Neutral Citation: [2025] UKFTT 455 (TC)
Case Number: TC09492
FIRST-TIER TRIBUNAL
TAX CHAMBER
Held at Leeds Employment Tribunal
Appeal reference: TC/2023/08179
Customs civil evasion penalty - excise civil evasion penalty –dishonest conduct - yes - appeal dismissed
Heard on: 31 January 2025
Judgment date: 16 April 2025
Before
TRIBUNAL JUDGE SUSAN TURNER
SUSAN STOTT
Between
GEORGE JENNINGS
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY'S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: George Jennings appeared in person.
For the Respondents: Varuna Jeewon, litigator of HM Revenue and Customs' Solicitor's Office
DECISION
Introduction
1. This is an appeal against a Customs Civil Evasion Penalty in the sum of £1,195 issued by HM Revenue and Customs (HMRC) on 28 October 2021 under s 25(1) Finance Act 2003 and an Excise Civil Evasion Penalty in the sum of £3,070 issued by HMRC on 28 October 2021 under s 8(1) Finance Act 1994. The penalties under appeal total £4,265.
Procedural Matters
2. At the hearing, we heard witness evidence from Mr Jennings. We also heard witness evidence from Officer Ahmed (the Border Force Officer who stopped Mr Jennings at Manchester Airport) and Officer White (the decision-making Officer) on behalf of HMRC.
3. Prior to the hearing, Mr Jennings had objected to an application made by HMRC for Officer White to attend the hearing remotely rather than in person. HMRC's application had been approved. At the hearing, we reiterated the reasons given for approving HMRC's application and ensured we were confident that Officer White could clearly hear and be heard and was able to participate in the hearing. Mr Jennings confirmed that he accepted this decision.
4. At times, the hearing became somewhat heated. We sought to ensure all parties were treated with respect throughout. It was apparent that Mr Jennings took exception to terminology relating to dishonesty, smuggling and evasion. Ms Jeewon took care to explain that the use of such terminology was not personal and was required as it was the language of the relevant statutes. The Tribunal reassured Mr Jennings that the proceedings were not criminal in nature.
Background and Facts
5. On 20 October 2020, Mr Jennings arrived at Manchester Airport from Turkey. Mr Jennings, a retired officer of the fire service, owned a second home in Turkey and had been there on holiday.
6. After collecting his luggage from the carousel, Mr Jennings was stopped by Officer Ahmed and escorted to the baggage search area, where Mr Jennings confirmed to Officer Ahmed that he had packed his bags himself and was fully aware of the contents. He said that he was carrying cigarettes and tobacco and was unaware of his duty-free allowances.
7. Upon searching Mr Jennings' bags, Officer Ahmed found 16,580 Lambert & Butler cigarettes and 3.5kg of Amber leaf hand rolling tobacco. This exceeded by over 96 times the permitted personal allowance of 200 cigarettes or 250 grammes of tobacco and the goods were seized under s 139 Customs and Excise Management Act 1979 (CEMA 1979). Officer Ahmed issued Mr Jennings with warning notices 1 and 12A, informing him how to challenge the seizure. Mr Jennings was also issued with and signed form BOR 156 detailing the items seized and a form BOR 162 warning letter.
8. Mr Jennings did not challenge the seizure of the goods and the cigarettes and rolling tobacco have been deemed to be forfeited in accordance with para 5, sch 3 CEMA 1979.
9. On 23 September 2021, Mr Jennings was contacted by HMRC to inform him that HMRC were conducting an enquiry into his customs duty, import VAT and excise duty affairs and he was invited to disclose any relevant information or documents in connection with their enquiry. He was notified of the possibility that civil evasion penalties could be issued. Mr Jennings was notified that co-operation with the enquiry could reduce any penalties imposed.
10. Mr Jennings responded by phone call on 4 October 2021 and was requested to provide a response in writing.
11. Following a reminder letter from HMRC, Mr Jennings provided a written response dated 16 October 2021 and gave some information relating to HMRC's enquiry. He answered some questions in full and responded N/A to others.
12. On 28 October 2021, Mr Jennings was issued with civil evasion penalties in a total amount of £4,265, which included 25% mitigation for disclosure and 25% mitigation for cooperation.
13. Mr Jennings contacted HMRC by telephone on 1 November 2021. During this call, Mr Jennings indicated that he disagreed with HMRC's decision. He said that he had been assessed on goods which belonged to his ex-partner. He was informed that a written statement from his ex-partner would be required and Mr Jennings responded that they were not on speaking terms.
14. On 2 November 2021, at Mr Jennings' request, HMRC reissued their penalty assessment letter and explained his options for reconsideration, review or appeal.
15. By undated letter received by HMRC on 16 November 2021, Mr Jennings provided further arguments against the penalty assessment and requested that the penalty be reconsidered. In particular, Mr Jennings informed HMRC that he had been travelling with an ex-partner and that some of the seized goods belonged to her. He also said that they were not given the opportunity to declare the goods as they were approached immediately after collecting their baggage. Finally, he said that the airlines and duty-free shops did not confirm the duty-free allowances and continued to sell tobacco without any guidelines.
16. HMRC wrote to Mr Jennings on 29 November 2021, informing Mr Jennings that he needed to provide details of his co-traveller so that his claim about ownership of the seized goods could be investigated.
17. Mr Jennings replied by letter dated 7 December 2021 to say that he did have a small amount of tobacco for his own use seized by customs but that the majority belonged to his ex-partner, for herself and her large family. He said that he could not provide details of his ex-partner because she was troubled and he was not willing to contact her. He also said that he had been threatened by her brothers if he did contact her again. He offered a name to HMRC, which we shall abbreviate to ML, but said that even he was not convinced this name was correct. He said he had only dated her for around 8 weeks and that he did not know her date of birth, her passport details or her address.
18. On 20 December 2021, HMRC informed Mr Jennings that the penalty had been reconsidered and remained unchanged. HMRC told Mr Jennings that this was because he had been unable to provide sufficient details about the alleged owner of part of the seized goods to enable HMRC to investigate further and that he had taken responsibility for the seized goods by signing forms BOR 156 and BOR 162.
19. On 6 January 2022, HMRC received an undated letter from Mr Jennings in which he stated that he thought he had given sufficient information to prove he was not the owner of the seized goods. He said that he had been open and honest and provided all of the information he could. He did not know any further information to give. He repeated that he had explained verbally to Officer Ahmed that a small proportion of the tobacco was indeed his and that his ex-partner admitted that the "whole majority" was indeed hers for herself and her large family. He said he had not signed to say all the tobacco was his.
20. On 17 January 2022, HMRC wrote to Mr Jennings and explained that he had not provided sufficient information to establish that he was not the owner of the goods he had signed for. They said, in the absence of evidence to the contrary, HMRC considered that he was responsible for all of the seized goods. Mr Jennings was told how to appeal against the penalty decision.
21. By letter dated 11 February 2022, Mr Jennings requested a review of HMRC's decision. He informed HMRC that he was in contact with his ex-partner's mother about the information required, but that he had been advised to stay away from ML by his solicitor. He said that 75% of the seized goods belonged to her.
22. HMRC responded on 28 February 2022 to inform Mr Jennings that the decision remained unchanged.
23. By letter dated 13 March 2022, Mr Jennings again stated that he did not own all of the seized goods and said he would not have taken responsibility for them all. He was responsible for his own case, not ML's. Mr Jennings wrote that he and ML waited at the carousel for a very long time. As soon as the cases arrived, a Border Force officer started running and shouted to her colleague. As he picked up the cases, the Border Force officer asked Mr Jennings and his partner to follow her and escorted them through the green channel. He raised concerns that customs officers did not explain the declarations properly to him and asked why ML wasn't given the same paperwork.
24. Mr Jennings contacted HMRC by telephone on 4 April 2022 to enquire whether his ex-partner had provided any response to HMRC and was advised by subsequent letter that HMRC could not provide information to him about a third party.
25. By letter dated 22 April 2022, HMRC wrote to Mr Jennings to confirm that their decision to charge civil evasion penalties remained unchanged. They also noted that Mr Jennings should raise a complaint to Border Force if he was unhappy with any matters regarding the seizure at the airport. HMRC also confirmed in this letter that they would accept a late review request into the penalty decision.
26. Such review request was received by HMRC on 12 May 2022 and was accepted. On 2 November 2022, HMRC wrote to Mr Jennings to extend the review date and Mr Jennings agreed to this by phone on 16 November 2022.
27. On 1 December 2022, HMRC issued a review conclusion letter upholding the decision to charge civil evasion penalties.
28. On 13 March 2023, Mr Jennings provided, by email, a screenshot of a handwritten letter dated 10 February 2023, signed by ML. In it, she said that she had been asked by her mother to confirm nearly all of the hand rolling tobacco and cigarettes were hers and says she had written to HMRC four months ago. She said the tobacco was all hers and that she had explained to the customs officers that she had purchased and packed in her own cases a large amount of what was seized.
29. On 23 March 2023, HMRC wrote to ML at the address shown on the handwritten letter requesting further information about her personal details and involvement in the seizure at Manchester Airport.
30. By letter dated 24 April 2023, HMRC wrote to Mr Jennings to inform him that they had been unable to confirm the identity of ML or confirm she was responsible for part of the seized goods and therefore the decision to charge civil evasion penalties remained unchanged.
31. On 19 May 2023, Mr Jennings appealed that decision to this Tribunal.
The Issues
32. This Tribunal is required to decide whether Mr Jennings is liable to the Customs Civil Evasion Penalty and the Excise Civil Evasion Penalty. In order to do that, the Tribunal must decide whether Mr Jennings' conduct on 20 October 2021 involved dishonesty.
33. If Mr Jennings' conduct is found to be dishonest and he is liable to the penalties, the Tribunal must determine whether the penalties have been properly raised and are at an appropriate level.
THE LAW
34. The penalties under appeal were raised under s 8(1) Finance Act 1994 and s 25(1) Finance Act 2003. As detailed at [12] above, they were reduced by 25% for disclosure and cooperation in accordance with s 29 Finance Act 2993 and s 8(4) Finance Act 2004. These sections are set out below.
Excise Duty
35. Sections 8(1), (4) and (5) of the Finance Act 1994 provide as follows:
"8 Penalty for evasion of excise duty
(1) Subject to the following provisions of this section, in any case where -
(a) any person engages in 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."
36. Section 8 Finance Act 1994 was repealed by para 21(d)(i), sch 40 Finance Act 2008 with the exception of the dishonesty penalty, which was preserved by The Finance Act 2008, Schedule 41 (Appointed Day and Transitional Provisions) Order 2009.
Customs Duty
37. Sections 25(1) and 29(1)(a) of the Finance Act 2003 provide as follows:
"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.
(2) In exercising their powers under subsection (1), neither the Commissioners nor an appeal tribunal are entitled to take into account any of the matters specified in subsection (3).
(3) Those matters are—
(a) the insufficiency of the funds available to any person for paying any relevant tax or duty or 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 any relevant tax or duty,
(c) the fact that the person liable to the penalty, or a person acting on his behalf, has acted in good faith."
Import Limits
38. The Travellers' Allowance Order 1994 provides for the import limits for relevant goods contained in the personal luggage of a person who has travelled from a third country. The limit for tobacco products is 200 cigarettes or 250 grams of smoking tobacco. In this case, the seized goods exceeded the import limits by more than 96 times.
Test for Dishonesty
39. The penalties imposed by HMRC require that the Appellant's conduct has been dishonest and, in reaching its decision as to dishonest conduct, the Tribunal is required to consider the two-stage test for dishonesty set forth in Ivey v Genting Casinos (UK) Ltd t/a Crockfords v Genting [2017] UKSC 67 at [74]:
"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."
40. The burden of proof in establishing conduct involving dishonesty lies with HMRC and the standard of proof is the civil standard of the balance of probabilities.
Submissions and Discussion
41. Ms Jeewon submitted for HMRC that Mr Jennings entered the green channel and that, by doing so while in possession of goods in excess of his personal allowance, he made a false declaration that he had no goods attracting excise or customs duty. She said that this is objectively dishonest by the standards of an ordinary reasonable person. Ms Jeewon also submitted that Mr Jennings was a frequent and experienced traveller who should have been aware of his allowances and that it was his responsibility to make himself aware of the permitted allowances when importing goods into the UK. She said that it is well known that excise duty is payable upon importation of tobacco goods from outside the EU.
42. She also contended that the subjective element of the test will be met, as Mr Jennings went into the green channel and that by doing so he made a declaration that he had nothing to declare. Ms Jeewon said that, on the balance of probabilities, Mr Jennings knew that he was importing goods in excess of the permitted allowances and, even if he did not know the exact limits, that the large quantities of tobacco products would have prompted a reasonable and honest person to make reasonable enquiries rather than assuming that there was no tax to pay.
43. Mr Jennings does not dispute that Officer Ahmed discovered and seized 16,580 Lambert & Butler cigarettes and 3.5kg of Amber leaf hand rolling tobacco. However, he does dispute that he was responsible for the full amount of the seized goods. He also disputes that his conduct was dishonest and submitted that he had no choice whether or not to declare the goods because he was stopped before entering the green channel. Mr Jennings also disputes that he signed to say he was responsible for all of the seized goods and that he was aware of the relevant permitted allowances. He says he made a genuine mistake.
Opportunity to declare the goods
44. Officer Ahmed's notebook records that Mr Jennings was intercepted in the green channel at Manchester Airport. His notebook records that the reason for the stop was that an x-ray showed a "large amount of cigarettes" in his bags and that the passenger avoided eye contact rushing down towards the exit. When giving evidence, he said that he had been positioned after the nothing to declare exit and that this was where he had stopped Mr Jennings.
45. Mr Jennings disputed that he was travelling through the green channel at the airport when he was stopped. In his letter of 16 November 2021, and during the hearing, he said that he and his ex-partner were approached just after they took their bags from the carousel and were escorted through the green channel. However, under cross-examination, Mr Jennings agreed that he had been stopped by Officer Ahmed at the front of the green channel.
Responsibility for the seized goods
46. In correspondence, Mr Jennings says that he was with ML at the time he was stopped and that ML told Officer Ahmed that she was responsible for her own tobacco, which was in her case. At the hearing, while he said the ML was spoken to by a female Border Force officer, he also said under cross-examination that ML came forward while he was speaking to Officer Ahmed and accepted that some of the seized goods were hers. There is no record of this exchange in Officer Ahmed's notebook.
47. At the hearing, Officer Ahmed told the Tribunal that, after 4 years, he could not remember if Mr Jennings had been travelling alone when he was intercepted. However, he said that, if there had been a co-traveller, it would be usual practice for both parties to be stopped and asked whose name should go on the paperwork.
48. Ms Jeewon said that the first time information about an ex-partner was raised was in Mr Jennings' phone call of 1 November 2021 and letter of 16 November 2021 after the issue of the penalty assessment. Furthermore, Mr Jennings had been unable to provide conclusive details about his ex-partner and had managed only to provide a hand-written letter from his ex-partner via her mother.
49. When asked if he had signed for the seized goods, Mr Jennings said that he had believed that he was signing for his own, even if the form included all of the seized goods. He said that he would not have accepted responsibility for all of the seized goods if he had known what he was signing for. He told the Tribunal that he would happily accept the penalties for the seized goods which were his. He said he had no intention to defraud anyone or smuggle. He was clearly very proud of his long service with the Fire Service and was keen to let us know that he had no criminal record.
50. Mr Jennings also told the Tribunal that there was no way ML would accept any responsibility for any of the seized goods or pay any tax.
51. Mr Jennings signed the seizure paperwork at the airport and made no complaint at the time or since.
Knowledge of permitted allowances
52. Mr Jennings told the Tribunal that the seized goods were for personal use. He agreed he was an experienced traveller to both EU and non-EU destinations: his parents live in Spain; he has a second home in Turkey; and he used to travel regularly for work, for example to the USA. Nevertheless, he told the Tribunal that he was confused about his personal allowances. He said he had been happy to tell Officer Ahmed that he was carrying cigarettes and tobacco for personal use. At that time, we were in the Brexit transition phase and Mr Jennings said that he thought you could bring in as much as you liked for personal consumption. He found HMRC guidelines unclear and did not know he could not import tobacco for the use of him and close family. He did not know that he was over any limit. He said that he believed it was common for travellers to bring goods into the UK from Spain, for example, for personal use and that he believed that was acceptable when explained to customs. He also said cigarettes were being sold on the plane and that duty free allowed you to purchase as much as you liked. He said he had made a genuine mistake about this.
The witness evidence
53. At the hearing, Mr Jennings was keen to stress that he had done everything he could to provide information. He appeared to feel aggrieved that this was not sufficient to persuade HMRC to change their decision to charge civil evasion penalties. In his evidence, Officer White was clear that he had followed up Mr Jennings' assertions that he was with a fellow traveller using the information provided to him but that the information had been insufficient to allow him to make contact with ML or receive confirmation that she was responsible for any of the seized goods.
54. Evidence provided by Mr Jennings during the hearing was inconsistent at times with information provided to HMRC in earlier correspondence. In addition, Mr Jennings referred to ML by an alternative name during the hearing, quickly explaining that that was the name he often used for her, though he acknowledged it was not the name he had provided to HMRC. In summary, we find Mr Jennings' account of events confusing and contradictory.
Dishonesty
55. We acknowledge Mr Jennings' long service as a fire officer and understand that he has found the process of dealing with this appeal difficult and stressful. However, we make our decision based on the applicable law and the evidence available to us. In this case, we find that HMRC have shown, on the balance of probabilities, that Mr Jennings did act dishonestly.
56. Mr Jennings has repeatedly referred to a fellow traveller, ML, an ex-partner, to whom at least some (75%, he says) of the seized goods belong. However, despite being asked on numerous occasions, and notwithstanding HMRC's efforts to conduct their own enquiries, no concrete details have been identified about ML's full name, date of birth or passport details. Given that Mr Jennings accepted responsibility for the seized goods at Manchester Airport by signing forms BOR 156 and BOR 162, we find, on the balance of probabilities, that the seized goods did belong to Mr Jennings and that he remains responsible for them.
57. Mr Jennings did know that he was carrying cigarettes and hand rolling tobacco in his bags. Indeed, Mr Jennings told the Tribunal that he was happy to accept responsibility for his share of the seized goods. From a subjective perspective, he did know he was carrying a substantial amount of tobacco and cigarettes. As a frequent traveller from Turkey, Spain and elsewhere, he would have been familiar with airport signage. We accept that there may have been some confusion surrounding allowances following Brexit, but Mr Jennings was travelling from outside of the EU and could not have been so confused about allowances as to believe that they would not apply to the substantial amount of tobacco and number of cigarettes he was carrying. He did know there were guidelines about what could and could not be brought into the UK, yet he did not approach any Border Force officer to seek clarification about his permitted allowances.
58. We find that, at the time he was stopped by Officer Ahmed, Mr Jennings was proceeding through the green channel as recorded by Officer Ahmed in his notebook and as relayed in evidence during the hearing. We therefore find that he was intending not to declare the cigarettes or tobacco in his bags. From an objective perspective, this was dishonest by the standards of ordinary decent people.
The Level of the Penalty
59. Under s 29(1)(a) Finance Act 2003 (in respect of customs duty) and s 8(4)(a) Finance Act 1994 (in respect of excise duty), the Tribunal 'may reduce any penalty to such amount (including nil) as they think proper'.
60. Ms Jeewon submitted that the penalties were reduced because Mr Jennings responded to HMRC's initial letter of 16 October 2021 but failed to provide sufficient information about his ex-partner and answered N/A to several questions about the seizure. He responded within the set timeframes and provided required confirmations to HMRC officers, but did not provide a full and detailed account of events.
61. During the hearing, we heard from Mr Jennings that he had provided as much information as he could about his ex-partner. He also told us that he had not answered all of the enquiry questions because some were not applicable to his situation. We note that a significant exchange of correspondence took place after the penalty letter had been issued, that further details did emerge regarding ML and that Officer White took steps to follow up leads available to him. However, the additional correspondence did not produce sufficient useful information to lead to a change to HMRC's decision to impose the penalties.
62. We therefore consider the imposed penalties, including mitigations of a total of 50% for disclosure and co-operation, to be at an appropriate level and do not make any further reductions.
DECISION
63. It follows that we DISMISS the appeal and uphold the penalties in a total amount of £4,265.
Right to apply for permission to appeal
64. 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.
Release date: 16th APRIL 2025