[2009] UKFTT 254 (TC)

TC00202

Appeal number LON/2008/8038

EXCISE DUTY -  vehicle on permanent loan to friend of appellant - friend brought in large quantities of tobacco - deemed forfeiture of tobacco and vehicle - whether non-restoration of vehicle reasonable - exceptional hardship for appellant  - appeal allowed - fresh review ordered

FIRST-TIER TRIBUNAL

TAX

                                           JOANNE MATTHEWS                          Appellant

                                                                      - and -

                                 THE COMMISSIONERS FOR HER MAJESTY’S

                                     REVENUE AND CUSTOMS (Excise Duties)  Respondents

                                                TRIBUNAL: Nicholas Aleksander (Tribunal Judge)

                                                                        Helen Myerscough

Sitting in public in London on 8 September 2009

The Appellant in person

R Jones of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2009

DECISION

1.     The Appellant, Miss Joanne Matthews, appeals against the review by Mrs Deborah Hodge (an officer of HM Revenue and Customs) contained in a letter dated 8 April 2008, by which she confirmed an earlier decision dated 10 March 2008 refusing to return a vehicle seized at Dover on 24 January 2008.

2.     We heard evidence from Miss Matthews, from her friend Mrs Tina Heath, and from Mrs Hodge.  We also had a bundle of documents.

Background Facts

3.     Mrs Heath is addicted to gambling.  As a result she is unable to obtain credit.  Miss Matthews and Mrs Heath are best friends.  In December 2006 Mrs Heath persuaded Miss Matthews to lend her name to a hire-purchase agreement, to enable Mrs Heath to acquire a car (registration EO54CBF).  It was agreed between them that Miss Matthews would enter into the hire-purchase agreement with the finance company (RFS Limited), but that the car would be registered in Mrs Heath's name with the DVLA, Mrs Heath would be responsible for insuring the car, and Mrs Heath would "help out" with the finance costs.

4.     On 24 January 2008, Mrs Heath travelled to the continent in the car with her then boyfriend.  They were stopped at Dover by Customs.  They were both interviewed, and it was established that the car had travelled four times to the continent in eight days, and on this trip alone they had purchased 40kg of hand rolling tobacco.  The Customs officer was satisfied that the tobacco was held for a commercial purpose and therefore seized it under section 139(1) Customs and Excise Management Act 1979 ("CEMA") as being liable to forfeiture.  In addition some cigarettes were seized because they were mixed/packed/found with goods liable to forfeiture.  The car was seized under section 139(1) as being liable to forfeiture under section 141(1)(a) CEMA because it was used to transport goods liable to forfeiture.

5.     As neither Mrs Heath nor Miss Matthews challenged the seizure of the tobacco and the vehicle in condemnation proceedings, the tobacco and the vehicle were therefore deemed condemned under paragraph 5, Schedule 3, CEMA.  On 28 January 2008 and on 1 February 2008 Mrs Heath wrote to HMRC in the name of Miss Matthews requesting restoration of the vehicle (but not the tobacco), which request was refused by letter dated 10 March 2008.  On 11 March 2008, Mrs Heath wrote in the name of Miss Matthews requesting a review of that decision.

HMRC Review

6.     Mrs Hodge undertook the review on behalf of HMRC, and her decision was communicated to Miss Matthews in her letter dated 8 April 2008.  She decided not to restore the vehicle.  Miss Matthews now appeals against that decision.

7.     Our jurisdiction in appeals of this nature is limited. Under section 16, Finance Act 1994 we cannot just allow the appeal.  We can only do one or more of the things mentioned in section 16(4), and then only if we are satisfied that the disputed decision is unreasonable.  The three things are: (a) to direct that the disputed decision ceases to have effect; (b) to require HMRC to conduct another review in accordance with any directions that we may give; and (c) to declare the decision to have been unreasonable.

8.     In reaching her decision, Mrs Hodge took into account the following principal factors:

(1)  Mrs Heath did not claim that the tobacco was to be passed to others on a "not for profit" basis or for own consumption, Mrs Hodge therefore concluded that the tobacco was imported with a view to resale at a profit.  In these circumstances HMRC's normal policy is not to restore the vehicle.

(2)  For first offences involving small quantities of excise goods, HMRC will consider restoring the vehicle.  However as 40kg of tobacco is not "small", she did not take account of this factor.

(3)  The correspondence relating to the restoration was (with Miss Matthew's permission) conducted by Mrs Heath in the name of Miss Matthews.  We deal with this further below.  HMRC were asked to restore the vehicle to Mrs Heath on the grounds that she (Mrs Heath) would suffer hardship without a car - she needed the car to take her children to school and to take a disabled relative shopping.   Where a vehicle is owned by a third party, and the third party is innocent of and blameless for the smuggling attempt, then the policy of HMRC is to consider restoring the car - however restoration is normally refused if it would be tantamount to restoring the car to the person responsible for the smuggling attempt.  In this case the request was to restore the car with a view to it being returned to Mrs Heath.  Mrs Hodge concluded that to restore it in these circumstances was tantamount to restoring it to Mrs Heath, the person involved in the smuggling attempt.

(4)  Mrs Hodge considered the degree of hardship that would be suffered as a result of her refusal to restore the car.  She considered that Miss Matthews would not suffer any hardship as she has her own vehicle and does not use the car.  Although Mrs Heath would be inconvenienced as a result of the seizure of the car, the hardship suffered would not be disproportionate in all the circumstances.  Any financial consequences of the non-restoration were an issue to be resolved between Miss Matthews and Mrs Heath.

9.     For these reasons, Mrs Hodge decided to confirm the original decision not to restore the car.

10.   During the course of evidence before us, we learned that although various letters to HMRC purported to be signed by Miss Matthews, they were in fact signed by Mrs Heath.  When Miss Matthews learned that the car had been seized, she told Mrs Heath to get the car back – and left Mrs Heath to deal with the restoration process – including writing the letters on her behalf.  Although Miss Matthews had authorised Mrs Heath to sign letters in her (Miss Matthews' name), Mrs Heath did not always consult Miss Matthews about the content of the correspondence in advance of it being sent. 

11.  It also transpired during the course of evidence that since the seizure, Mrs Heath had been declared bankrupt, and had served a sentence of imprisonment for offences related to her gambling.  Since the seizure, no instalment payments have been made to the finance company – Mrs Heath has been unable to pay anything to Miss Matthews, and Miss Matthews has insufficient income to be able to pay the instalments from her own resources.  The finance company is now taking action to enforce the finance agreement.

12.  It is clear that Miss Matthews' only concern is (and has always been) to have the car restored so that it can be returned to the finance company.  Although this will not extinguish the debt that she recognises that she owes to the finance company, it will significantly reduce it.  She is understandably concerned about her own credit record, and does not want to be "blacklisted" as a result of the defaults in payment.

13.  In her review letter, Mrs Hodge stated that any financial consequences of the non-restoration were an issue to be resolved between Miss Matthews and Mrs Heath. Mrs Hodge therefore paid no regard to the financial impact non-restoration would have on Miss Matthews in reaching her decision.  We consider that Miss Matthews would suffer exceptional hardship if the car was not restored to her.  She is entirely innocent of the smuggling attempt, and will suffer serious financial consequences if the car is not restored to her.

14.  We find that the impact of the non-restoration of the vehicle on Miss Matthews is a relevant consideration, which would constitute exceptional hardship, in particular it would frustrate her intention to return the vehicle to the finance company to reduce the debt that she owes to them.  We note that if the vehicle is returned to the finance company, restoration to Miss Matthews would not be tantamount to restoration to the offender.

15.  We, therefore, conclude that Mrs Hodge's decision of 8 April 2008 was unreasonably arrived at within the meaning of section 16(4) of the Finance Act 1994, in so far as it failed to have full regard to the facts of exceptional hardship in relation to Miss Matthews.

 Decision

16.  We are not entitled to order HMRC to restore the vehicle to Miss Matthews. In exercise of our powers on appeal under section 16(4), Finance Act 1994 we make the following orders:

(1)  The decision to refuse restoration of the vehicle shall cease to have effect from the date of release of this decision.

(2)  HMRC shall conduct a further review of the decision not to restore the vehicle and serve the same on both Miss Matthews and the Tribunal within 30 days of release of this Decision.

(3)  An Officer not previously involved with the case shall conduct the further review.

(4)  The further review shall be on the basis of the Tribunal's findings of fact set out above.

(5)   The Review Officer shall take account of any further material or representations made by the Appellant within 14 days from release of this decision. The representations shall be made to HM Revenue and Customs Review Officers, Crownhill Cou rt, Tailyour Road, Crownhill, Plymouth, PL6 5 BZ.

(6)  The Appellant will have a further right of appeal to the Tribunal if dissatisfied with the outcome of the further review.

17.  The result is that a further Review having been directed under section 16(4)(b) the appeal is allowed.  We make no order for costs.

18.  HMRC have a right to apply for permission to appeal against this decision.  The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this Decision Notice.

Nicholas Aleksander

TRIBUNAL JUDGE

RELEASE DATE: 5 October 2009