Appeal reference: TC/2022/13686 |
TAX CHAMBER
Judgment Date: 16 May 2025 |
B e f o r e :
TRIBUNAL MEMBER MICHAEL BELL
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RYAN HOUGHTON |
Appellant |
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- and - |
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THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS |
Respondents |
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For the Appellant: Mr Houghton, in person (did not attend)
For the Respondents: Ms Truelove, litigator of HM Revenue and Customs' Solicitor's Office
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Crown Copyright ©
CIVIL EVASION PENALTY – seizure of tobacco – appellant liable to penalty – reduction of penalty for disclosure and co-operation – reduction increased – appeal allowed in part
Introduction
This appeal is against a decision of the Commissioners for His Majesty's Revenue and Custom (HMRC) to issue Mr Houghton (the Appellant) with a civil evasion penalty of £11,252.00 (the Penalty), issued on 6 September 2022, pursuant to section 8(1) Finance Act 1994 (FA 1994) and section 25(1) Finance Act 2003 (FA 2003).
The Penalty was issued in respect of tobacco seized from the Appellant on two occasions, as follows:
The first seizure on 27 August 2021 – 34,000 L&B cigarettes, 3kgs of Golden Virginia hand rolling tobacco (HRT) and 1.5kgs of Amber Leaf HRT were seized from the Appellant at Manchester Airport by UK Border Force (UKBF) Officers.
The second seizure on 8 October 2021 – 5,800 Great & British cigarettes were seized from the Appellant at Manchester Airport by UKBF Officers.
The Appellant resides in Dubai. He did not attend this hearing. We are satisfied that he is aware of this hearing and that he has had notice of it for some time. We are satisfied that it would be in the interests of justice for this hearing to proceed in his absence, for the following reasons:
This hearing has been listed for some time. The notice of hearing is dated 2 September 2024. A copy of the notice of hearing was issued to both parties on or shortly after that date.
The Appellant has been in email contact with the Tribunal and HMRC since at least 2023. On 18 September 2023, the Tribunal sent an email to the Appellant explaining that a party may only participate in a video hearing from abroad if the authorities in the relevant country (e.g. Dubai) have given permission.
On 27 March 2024, the Tribunal (Tribunal Judge Vos) sent a letter to the Appellant, explaining in detail the process for requesting permission to access the hearing remotely. The letter sets out in detail the steps to be undertaken by the Appellant if he wished to request permission from the authorities in Dubai to attend the hearing remotely. The letter also explained that if the Appellant was not able or willing to come to the UK for an attended hearing, and did not wish to seek permission to participate in the hearing by video from Dubai, that an alternative would be to ask the Tribunal to go ahead with the hearing in his absence on the basis of written representations from the Appellant as to why his appeal should succeed. The Appellant was told however that this alternative may be less effective than if he were to appear at a hearing in person or to attend remotely.
The letter of 27 March 2024 gave the Appellant 14 days to decide how he wished to proceed, with the options being to attend a hearing in the UK (with dates of availability to be provided to the Tribunal), to seek permission from the authorities to participate in the hearing by video, or to file written submissions with the Tribunal proceeding with the hearing in his absence. In default of a response within 14 days, the Tribunal would arrange a hearing date and it would then be up to the Appellant as to whether he makes arrangements to attend the hearing or to appoint someone to attend on his behalf.
On 19 June 2024, the Appellant emails the Tribunal and stated that he did not see the letter of 27 March 2024, but that was "not to say I did not receive it but may have deleted it by mistake." He goes on to state that he had read it, he would like to attend in person as he was worried about contacting the Dubai authorities, planned to return to England in December around Christmas time, and asked whether it would be possible to schedule a hearing around then.
As stated above, the notice of hearing is dated 2 September 2024. The notice makes clear that the appeal would be listed for a face-to-face hearing on 13 January 2025, at Taylor House. No response was received from the Appellant to this notice.
On 9 January 2025, HMRC emails the Appellant a copy of the supplementary authorities bundle. On 10 January 2025, the Appellant replies to say that he was living in Dubai and would be unable to travel for the hearing. He states that the "date has changed several times. Is this the final one" and "it was mentioned I can access remotely but need permission to do so…can you explain the process."
HMRC responded promptly to the Appellant on 10 January 2025 (copying in the Tribunal), reminding the Appellant that the Tribunal had written to him on 27 March 2024 explaining in detail the process for requesting permission to join the hearing remotely, that the hearing date had not changed several times and that this was the only hearing listed, and that adequate notice had been given to both parties of this hearing. The Appellant was advised that if he chose not to attend the hearing on 13 January 2025, the Tribunal might proceed in his absence.
HMRC informed us at the outset of the hearing that no further communication had been received from the Appellant in response to their email of 10 January 2025. The Tribunal has also not received any further communication from the Appellant.
It is HMRC's case that the hearing should proceed in the Appellant's absence, given that he had had sufficient notice of the hearing (since September 2024) and had been given the option to seek permission to attend remotely, but had chosen not to. We agree.
The Appellant has not made any application to the Tribunal to adjourn. His email of 10 January 2025 was sent to HMRC and simply states that he lived in Dubai, and was unable to travel. There is no application to adjourn.
Background
The background has been extensively set out in the Appellant's notice of appeal dated 24 November 2022 and in HMRC's statement of case dated 20 February 2023. They are also set out in the witness statement of UKBF Officer David Small dated 28 September 2023, and in the witness statement of HMRC Officer Lee Crozier dated 4 October 2023. We have considered those witness statements, and heard oral evidence from Officer Small and Officer Crozier.
The first seizure – 27 August 2021
In summary, on 27 August 2021, the Appellant arrived at Manchester Airport having travelled from Dubai. He chose to exit customs controls through the green 'nothing to declare' channel, indicating that he had no excise goods to declare. The Appellant was intercepted by UKBF Officer Small.
During questioning, the Appellant confirmed to Officer Small that all bags belonged to him, that he had packed the bags himself, and that no one had given him anything to carry on their behalf. He also explained that he had been made redundant and was moving back to the UK. When asked by Officer Small what was in the bags the Appellant replied, "my house goods and clothes and boxes". When asked, however, if he was carrying any cigarettes or tobacco he then replied, "yes, the bags are full".
Officer Small asked the Appellant if he knew there was an allowance for tobacco goods, and he replied "No, I asked and they said I could bring as much as I wanted". Officer Small conducted a search of the Appellant's baggage, which was found to contain 34,000 L&B cigarettes, 3kgs of Golden Virginia HRT and 1.5kgs of Amber Leaf HRT which were seized as they were deemed to be for a commercial purpose.
The Appellant was issued with Form BOR 156 (Seizure Information Notice), Form BOR 162 (Warning Letter About Seized Goods), which states that the seizure was made without prejudice to any further action that may be taken by HMRC, and Public Notices: (1) "Travelling to the UK- what you can bring in, what you can't bring in, what you must declare" and 12A "What you can do if things are seized by HM Revenue and Customs". The Appellant duly signed form BOR156. The Appellant duly signed both forms.
The second seizure – 8 October 2021
On 8 October 2021, the Appellant arrived at Manchester Airport again having travelled from Dubai. The Appellant approached the customs red point and was questioned by UKBF Officer Haigh. The Appellant told Officer Haigh that he had some extra cigarettes and when Officer Haigh asked how many, the Appellant replied, "I've got 10 boxes".
Officer Haigh advised the Appellant that he was allowed 200 cigarettes and he would have to pay the duty on the excess, which was approximately £80 to £100. The Appellant replied, "I didn't know it was that much. I can't pay that". Officer Haigh then explained to the Appellant that he could keep his allowance of 200 cigarettes and pay the duty on the rest, or they would be seized.
The Appellant was told to bring his bags into the channel to be searched. At this point, the Appellant told Officer Haigh, "I've got more than 10 cartons. I've got my mates as well". The Appellant was asked how many people he was travelling with. The Appellant stated he was travelling with 2 others and that they had already gone through.
Officer Haigh searched the Appellant's baggage, which was found to contain 5,800 Great & British cigarettes, which were seized. The Appellant was given 200 cigarettes as his allowance.
The Appellant was issued with Form BOR 156 (Seizure Information Notice) and Public Notices: (1) "Travelling to the UK- what you can bring in, what you can't bring in, what you must declare" and 12A "What you can do if things are seized by HM Revenue and Customs". The Appellant duly signed form BOR156.
As respects both seizures, Public Notice 12A explains that any claim that the goods were not liable to seizure should be appealed to the Magistrates' Court within 30 days of the seizure. The Appellant did not challenge the seizure of the goods within the time limits advised (or at all). As such, the goods were deemed to be liable to forfeiture.
Subsequent events
The matter was referred to HMRC for consideration of further action due to possible conduct involving dishonesty for the purposes of evading Customs and Excise duty.
On 14 June 2022, HMRC Officer Crozier wrote to the Appellant to inform him of HMRC's enquiry and invited the Appellant to disclose any relevant information or documents in relation to the seizures. The letter explained that co-operation with the enquiry could significantly reduce any penalties that may become due. Importantly, the letter also set out the specific matters which the Appellant was invited to respond to, and in respect of which co-operation was sought.
A response was requested within 30 days of the date of the letter (by 14 July 2022). Public Notices 300 and 160, and factsheet CC/FS9 were also issued at the same time.
On 29 June 2022, Officer Crozier wrote to the Appellant reminding him to provide a response by 14 July 2022. The reminder letter advised the Appellant that if he did not reply by this date, the HMRC would take this as his intention not to help them with their enquiry.
No response received from the Appellant to Officer Crozier's letters of 14 June 2022 and 29 June 2022.
On 9 August 2022, a Civil Evasion Penalty - Notice of Assessment was issued to the Appellant by Officer Crozier. In that letter, Officer Crozier advised the Appellant that his actions on 27 August 2021 and again on 8 October 2021 were dishonest, and therefore a penalty was appropriate. According to the letter, the total revenue evaded was £18,756.00.
The penalty issued was in the sum £18,756.00 (consisting of an excise civil evasion penalty and a customs civil evasion penalty). No reduction was given for disclosure and co-operation.
On 18 August 2022, Officer Crozier received an email from the Appellant in which he provided some information in response to HMRC's initial letter of 14 June 2022. The email reads as follows:
"Good Afternoon Mr Lee Crozier, I recently visited the UK and there were letters at my mum's house regarding civil evasion penalty.
Please see details below:
Your Ref ISBC/C&P/S1250/2061914/PDA
Case Ref CFS-2061914
This is the first I am hearing anything about this since I had cigarettes ceased on 27th August 2021. I have been a resident in Dubai for two years and only return to the UK on holiday.
Just so you have my travel details I returned to the UK on 29th July 2022 and returned to Dubai 13th August. Prior to this the last time I was in the UK was February for my daughter birthday.
When I returned home on the 27th August I asked at Dubai airport how many cigarettes I can purchase and was told as many as I wanted. I tried to save my family members some money but was explained to me by your officers that I am only able to carry 200 cigarettes back and they confiscated them which I understood I was wrong.
In the letter it mentions the 8th October 2021, this time I never went through nothing to declare but went and declared the cigarettes as my understanding was I would pay tax of 20% on the cigarettes so I thought this would be cheaper than my mum purchasing them back home. When I discussed this with your officer there was no saving and I had insufficient funds on me to cover the cigarettes so I had to leave them there. It says I under declared how many I had but there was confusion because he asked me about how many I had in my bag that was on the counter I told him but I also had another bag with cigarettes in on my back and when we went into the back I told him the total as he asked how many I have in total.
I do not know where to go from here and will have to seek advice but thought would be beneficial to acknowledge your letter first. I do not have that sort of money or anywhere near that to pay this fine. I have recently taken a bank loan of over 350000 AED to pay debts after Covid paying this back consumes half my wages. I understand I was wrong after speaking to your officers in August but I did declare the cigarettes in October.
Do not know how to end this or what else to say and feel like I am just whaffling now so will end this here.
Look forward to your response."
On 6 September 2022, Officer Crozier issued the Appellant with a revised civil evasion penalty - notice of assessment for £11,252.00 (the Penalty). This consisted of a customs civil evasion penalty of £2,811.00 and excise civil evasion penalty of £8,441.00.
The letter also informed the Appellant that he has been awarded an overall reduction of 40%, consisting of 20% mitigation for co-operation and 20% mitigation for disclosure. A duty schedule and HMRC1 factsheet was attached.
On 21 September 2022, the Appellant sent an email to Officer Crozier disagreeing with the penalty notice (for £11,252.00) and stated that he wished to appeal. The email reads as follows:
"Dear Mr Crozier,
Sorry for the late reply. I missed your email.
I feel this is really harsh as I could not have cooperated more than I did as I contacted you once I was aware of the penalty. I explained I do not live in the UK and my travel dates. I can provide evidence of this if you do not already have it. As explained in the incident on the 8th October I went to the station to declare my goods. Both times the items were seized, yet the fine is over 11000 pound.
I would like to appeal this as I feel it is excessive.
I really do not understand how you can purchase items from a shop when they know your destination, there are no signs to say you can only purchase a certain amount. They actively encourage you to buy more and you get fined over 11000 pounds. I am not the brightest but it really makes no sense.
Please stop writing to my Mothers address in the UK. It's a waste of time. I am happy to receive contact via email and have no plans to return to the UK any time soon, when I do return I will not stay there.
Please let me know what I need to do to appeal."
Officer Crozier responded to the Appellant on the same day. The Appellant was advised of his options in respect of appealing the decision and the steps required to be taken to redirect correspondence from his mother's address.
Officer Crozier also explained to the Appellant that when purchasing goods from duty-free shops, it is not the responsibility of staff to make travellers aware of the restrictions for their destination. While there may be no limit on the quantity of goods an individual can buy, the responsibility lies on the traveller to ensure they are aware of the customs restrictions for their destination country (in this case, the UK).
On 5 October 2022, the Appellant wrote to Officer Crozier requesting an independent review of his decision.
On 3 November 2022, Officer Baxter of HMRC's Appeals and Reviews Team wrote to the Appellant, upholding Officer Crozier's decision to issue the Penalty (in the sum of £11,252.00).
On 24 November 2022, the Appellant sent a notice of appeal to the Tribunal, which was acknowledged by the Tribunal on 18 December 2022. The notice of appeal states as follows:
"To whom it may concern,
I made contact once I was aware of the notice as I no longer live in the UK and return very little. I contacted the case worker asap once I was aware and do not feel this has been fully taken into consideration. The letters written to me calling me dishonest and it is unlikely I can honestly believe it would be within the law. How can…(the document cuts off)…
…how many I can carry and was told by the shop steward as many as I want. The second time I went to the counter to declare them. He picked up one bag and asked me how many I had in the bag. I told him and informed him I had more in my other bag. Both times I didn't keep the cigarettes. I didn't complain I accepted ok I am wrong but them (sic) to find me a huge amount after I don't understand. I bought them from a shop.
I am saving up for legal representation regarding this because it is well above my skill set. I want to comply with the dates and realise time is running out. I will contract representation for prices and go from there. Thank you for taking the time to read this and I await your reply.
Kind reagrds (sic)
Ryan"
The Legal Framework
The issues which we need to determine are as follows:
Whether the Appellant attempted to evade payment of UK excise duty on 34,000 cigarettes and 4.5kg of HRT on 27 August 2021 by conduct involving dishonesty.
Whether the Appellant made an under declaration of excise goods in an attempt to evade payment of UK excise duty on 5,800 cigarettes on 8 October 2021 by conduct involving dishonesty.
Whether the Appellant is liable to a civil evasion penalty in sum of £11,252.00 (the Penalty).
The burden of proof in establishing conduct involving dishonesty lies with HMRC pursuant to s16(6) of FA 1994 in respect of excise duty and s33(7)(a) of FA 2003 in respect of customs duty and import VAT.
The test to be applied when establishing dishonesty is set out in Ivey v Genting Casinos (UK) Limited t/a Crockfords [2017] UKSC 67:
"62. Dishonesty is by no means confined to the criminal law. Civil actions may also frequently raise the question whether an action was honest or dishonest…Successive cases at the highest level have decided that the test of dishonesty is objective. After some hesitation in Twinsectra Ltd v Yardley [2002] UKHL 12 ; [2002] 2 AC 164, the law is settled on the objective test set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378: see Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37; [2006] 1 WLR 1476, Abou-Rahmah v Abacha [2006] EWCA Civ 1492; [2007] Bus LR 220; [2007] 1 Lloyd's Rep 115 and Starglade Properties Ltd v Nash [2010] EWCA Civ 1314 ; [2011] Lloyd's Rep FC 102. The test now clearly established was explained thus in Barlow Clowes by Lord Hoffmann, at pp 1479-1480, who had been a party also to Twinsectra:
"Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant's mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards. The Court of Appeal held this to be a correct state of the law and their Lordships agree."
63. Although the House of Lords and Privy Council were careful in these cases to confine their decisions to civil cases, there can be no logical or principled basis for the meaning of dishonesty (as distinct from the standards of proof by which it must be established) to differ according to whether it arises in a civil action or a criminal prosecution. Dishonesty is a simple, if occasionally imprecise, English word. It would be an affront to the law if its meaning differed according to the kind of proceedings in which it arose.
74…The test of dishonesty is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan and by Lord Hoffmann in Barlow Clowes: see para 62 above. When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest."
The definition of dishonesty as set out in Ivey applies equally to civil and criminal proceedings.
It is therefore necessary, when considering the question of dishonesty, for one to firstly establish the actual state of the individual's knowledge or belief as to the facts. Once his actual state of mind as to knowledge or belief as to the facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.
The standard of proof is the civil standard of the balance of probabilities: Bintu Binette Krubally N'diaye [2015] UKFTT 380.
The applicable legislation in relation to penalties for evasion of excise duty, seizure of goods and the reductions which may apply to penalties are set out in an appendix to this decision (see Appendix A).
Discussion
We have considered all the documentary evidence in the hearing bundle, including the notice of appeal and enclosures, and the witness statements of Officer Small and Officer Crozier. Both Officer Small and Officer Crozier gave oral evidence to the Tribunal. We did not hear from the Appellant, who did not attend this hearing, but have had regard to all his documents, which in addition to his notice of appeal, included his emails to HMRC of 18 August 2022 and 21 September 2022.
First seizure on 27 August 2021
We find that on 27 August 2021, the Appellant attempted to evade payment of UK excise duty on 34,000 cigarettes and 4.5kg of HRT by conduct involving dishonesty. Our reasons are as follows:
The overall quantity of cigarettes and HRT found in the Appellant's possession on that occasion was considerably in excess (118 times over the limit) of his permitted personal tobacco allowance when travelling to the UK from a third country. The allowance was 200 cigarettes or 250g of tobacco (or a combination thereof, provided that one does not exceed the total tobacco allowance). We find it very unlikely that he believed that he would be permitted to bring such significant quantities of tobacco into the UK without declaring them and having to pay UK excise duty.
A traveller in his position, one which has taken international flights, would have been more likely than not aware that tobacco allowances applied.
Furthermore, we accept that when a traveller arrives at the customs clearance channel within an airport, he or she would have had to pass signage outlining the restrictions and allowances on importing goods, including tobacco, into the UK. If the Appellant had really been unaware of the tobacco allowance, he would have more likely than not been alerted to those allowances as a result of the signage on previous occasions when he travelled to the UK and/or on this occasion.
When Officer Small intercepted the Appellant in the green channel and questioned him as to the contents of his bags, the Appellant initially replied, "my house goods and clothes and boxes". When he was asked whether he had any cigarettes or tobacco, he then said "yes, the bags are full." When the bags were searched, 34,000 cigarettes and 4.5kg of HRT were found. There were no house goods, clothes or boxes. During the hearing, Officer Small was questioned by the Tribunal in relation to this. Officer Small gave sworn evidence that the bags did not contain anything but tobacco, contrary to the Appellant's initial response to the officer when first asked about the contents of his bags. We find that the Appellant sought to mislead Officer Small about the contents of his bags, and that the Appellant did so because he knew that he was carrying tobacco far in excess of his allowance and that by
We find that by walking down the green channel at Manchester Airport, the Appellant was attempting to evade payment of UK excise duty.
We find, in light of all the circumstances and by applying the objective standards of ordinary decent people, that the Appellant's conduct was dishonest.
Second seizure on 8 October 2021
We also find that on 8 October 2021, the Appellant made an under declaration of excise goods in an attempt to evade payment of UK excise duty on 5,800 cigarettes by conduct involving dishonesty. Our reasons are as follows:
Whilst the Appellant entered the red channel, we find that he did not make a full and honest declaration to Officer Haigh. There is no witness statement from Officer Haigh, but his notebook records his conversation with the Appellant and the subsequent search of his bags on 8 October 2021. The notebook records that Officer Haigh asked the Appellant how many cigarettes he had, and the Appellant responding, "I've got 10 boxes." The notebook records that Officer Haigh explained that the allowance was 200 cigarettes and that he could pay the duty on the excess. The Respondent replied to state, "I didn't know it was that much. I can't pay that." It was only after Officer Haigh had asked the Appellant to bring his bags into search area that the Appellant then said, "I've got more than 10 cartons. I've got my mates as well". Those friends had apparently walked through. A search of the Appellant's bags found 5,800 cigarettes, which were seized. We find that it was not until the Appellant realised that his bags would be searched that he disclosed that he was carrying more than 10 boxes. We do not accept the Appellant's explanation in his email of 18 August 2022 that his initial response was only in relation to the cigarettes in the bag that was on the counter. If the Appellant had intended to make an honest declaration of the full amount of tobacco he was carrying, he could and should have done so at the earliest opportunity.
We are reinforced in this view by the fact that there is an inconsistency between the Appellant's assertion to Officer Haigh on 8 October 2021 that he was carrying additional tobacco for his friends, and the Appellant's later emails to HMRC. In none of the Appellant's emails does he refer to carrying any tobacco for his friends. Indeed, in his first email to HMRC of 18 August 2022, he implied that the cigarettes were for his mother (he stated that it would be cheaper than his mum purchasing them back home). There was no mention of carrying tobacco for his friends.
The Appellant would have had a full awareness of the allowances for the importation of tobacco given the recent, previous seizure of tobacco on 27 August 2021. Despite this, the Appellant still gave a false declaration regarding the total amount of tobacco he was carrying. We find that he did this to avoid paying the necessary duties.
We find, in light of all the circumstances and by applying the objective standards of ordinary decent people, that the Appellant's conduct was dishonest.
Whether the Appellant is liable to a civil evasion penalty in sum of £11,252.
The civil evasion penalty amounts to £11,252. This consists of (a) a penalty for 27 August 2021 of £9,794; and (b) a penalty for 8 October 2021 of £1,458.
However, under section 29(1) of the FA 2003 (in respect of customs duty) and s 8(4) of FA 1994 (in respect of excise duty), HMRC, or on appeal, the Tribunal 'may reduce any penalty to such amount (including nil) as they think proper'. Public notice 300 details a maximum of 40% reduction for disclosure and 40% for co-operation. The policy has no statutory force and is not binding on the Tribunal. However, HMRC contend that this policy provides for a consistent approach for the reduction of penalties and should normally be respected.
In this case, HMRC have allowed the Appellant a 20% reduction for disclosure and 20% for co-operation. The letter from Officer Crozier of 6 September 2022, which sets out the revised penalty, refers to the reductions given, but in very brief form. The review conclusion letter of 3 November 2022 does explain these reductions in greater detail, as follows:
"There are two factors determining the level of reduction which I have explained below:
3.1.1 Disclosure
During the investigation an early and truthful admission of the extent of the arrears and why they arose will attract considerable reduction (up to 40 per cent). By the extent of the arrears, we mean what has happened and over what period of time, along with any information about the value involved, rather than the precise quantification. Disclosure forms the first part of the available reduction of any penalty as described in Section 3.2.
3.1.2 Co-operation
You will receive further mitigation (up to 40 per cent) if you:
• attended all the interviews (where necessary)
• provide all information promptly
• answer all questions truthfully
• give the relevant information to establish your true liability
• co-operate until the end of the investigation."
The review letter goes on to state that Officer Crozier had concluded that a 20% reduction for cooperation and a 20% reduction for disclosure should be awarded, and the reasons.
These reasons are mirrored in paragraph 16 of Officer Crozier's statement, which states that in respect of disclosure, he awarded the Appellant mitigation for the following reasons:
According to paragraph 17 of Officer Crozier's statement, the Appellant was not awarded mitigation for disclosure for the following reasons:
Officer Crozier stated that he was not satisfied that the Appellant had provided a truthful or accurate account of the events as there were several discrepancies between the Appellant's conversations with Border Force and the Appellant's later accounts. The officer did not find the Appellant's disclosure to be truthful and concluded that he should therefore only be awarded a 20% reduction for the element of disclosure.
In respect of co-operation, Officer Crozier awarded the Appellant mitigation for the following reasons:
We agree that a 20% reduction for the element of co-operation is appropriate in respect of the penalty assessed for 27 August 2021 and for 8 October 2021.
However, we consider that the appropriate reduction for the element of disclosure should be 25% in respect of the penalty assessed for 27 August 2021, and 30% in respect of the penalty assessed for 8 October 2021.
Firstly, the first two points said to go against mitigation for disclosure in respect of the penalty assessed for 27 August 2021 and for 8 October 2021 are not, in our view, well founded (these two points being that the Appellant did not explain how the attempt was made; and the Appellant did not provide details of the quantities involved). It is clear on both occasions how the attempts were made. It is also clear on both occasions what the quantities involved were.
Furthermore, we consider it relevant, when considering the issue of reduction for disclosure in respect of the penalty assessed for 8 October 2021, that the Appellant had chosen to enter the red lane, and disclosed that he had 10 cartons of cigarettes (2,000 cigarettes out of the 5,800 cigarettes ultimately seized). Although this was not the full extent of the tobacco that he was carrying, it would not be appropriate, in our view, to completely discount the fact that he did enter the red lane and did then disclose a not insignificant proportion of the cigarettes.
Finally, in respect of any inability to pay or insufficiency of funds, pursuant to section 8(5) FA 1994 and section 29(2) and (3)(a) of FA 2003, inability to pay/insufficiency of funds shall not be taken into account when considering whether there should be a reduction in the penalty. Therefore, the Appellant having taken out a bank loan of 350,000 AED to pay debts after Covid which he states consumes half his wages, or any other insufficiency of funds, are not factors which we can take into account.
Conclusion
For the reasons set out above, we would allow the appeal but only to the extent provided above in relation to allowing a 25% (rather than 20%) reduction for the element of disclosure in respect of the penalty assessed for 27 August 2021, and allowing a 30% (rather than 20%) reduction for the element of disclosure in respect of the penalty assessed for 8 October 2021. HMRC should recalculate the total revised level of penalties and write to the Appellant accordingly.
Right to apply for permission to appeal
This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. 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.
Appendix A
Finance Act 1994, Sections 8(1), 8(4) and 8(5)
Penalty for evasion of excise duty
(1)Subject to the following provisions of this section, in any case where—
(a) any person engages in any conduct for the purpose of evading any duty of excise, and
(b) his conduct involves dishonesty (whether or not such as to give rise to any criminal liability), that person shall be liable to a penalty of an amount equal to the amount of duty evaded or, as the case may be, sought to be evaded.
(…)
(4)Where a person is liable to a penalty under this section(a )the Commissioners or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and
(b) an appeal tribunal, on an appeal relating to a penalty reduced by the Commissioners under this subsection, may cancel the whole or any part of the reduction made by the Commissioners.
(5) Neither of the following matters shall be a matter which the Commissioners or any appeal tribunal shall be entitled to take into account in exercising their powers under subsection (4) above, that is to say-
(a) the insufficiency of the funds available to any person for paying any duty of excise or for paying the amount of the penalty;
(b) the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of duty.
45. Finance Act 2003, Sections 25(1), 29(1)(a) and 31
25 Penalty for evasion.
(1)In any case where—
(a)a person engages in any conduct for the purpose of evading any relevant tax or duty, and
(b)his conduct involves dishonesty (whether or not such as to give rise to any criminal liability), that person is liable to a penalty of an amount equal to the amount of the tax or duty evaded or, as the case may be, sought to be evaded. (…)
29 Reduction of penalty under section 25 or 26.
(1)Where a person is liable to a penalty under section 25 or 26—
(a)the Commissioners (whether originally or on review) or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and
(b) the Commissioners on a review, or an appeal tribunal on an appeal, relating to a penalty reduced by the Commissioners under this subsection may cancel the whole or any part of the reduction previously made by the Commissioners. (…)
31 Time limits for demands for penalties
(1) A demand notice may not be given—
(a) in the case of a penalty under section 25, more than 20 years after the conduct giving rise to the liability to the penalty ceased, or
(b) in the case of a penalty under section 26, more than 3 years after the conduct giving rise to the liability to the penalty ceased.
(2) A demand notice may not be given more than 2 years after there has come to the knowledge of the Commissioners evidence of facts sufficient in the opinion of the Commissioners to justify the giving of the demand notice.
(3) A demand notice—
(a) may be given in respect of a penalty to which a person was liable under section 25 or 26 immediately before his death, but
(b) in the case of a penalty to which the deceased was so liable under section 25, may not be given more than 3 years after his death.
Customs and Excise Management Act 1979, Sections 78(3) and 139
78 Customs and excise control of persons entering or leaving the United Kingdom.
(…)
(3) Any person failing to declare any thing or to produce any baggage or thing as required by this section shall be liable on summary conviction to a penalty of three times the value of the thing not declared or of the baggage or thing not produced, as the case may be, or [level 3 on the standard scale], whichever is the greater. (…)
139 Provisions as to detention, seizure and condemnation of goods, etc
(1) Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty's armed forces or coastguard.
(2)Where any thing is seized or detained as liable to forfeiture under the customs and excise Acts by a person other than an officer, that person shall, subject to subsection
(3) below, either—
(a) deliver that thing to the nearest convenient office of customs and excise; or
(b) if such delivery is not practicable, give to the Commissioners at the nearest convenient office of customs and excise notice in writing of the seizure or detention with full particulars of the thing seized or detained.
(3)Where the person seizing or detaining any thing as liable to forfeiture under the customs and excise Acts is a constable and that thing is or may be required for use in connection with any proceedings to be brought otherwise than under those Acts it may, subject to subsection (4) below, be retained in the custody of the police until either those proceedings are completed or it is decided that no such proceedings shall be brought.
(4)The following provisions apply in relation to things retained in the custody of the police by virtue of subsection (3) above, that is to say—
(a)notice in writing of the seizure or detention and of the intention to retain the thing in question in the custody of the police, together with full particulars as to that thing, shall be given to the Commissioners at the nearest convenient office of customs and excise;
(b) Any officer shall be permitted to examine that thing and take account thereof at any time while it remains in the custody of the police;
(c) Nothing in [section 31 of the Police (Northern Ireland) Act 1998] shall apply in relation to that thing.
(5)Subject to subsections (3) and (4) above and to Schedule 3 to this Act, anything seized or detained under the customs and excise Acts shall, pending the determination as to its forfeiture or disposal, be dealt with, and, if condemned or deemed to have been condemned or forfeited, shall be disposed of in such manner as the Commissioners may direct.
(6)Schedule 3 to this Act shall have effect for the purpose of forfeitures, and of proceedings for the condemnation of anything as being forfeited, under the customs and excise Acts.
(7)If any person, not being an officer, by whom anything is seized or detained or who has custody thereof after its seizure or detention, fails to comply with any requirement of this section or with any direction of the Commissioners given thereunder, he shall be liable on summary conviction to a penalty of [level 2 on the standard scale].
(8)Subsections (2) to (7) above shall apply in relation to any dutiable goods seized or detained by any person other than an officer notwithstanding that they were not so seized as liable to forfeiture under the customs and excise Acts.
Travellers' Allowance Order 1994 (as amended by SI 1995/3044, SI 2008/3058 and SI 2009/3172)
1. This Order may be cited as the Travellers Allowances Order 1994 and shall come into force on 1st April 1994.
2. – (1) Subject to the following provisions of this Order a person who has travelled from a third country shall on entering the United Kingdom be relieved from payment of value added tax and excise duty on goods of the descriptions and in the quantities shown in the Schedule to this Order obtained by him in a third country and contained in his personal luggage.
(2) For the purposes of this article—
(a)goods shall be treated as contained in a person's personal luggage where they are carried with or accompanied by the person or, if intended to accompany him, were at the time of his departure for the United Kingdom consigned by him as personal luggage to the transport operator with whom he travelled;
(b) A person shall not be treated as having travelled from a third country by reason only of his having arrived from its territorial waters or air space;
(c) "Third country" -
(i) Shares the definition that applies to that expression for the purposes of Council Directive 2007/74/EC (this is termed "outside country" below) (see both indents of Article 3(1) of the Directive) (value added tax and excise duty exemptions for travellers from outside the Member States of the European Union, etc); but
(ii) It incorporates the definition that applies for the purposes of that Directive to "territory where the Community provisions on VAT or excise duty, or both do not apply" (this is termed "outside territory" below) (see both indents of Article 3(2) of that Directive); but
(iii) Any outside territory where those "Community provisions on VAT" do apply (or where that Directive regards them as applying) is not a third country for value added tax purposes; and
(iv) Any outside territory where those "Community provisions on … excise duty" do apply (or where that Directive regards them as applying) is not a third country for excise duty purposes
(v) Where the person's journey involved transit through an outside country, or began in outside territory, this Order applies if that person is unable to establish to an officer of Revenue and Customs that the goods contained in that person's personal luggage were acquired subject to the general conditions governing taxation on the domestic market of a member State and do not qualify for any refunding of value added tax or excise duty
3. The reliefs afforded under this Order are subject to the condition that the goods in question, as indicated by their nature or quantity or otherwise, are not imported for a commercial purpose nor are used for such purpose; and if that condition is not complied with in relation to any goods, those goods shall, unless the non-compliance was sanctioned by the Commissioners, be liable to forfeiture.
[That condition is complied with, for example, where an occasional importation consists exclusively of goods intended as presents, or of goods for the personal or family use of the person in question.
4. No relief shall be afforded under this Order to any person under the age of 17 in respect of tobacco products [, alcoholic beverages and alcohol].
(…)
Schedule
Tobacco Products: 200 cigarettes, or 100 cigarillos, or 50 cigars, or 250 grams of smoking tobacco.
Notes:
(k) Each respective amount represents 100% of the total relief afforded for tobacco products.
(l) For any one person, the relief applies to any combination of tobacco products provided that the aggregate of the percentages used up from the relief the person is afforded for such products does not exceed 100%.
(m) A cigarillo is a cigar of maximum weight 3 grams.
(n) This relief corresponds to Articles 8(1) and 8(4) of that Directive.