unless it was inevitable HMRC would come to the same conclusion or make the same decision:

“[77] Thus the Court of Appeal endorsed the approach adopted by Turner J namely that, save in circumstances where the Commissioners could show that, had the additional material which should have been taken into account, in fact been taken into account, the decision would inevitably have been the same, where a tribunal could nonetheless dismiss the taxpayer’s appeal against a wrongly made decision of the Commissioners, the taxpayer’s appeal should be allowed and that it was not for the tribunal to re-exercise the discretion. The tribunal should have allowed the taxpayer’s appeal and ‘left it to the commissioners to take a fresh decision if they thought fit on the facts as they had become by the date of the fresh decision’.

…

[79] In my judgment a similar approach to that adopted by this court in John Dee is applicable to a case such as the present, where the relevant decision was a failure by HMRC, as a result of a misapprehension as to the necessity of a billing agreement, to consider the exercise of their discretion under reg 29(2) to allow input tax. The present case was one where, on the findings of fact by the FtT, HMRC clearly could not have suggested that, if they had properly considered or re-considered the exercise of their discretion under reg 29, they would have inevitably have come to the same result—ie to have refused to allow the credit for the input tax. Indeed, Mr Mandalia did not seek so to argue.”

Mr Thornton submitted that HMRC made one decision, as upheld on review, being to reject the whole of the excise duty drawback claim. At [154] the FTT recorded that it was unclear how HMRC came to make that decision. Nevertheless, he argued that what was clear is that the FTT disagreed with the grounds for refusal relied upon by HMRC in their decisions on a number of points, finding:

At [165] the FTT had found that HMRC’s decision not to waive the duty stamp condition was not unreasonable. Mr Thornton submitted that it was implied within that finding that the FTT was aware of and applied the correct test of considering whether reasonable or unreasonable matters were taken into account. This was explicitly set out at [173] where the FTT decided that HMRC did not fail to take into account relevant factors nor take into account irrelevant factors in deciding not to waive the export evidence condition. The FTT had also recorded this test at [136] and [153] and there is no doubt it understood the correct approach.

Mr Thornton noted that HMRC produced only one witness, the original decision-maker, Officer O’Rourke. His evidence did not set out what factors were or were not taken into account in the exercise of the discretion to refuse the claim in the original and review decisions. To the contrary, it appears that there was no attempt to exercise discretion in the decisions. At [11]-[14] of his statement Officer O’Rourke recorded a number of perceived breaches of the drawback conditions. At [15] Officer O’Rourke acknowledged that HMRC had the discretion to waive the time limit condition. He then briefly outlined what he needed to consider and what he had been provided with at [16] before concluding at [17] that he saw no mitigating circumstances and so could not exercise HMRC’s discretion to waive the time limit. At [18] Officer O’Rourke confirmed the decision that the claim would have been rejected solely on that basis. He reiterated that position at [19] before noting that the rest of the issues were secondary and would only have come to prominence if the mitigating circumstances he considered were missing at [17] had been present.

In short, Mr Thornton argued that the evidence presented appeared to demonstrate that, having concluded the claim would be dismissed, Officer O’Rourke did not even turn his mind to the remaining discretion to otherwise allow the claim even if conditions had not been complied with.

He contended that HMRC chose not to produce the review officer, Officer Ramsay, as a witness which meant DFUK had no opportunity to test her evidence and challenge any purported exercise of the discretion on her part. However, at [58] of the Decision the FTT recorded that the review letter had explained that due to non-compliance with other requirements, the time limit condition would not be waived. It also found that there was no indication in the decision that HMRC believed they had the power to waive any of the other conditions and accordingly there was no evidence before the Tribunal that any person at HMRC had actually and effectively decided whether or not to waive those conditions.

Even if this is wrong, Mr Thornton submitted that it was abundantly clear that both decision makers believed other conditions to have been breached when, as the FTT found, they were not. Those points must have been in their minds when considering whether to waive any one of them and must naturally have influenced that decision.

Accordingly, in light of the FTT’s findings, he contended that it was not open to the FTT to conclude that HMRC took no irrelevant factors into account when deciding whether to waive these conditions. The FTT ought to have determined that as there was no evidence of any decision not to waive them, the discretion was exercised unlawfully or not at all and the decisions were consequently unlawful. The judgment in GB Housley clearly implied that a non-exercise of a discretion was as unlawful as the improper exercise of discretion at [70(i)].

The FTT also noted at [170] that the review decision had outlined three methods of obtaining an S8 document showing status 60. Whilst it was not accepted by DFUK that each of these were correct, the FTT did record that none of them were available to DFUK. Mr Thornton argued that these appear to have been irrelevant factors taken into account by the review officer. Even if these were perceived as ways that DFUK might have complied with the condition by acting in different ways from the start, it chose to export the goods in the ways in did, and given the absence of publicity by HMRC on the way their system had been set up, it did not know in advance that there was an issue. It was not unreasonable for DFUK to have chosen RoRo transport but it then discovered it was stuck with the impossible task of providing HMRC’s required confirmation of export.

He contended that each express or implied finding of fact by the FTT to the effect that HMRC took no irrelevant factors into account when deciding not to waive the duty stamp and export conditions was plainly irrational. It was inconsistent with other elements of the decision and was not based on supporting evidence.

Having decided that HMRC’s decision not to waive the conditions was not unreasonable, the FTT did not need to address whether the decisions would inevitably have been the same if made again. However, the FTT did so at [165] in relation to the duty stamp decision alone. The Court of Appeal confirmed at [77]-[79] of GB Housley that the test was one of inevitability. This cannot be a low bar and it was for HMRC to show that it applies. The FTT appeared to rely on the decision in Corbitt to justify their reaching this conclusion without evidence or submissions on the point from HMRC. It is unclear why the FTT believed this as it flies in the face of the normal approach to burden of proof.

Mr Thornton submitted that the FTT’s finding on inevitability was based on no evidence. HMRC’s only witness did not make that claim in evidence. HMRC also made no submissions that the decision would inevitably be the same – they could not have done so without misleading the Tribunal. In addition to the above, the FTT relied on DFUK not having taken steps after the event to ensure that BWA had complied with its duty. There was no evidence or argument submitted by HMRC that this was relevant or should be a factor in the decision. It appears to be an invention of the FTT and its logic is unclear. No action of DFUK after the event would change whether or not the duty stamp details were recorded and it is unclear why this would be a relevant factor at all, let alone one that shows it is inevitable the condition would not be waived.

Mr Thornton argued that the Upper Tribunal was in a sufficient position to remake the Decision or, at the least, remit the drawback decision back to HMRC to consider waiving any of these two conditions that are considered to apply.

There is no need to record Ms McArdle submissions opposing this ground of appeal. We have incorporated her reasoning below where we have agreed with it.