[2025] UKUT 00315 (TCC)

The Appellant essentially argues that: i) the FTT failed to apply its own finding that HMRC failed to exercise its own discretion as to whether to waive each and every condition that had not been complied with; and ii) having rejected some elements of HMRC’s reasoning in rejecting the drawback claim, the FTT fell into error of law by not remitting the claim for reconsideration as it could not know that HMRC would inevitably have reached the same conclusion.

We are satisfied that the FTT made no material error of law in the Decision. We accept the FTT’s point that the rationale for HMRC’s decisions could have been clearer but this much is tolerably clear. In refusing the drawback claim, HMRC relied on it being made out of time and deciding that this condition should not be waived as the Appellant had not provided a good reason for the delay and had also failed to comply with other requirements of the drawback regime.

On appeal the FTT decided that the drawback claim was made out of time but found that HMRC had waived the time limit. However, the FTT found that the Appellant failed to satisfy the duty-stamp and export evidence conditions and it was not unreasonable for HMRC to rely upon the failure to satisfy these conditions to refuse the claim. The FTT therefore upheld the refusal of the vast majority of the value of the claim on the basis that it was affected by these two conditions.

Addressing Mr Thornton’s first point, to the extent that HMRC’s decisions only consider the exercise of the discretion to waive the time limit and fail to consider the exercise of a discretion to waive the other conditions, that might be expected. The decisions are premised on the Appellant’s request which in turn was based on it meeting all the drawback conditions other than the time limit condition – the Appellant was not asking HMRC to exercise any discretion in relation to the other conditions. Therefore, HMRC should not properly be criticised for failing to address waiver of other conditions explicitly.

Further and in any event, the original and review decisions do provide some evidence that HMRC considered all the circumstances of the case beyond the mere question of strict compliance with the conditions. For example, in the review decision Officer Ramsay considered alternative evidence of export being provided or alternative means of transport being undertaken in light of the ports not using the CHIEF system for RoRo exports. She did not simply rely on the lack of the specific evidence of export being provided as required by EN207. Therefore, even if the decisions did not expressly state that they had considered whether to waive any of the conditions apart from the time limit, it was implicit that HMRC had considered the exercise of their discretion more widely.

Finally, the FTT independently considered the reasonableness of HMRC’s reliance on the two conditions which it upheld, namely the failure to comply with the DSR in relation to duty-stamps and failure to provide the required evidence of export.

The FTT went on to make a specific finding in relation to the duty stamps that it was reasonable for HMRC to rely upon non-compliance with the DSR to refuse that part of the claim in light of all the circumstances, and that even if HMRC did not specifically consider the exercise of its discretion to waive the condition, it is inevitable that HMRC would have come to the same conclusion (see [165]). Addressing Mr Thornton’s point that the FTT was required to hear evidence that it was inevitable that HMRC would have come to the same conclusions if they did not exercise a discretion, we disagree. As a matter of law, if a condition of drawback is not complied with and it would be reasonable for HMRC not to waive that condition, then it is inevitable any claim based upon the satisfaction of this condition would be refused. The FTT would not be required to hear evidence on the point because inevitability flows as a logical consequence of the law.

In relation to the evidence of export, while the FTT did not make the equivalent finding on inevitability at [173], it did find that HMRC acted reasonably in relying upon the Appellant’s failure to comply with this condition. The FTT found that HMRC took into account all relevant matters and did not take into account irrelevant ones. It found that HMRC had exercised a discretion to consider all the circumstances, including the difficulties faced by importers, when relying upon this ground. Therefore, it implicitly found there was no failure by HMRC to exercise a discretion to waive non-compliance. Thus, it was not required to apply a test of inevitability because HMRC had effectively and reasonably considered all the circumstances and decided not to exercise a discretion to waive the condition.

Mr Thornton’s second broad point was that the FTT found that HMRC took into account a number of irrelevant matters or acted unreasonably in relying on reasons that it found to be flawed. He is right about this and HMRC did not cross-appeal in respect of most of the matters that the FTT found to have contained flaws. Mr Thornton correctly listed a number of matters, including the refusal to waive the time limit, that HMRC relied upon but which the FTT found to be flawed or unreasonable. However, it does not follow that this required the FTT to remit the matter for a fresh decision based upon HMRC taking into account irrelevant matters.

As set out above, if any one drawback condition is not complied with and it would be reasonable for HMRC not to waive that condition, then it is inevitable that any claim which relies on the satisfaction of the condition would have to be refused. This applies to the duty stamp and export-evidence conditions. The reliance on additional flawed or irrelevant additional grounds for refusing the claim cannot be material in these circumstances. As a matter of law, it is inevitable that any part of a claim relying upon satisfying a condition must be refused in any respect where a condition has not been met and it was reasonable for HMRC not to waive it. Therefore, it is not material that HMRC relied on the Appellant failing to satisfy additional conditions which turned out to be flawed. All the conditions of drawback would have to be met unless HMRC waived them in respect of any claim.

The FTT was entitled to find that, in respect of that part of the claim affected by the duty stamp and export evidence conditions, HMRC’s refusal of drawback was a reasonable decision which they were entitled to make and involved a reasonable exercise of their discretion. The decision treated each of the conditions as material matters which the Appellant was required to comply with. Each of the conditions, if not waived and not complied with, was capable of forming the basis on which some of the claim could be refused.

The FTT’s guidance as to its supervisory jurisdiction at [153] was without flaw and it followed it without error. Thus, there was no error of law in the FTT’s approach.

We dismiss this ground of appeal.