Excise duty loss is a particular concern of HMRC at present. Its mid-point estimate of the excise duty lost each year is £1.3m. In order to combat this, HMRC and the UK Border Force take a firm stance where irregularities are discovered. Whenever it finds non-duty paid alcohol, whether at the border or from UK premises, it will usually seize that alcohol, raise an assessment for excise duty and impose a wrongdoing penalty based on the lost revenue.
This triple whammy of measures is most likely intended to have a strong deterrent effect. However, while each measure alone has previously been upheld as legal and proportionate, all three together present a draconian punishment to the recipient.
A recent case in the First-tier Tribunal, Jeffrey Williams v HMRC [2015] UKFTT 0330 (TC), has considered challenges to this approach. The primary argument is based on the premise that excise duty is a tax on consumption; however, when HMRC has seized and destroyed goods, it has also destroyed any possibility of those goods being consumed. It was also argued that it was disproportionate to attempt to seize the goods and assess for the excise duty and penalty.
In this appeal, Mr Williams was a haulier who had been tasked with collecting goods from a warehouse in France. He knew that he was carrying alcohol and had been given what appeared to be the correct paperwork. However, he was stopped at the border and his load did not match that paperwork. His appeal had a variety of bases, including the analysis in Taylor and Wood [2013] EWCA 1151 that a haulier who was innocent of the attempt to smuggle goods in the UK was not ‘holding’ the goods in the eyes of the law.
If upheld, he could not be the person liable for excise duty under reg 13 of The Excise Goods (Holding, Movement and Duty Point) Regulations, SI 2010/593, nor for a wrongdoing penalty under FA 2008 Sch 41. The tribunal ultimately agreed that Mr Williams was innocent and therefore did not need to consider all the remaining challenges to HMRC’s decision to assess for excise duty or for the wrongdoing penalty.
Despite this, Judge Walters saw fit to set out the bones of the argument (paras 106–115). While no comment was made on whether excise duty could be charged if the goods were destroyed, the tribunal accepted that the UK had not fully implemented Directive 2008/118/EC. Judge Walters felt that while reg 21 had enacted part of art 37, which dealt with the total destruction or irretrievable loss of excise goods, it did not deal with events which would cause an excise duty liability under reg 13. As HMRC had assessed for the duty under reg 13 but did not sufficiently deal with this aspect of the appeal, further submissions would have been needed for a final decision.
Importantly, the tribunal has taken these submissions so seriously, that in three separate applications by HMRC to strike out smaller appeals, those applications were refused and the appellant was informed about the arguments raised in Williams. They were then invited to consider amendments to their grounds of appeal and pursue the arguments themselves. These appeals were James Murray [2015] UKFTT 0371, Charles Fleming [2015] UKFTT 0362 and Marcin Staniszewski [2015] UKFTT 0349. It is now just a matter of time before the tribunal considers this argument in more detail, and we can only hope that the next appellant to raise this is properly represented so that the point can be done justice.
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Williams and excise duty assessments
Excise duty loss is a particular concern of HMRC at present. Its mid-point estimate of the excise duty lost each year is £1.3m. In order to combat this, HMRC and the UK Border Force take a firm stance where irregularities are discovered. Whenever it finds non-duty paid alcohol, whether at the border or from UK premises, it will usually seize that alcohol, raise an assessment for excise duty and impose a wrongdoing penalty based on the lost revenue.
This triple whammy of measures is most likely intended to have a strong deterrent effect. However, while each measure alone has previously been upheld as legal and proportionate, all three together present a draconian punishment to the recipient.
A recent case in the First-tier Tribunal, Jeffrey Williams v HMRC [2015] UKFTT 0330 (TC), has considered challenges to this approach. The primary argument is based on the premise that excise duty is a tax on consumption; however, when HMRC has seized and destroyed goods, it has also destroyed any possibility of those goods being consumed. It was also argued that it was disproportionate to attempt to seize the goods and assess for the excise duty and penalty.
In this appeal, Mr Williams was a haulier who had been tasked with collecting goods from a warehouse in France. He knew that he was carrying alcohol and had been given what appeared to be the correct paperwork. However, he was stopped at the border and his load did not match that paperwork. His appeal had a variety of bases, including the analysis in Taylor and Wood [2013] EWCA 1151 that a haulier who was innocent of the attempt to smuggle goods in the UK was not ‘holding’ the goods in the eyes of the law.
If upheld, he could not be the person liable for excise duty under reg 13 of The Excise Goods (Holding, Movement and Duty Point) Regulations, SI 2010/593, nor for a wrongdoing penalty under FA 2008 Sch 41. The tribunal ultimately agreed that Mr Williams was innocent and therefore did not need to consider all the remaining challenges to HMRC’s decision to assess for excise duty or for the wrongdoing penalty.
Despite this, Judge Walters saw fit to set out the bones of the argument (paras 106–115). While no comment was made on whether excise duty could be charged if the goods were destroyed, the tribunal accepted that the UK had not fully implemented Directive 2008/118/EC. Judge Walters felt that while reg 21 had enacted part of art 37, which dealt with the total destruction or irretrievable loss of excise goods, it did not deal with events which would cause an excise duty liability under reg 13. As HMRC had assessed for the duty under reg 13 but did not sufficiently deal with this aspect of the appeal, further submissions would have been needed for a final decision.
Importantly, the tribunal has taken these submissions so seriously, that in three separate applications by HMRC to strike out smaller appeals, those applications were refused and the appellant was informed about the arguments raised in Williams. They were then invited to consider amendments to their grounds of appeal and pursue the arguments themselves. These appeals were James Murray [2015] UKFTT 0371, Charles Fleming [2015] UKFTT 0362 and Marcin Staniszewski [2015] UKFTT 0349. It is now just a matter of time before the tribunal considers this argument in more detail, and we can only hope that the next appellant to raise this is properly represented so that the point can be done justice.
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