Judgment summary
This appeal concerned excise duty assessments of £32,649 and £36,632 and excise wrongdoing penalties of £12,569 and £14,103 raised against Kearney Transport Limited following the seizure of two trailers found to contain palletised beer rather than the declared cargo of peat (1).
The Tribunal found that HMRC had established, on the balance of probabilities, that the appellant company was the entity 'holding' the goods for the purposes of the relevant excise legislation, and that the appellant's behaviour was deliberate, resulting in the assessments and penalties being upheld in full (28, 29, 31, 33).
Background
On 27 July 2023, two vehicles belonging to the appellant company were stopped at a ferry terminal for fuel testing under regulation 47(3) of the Hydrocarbon Oils Regulations 1976 (2). The drivers told officers the trailers contained peat and produced paperwork referring to 'bulk peat shrub mix', but a search revealed approximately 22,896 litres of beer in one trailer and approximately 25,956 litres in the other (2).
Officers considered the beer was being held outside a duty-suspension arrangement with UK excise duty unpaid, and seized the goods, vehicles and trailers, issuing seizure information notices to the drivers (3).
HMRC's case was that an excise duty point arose under regulations 5 and 6(1)(b) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010, and that the appellant company was 'holding' the goods under regulation 10(1), making it liable for the duty (4). Following enquiries, including correspondence with the drivers, the appellant company, and the consignor and consignee, and after the appellant company asserted that an Irish company, Legnakelly Transport Ltd, was responsible for the movement, HMRC wrote to Legnakelly on 14 March 2024 but received no response (5).
HMRC issued a pre-assessment letter on 22 April 2024 and then issued the duty assessments and penalties under appeal on 4 June 2024 (6). The penalties were imposed under paragraph 4(1) of Schedule 41 Finance Act 2008, HMRC having concluded the conduct was deliberate with prompted disclosure (7).
Core dispute
The appellant company's case was that it was not liable for the duty assessments or penalties because it was not the person holding the goods at the material time, contending that an arrangement existed whereby its vehicles and drivers were being used by Legnakelly Transport Ltd while the appellant's directors were on holiday, so that responsibility rested with Legnakelly rather than the appellant company (8).
There was no dispute as to the seizure of the goods, the quantities discovered, the amount of duty assessed, or the calculations underlying the assessments and penalties (9). The principal issue was whether HMRC had established that the appellant company was the person holding the goods, or otherwise liable, for the purposes of regulations 6 and 10 of the HMDP Regulations and paragraph 4 of Schedule 41 Finance Act 2008 (9).
Court findings
The Tribunal noted that the burden of proving the appellant was 'holding' the goods rested on HMRC, to the civil standard of balance of probabilities (10). It heard evidence from Mr Kearney, a director of the appellant company, and two HMRC officers (11).
Mr Kearney's evidence was that Legnakelly had responsibility for the movement under an informal leasing arrangement, but Legnakelly failed to respond to HMRC's enquiries and the appellant company did not obtain witness evidence from Legnakelly (12). The only evidence supporting the arrangement was Mr Kearney's own evidence and a small number of invoices (12).
The Tribunal found the invoices inconsistent and noted that Mr Kearney could not explain the inconsistencies (15, 18). A further invoice, differing in format and customer number from the others, dated for periods overlapping the directors' holiday, was also unexplained (17-19). There was no evidence of payment for this invoice (19).
The Tribunal rejected submissions that the nature of the trailers (described as 'tipper' trailers) indicated driver knowledge of the true cargo, describing this as speculation (22, 23). It also gave no weight to falsified transportation documents, as there was no clear evidence as to who produced them and it was not put to Mr Kearney that he had done so (24).
The Tribunal found that the drivers were the appellant company's employees and had stated that they received instructions for the loads from one of the appellant company's directors, with no evidence that the drivers were taking instructions from Legnakelly (25). The directors' absence abroad at the time of the seizure was not considered inconsistent with this, since instructions could have been given before departure or by telephone (26).
The Tribunal concluded that the inconsistent invoices, the limited enquiries made of Legnakelly by Mr Kearney despite the substantial sums at stake, and the lack of satisfactory evidence of a transfer of responsibility, meant it was more likely than not that the appellant company was responsible for the transportation of the goods (27). Standing back, the Tribunal was satisfied that HMRC had established that the appellant company had possession and control of the goods and was the entity physically holding them (28).
On penalties, the Tribunal found the behaviour deliberate because the appellant company had possession and control of the goods and had attempted to divert responsibility to a third party with no credible evidence (31). The amount of the penalties was not disputed and the Tribunal saw no reason to alter them (32).
Outcome
The appeal was dismissed and the duty assessments and penalties were upheld in full (33). The Tribunal found that the appellant company was holding the excise goods at the relevant time and was liable to pay the duty arising at the duty point, and was also liable to the excise wrongdoing penalties on the basis that its behaviour was deliberate (29, 31).
Major issues / areas of contention
- Whether the appellant company was the person 'holding' the goods for the purposes of regulation 10 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (10).
- Whether HMRC had established an excise duty point under regulations 5 and 6(1)(b) of the HMDP Regulations (4).
- Whether responsibility for the movement of goods rested with the appellant company or with a third party, Legnakelly Transport Ltd, under an alleged informal leasing arrangement (8, 12).
- Whether the appellant company's behaviour leading to the unpaid duty was deliberate for the purposes of paragraph 4(1) of Schedule 41 Finance Act 2008 (30, 31).
- The evidential weight to be given to inconsistent invoices, falsified transportation documents, and the drivers' statements as to who gave instructions for the movements (15-27).