United Kingdom VAT & Duties Tribunals (Excise) Decisions

 


Gibbons & Anor v Revenue & Customs [2006] UKVAT(Excise) E00964 (23 June 2006)

E00964

Excise duty red diesel – assessments by HMRC in the absence of primary evidence of fuel use – decisions on available evidence

LONDON TRIBUNAL CENTRE

JAMES ASHLEY GIBBONS

RICHARD LEE GIBBONS Appellants

and –

THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents Tribunal: Dr. David Williams (Chairman) C Perry (Member)

Sitting in public in Cardiff on 30 and 31 March 2006

Paul Carless, transport consultant, for the Appellants

Richard Smith of counsel, instructed by the Office of the Solicitor to Her Majesty's Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2006
DECISION
1. This decision concerns two appeals by a father ("JG") and his son ("LG") heard together at their request. Both JG and LG are self-employed lorry and truck drivers working in and near Newport, Wales. They live at the family home in Newport, and run their businesses separately from there or from their vehicles.
2. Vehicles belonging to both Appellants were tested by officers of the Respondents (previously the Commissioners of Customs and Excise and now the Commissioners for Her Majesty's Revenue and Customs, both referred to as "HMRC" in this decision), in October 2004. The officers found rebated diesel ("red diesel") in the tanks of vehicles belonging to both Appellants. As a result, after inconclusive correspondence between the parties, and in particular after the loss of a package of evidence sent by JG and LG to HMRC, HMRC assessed both JG and LG for use of red diesel over a three year period. The assessments were made under the Hydrocarbon Oil Duties Act 1979.
3. Neither JG nor LG disputed the validity of part of those assessments. On their behalf, Mr Carless accepted that the assessments were correct in principle as to red diesel in the tanks at the time of the tests, and that there was no point of law in issue in the appeals. But both his clients disputed strongly the way that the assessments had been made, and the amounts of the assessments.
4. The main question for the tribunal in each appeal was about the quantum of red diesel used by JG or LG. There is also a subsidiary question about the alleged loss of primary sources of evidence. Inevitably, as Mr Carless fully accepted, the tribunal had to consider issues about the reliability and credibility of the evidence of both appellants. The tribunal invited Mr Carless to indicate his views on the appeals of the two appellants being heard together or separately. He indicated that he and his clients wished the two appellants' appeals to be considered at the same hearing, and the tribunal agreed to this. While there was some common ground between the cases of the two Appellants, the tribunal formed separate views about the reliability and credibility of each witness.
5. The tribunal received limited primary documentary evidence about the purchases of fuel and the uses to which the vehicles were put. The tribunal gave Mr Carless and his clients a final opportunity to produce evidence in the form of credit card records and bank statements during the short adjournment on the first day of the hearing. The evidence produced was admitted late with the agreement of HMRC. The tribunal heard evidence under oath from both Appellants and also from Mr Sked and Mrs Manley, officers of Revenue and Customs.

The fuel tests and resulting assessments

6. HMRC Road Fuel Testing Unit tested a vehicle registered as M2 SPH and belonging to JG on 13 October 2004. Red diesel was found in its tanks. The vehicle was seized and fuel invoices were taken from it.
7. The Unit conducted a test of vehicle N3 LEX, belonging to LG the following day. Red diesel was found in that vehicle's tanks, and it was also seized and any available records taken. A week later, on 20 October, another vehicle belonging to LG, registered as L840 RLG, was also tested. Red diesel was again found, and the vehicle again seized. Both the vehicles registered as belonging to LG were found to have secondary fuel tanks that the Unit officers considered to be false fuel tanks.
8. JG and LG were asked by separate letters to produce any fuel records that they had, and also other documents relating to, and records about, their vehicles. JG and LG were also asked on 15 October 2004 to attend voluntary interviews at Newport Central Police Station on 25 October. Little documentary evidence had been received from either JG or LG by the Commissioners when they attended their separate interviews. The first account of why there was no evidence emerges in JG's formal statement given under caution that day. At that time JG stated that certain items had been sent in the post to HMRC. His interview was conducted on the basis that evidence would be received shortly after the interview by HMRC. There is only a brief mention of this in the interview with LG that took place earlier that day. No package of documents was received by HMRC.
9. In his interview, JG stated that he had red diesel in his truck's tanks because he was working off road at the time. The interview record shows that the officer conducting the interview sought to explain to JG that because his vehicle was fully taxed at all times, he should not have put red diesel in it at all, even when working off road. The same point was made in the interview with LG. LG's account at that time was that he was doing most work off road. The vehicles were intercepted off road. Both Appellants stated that they had been undertaking shunting at the local steel works.
10. HMRC made the following assessments for duty due for use of rebated fuel:

In respect of L840 RLG, an assessment on LG £35,057.84 for fuel used from acquisition on 02 12 2002 until detection on 20 10 2004.

In respect of N3 LEX, an assessment on LG of £610.31 for fuel used from

Acquisition on 18 07 2004 until detection on 13 10 2004.

In respect of M2 SPH, an assessment on JG of £46,171.05 for fuel used from

01 02 2002 until detection on 13 10 2004.

The assessments were based on the documentary evidence available to officers at the time of assessment about the use of the vehicles and the assumption that all fuel used for each vehicle was rebated fuel unless specific receipts for taxed fuel were produced.

The missing evidence

11. The Appellants produced to the tribunal a Royal Mail recorded delivery slip showing postage of an item addressed to S Fenton (the officer dealing with the Appellants and who led the interviews) at Kings Dock, Swansea. The postage paid is £5.75. There is also a letter from the Royal Mail dated 11 November 2004 confirming that there was no computer or manual record of delivery of the item by Royal Mail. It is clear from the interview records on 25 October 2004 that both JG and LG represented that they posted various relevant items to Mr Fenton and that Mr Fenton represented that the relevant office of HMRC had not received them. The tribunal accepts that a package was posted as stated, that the package was not delivered, and that none of the parties to these appeals is responsible for the non-delivery. What is less clear is the extent of the contents of the package.
12. Both Appellants gave oral evidence about the package and about posting it. The oral evidence to the tribunal was consistent with the contemporary evidence that the item posted was a jiffy bag containing various records. The Appellants did not keep any note of what was sent in the bag, or any copies of the items sent. The accounts of what was in the bag varied between the contemporary interviews and the evidence to the tribunal. HMRC had sent the Appellants a full list of documents and items to be produced. There was an initial request by HMRC followed by other specific requests. The jiffy bag was sent in response to the original pre-interview requests. It appears from the interview records that JG was under the impression that once the documents were produced his truck would be released, so there was a clear reason why he would want to comply, or to be seen to want to comply, with the request for early production of evidence. The tribunal is not persuaded, however, that they both put full sets of records about all three vehicles in the same envelope, although a postal charge of £5.75 suggests that a number of items went into the jiffy bag. And the tribunal is not satisfied that JG and LG would post all their documentation in one jiffy bag on a Wednesday when they were to be interviewed by the officer the following Monday. Unfortunately, their failure to keep copies or a record of contents prevents the tribunal having a clear view of what was sent, and lost.
13. JG stated in the interview on 25 10 2004 that he posted a few service sheets and could produce others. He stated that he had sent in some "tachos" and all his fuel receipts. There is no specific mention of any other document in that interview. JG suggests in the interview that he had previously shown some documents (including fuel receipts written on French beer mats) to Mr Fenton. Mr Fenton did not refute those suggestions in the interview and has given no further relevant evidence to the tribunal. JG claimed that he did not use a credit card or similar for the purchase of fuel, and that he did not have an account with any garage. He paid cash as and when he needed fuel. JG gives the impression in the interview that there is more evidence that could be produced. If that is so, the tribunal records that none of it has since been produced to HMRC or the tribunal.
14. The interview with LG contains little of direct relevance. However, the evidence suggests that LG took a lead from JG in much of what he did, but that he was less organised than his father, less inclined to see the relevance or usefulness of keeping evidence about what he had done with his vehicles, less likely to have created any records or kept invoices of evidential value in a case such as this, and more hostile in his approach to HMRC officials.
15. JG's evidence to the tribunal suggested a more extensive list of enclosures, including the V5 form, credit card statements, a bound duplicate invoice book, and tyre receipts. LG stated that he had sent his invoice book also. Evidence was also given by JG that he had offered further documents to Mr Fenton when he retrieved his truck from the Commissioners some time later, but Mr Fenton did not accept those documents. Again, the tribunal heard no evidence from Mr Fenton to confirm or contradict this. A few receipts were discovered in JG's truck on seizure, and they were taken into account in the assessments.
16. The tribunal accepts that the Appellants posted a package. It accepts that the package contained a number of relevant documents, including some tachographs, some fuel receipts, and other documents about the vehicles. It accepts that that evidence may have assisted the Appellants' appeals. It accepts as probably more accurate the information given in the formal interviews by JG and LG before it was realised by anyone that the package had been lost. There was no strong reason at that time for the Appellants to exaggerate or forget what was in the package, as JG at least would be acting on the assumption that the information could be checked. There was also good reason to ensure that some evidence was shown to HMRC. The tribunal does not accept an alternative explanation that the Appellants never intended a package to arrive. But the tribunal also does not accept that the package contained any kind of orderly presentation or accounts of fuel use or mileage of the vehicles. It accepts that the production of even a few more tachographs would have assisted making the assessment of JG more accurate. But it finds the account of the contents of the posted package given by JG to the tribunal, and therefore the importance of the loss of the evidence, to be exaggerated.
17. The other strand of evidence relevant to assessing the available records is the consistent answers given by both JG and LG that they paid cash and were paid cash. JG explained that he would take significant amounts of cash with him on longer trips, and would buy fuel and other items for cash. He did not use credit cards and he did not have accounts at garages. His evidence indicated that some of the cash was held in bank accounts, but the tribunal saw no evidence of those accounts at any relevant times. The extent of the use of cash prevented the ready production of third party evidence such as a garage fuel account or credit card statement, but also put at a premium the need to keep records and invoices if not all receipts to deal with questions such as those in these appeals.
18. The tribunal's conclusion is that JG had no independent records or summaries of primary information, and that there were therefore no such records to produce. And he either did not have, or is not willing to produce, any secondary information such as contemporary bank account records or credit card statements. While it accepts that JG sent some documentation to HMRC, it does not accept that all the relevant primary records or invoices were sent, or that they were then still available for JG to send, and it also finds that JG has failed to produce at any later stage the additional evidence that he indicated in his initial interview. Nor does there appear to have been any serious attempt on behalf of JG either to produce personal evidence such as a calendar or diary of visits abroad, or to assemble third party evidence from suppliers, customers, garages, service engineers, stand-in drivers, or others who might have useful collaborative evidence. Nor was there any of the evidence frequently seen by the tribunal of ferry tickets or records confirming the passage of a particular vehicle. It is less clear what evidence was retained by LG or sent by LG in the package or how far, if it had been produced, that evidence would have assisted LG's case.
19. The tribunal therefore finds that some evidence has been lost, but that the Appellants and those advising them have not used all reasonable endeavours to make good the loss of the primary evidence. Neither party was responsible for the partial loss of the evidence. The Appellants could have kept, but failed to keep, copies or details of the evidence sent, and did not have any contemporary alternative records. And they have failed to produce alternative evidence, including evidence of which there is a contemporary offer of production not affected by the loss of the package in the post. The Appellants were also unable to produce any relevant income tax or value added tax returns, assessments or other information. Neither JG nor LG were registered for value added tax nor, so far as the tribunal could establish, had they made any returns of their activities for income tax. The failure to keep any accounts, or any summary or copy records when posting items to HMRC, suggests that both JG and LG saw no need to keep such records for any purpose and therefore no need to take precautions against the loss of information. Any problems of the Appellants in meeting the burden of proof on them both in dealing with HMRC and in these appeals arises largely as a consequence of that approach to keeping records. On that basis, the tribunal does not accept the Appellants' suggestion that the assessments should be discharged, or at least reduced to a minimum agreed level, because of the loss of the evidence.

The available evidence

20. The tribunal must reach a decision using the evidence available to it, recognising that the Appellants intended to make some primary evidence available to HMRC in addition to evidence now available. Evidence of vehicle usage that is available consists mainly of oral evidence of JG and LG first given in formal statements and then to the tribunal under oath. The tribunal concludes from the evidence above that neither of the Appellants had any detailed accounts or independent summaries of relevant fuel purchases or of the mileage and usage of the vehicles. The tribunal is prepared to accept that JG may have found further receipts in his lorry when he repossessed it. But that is of limited use to the tribunal as he is unable now to produce them. And it was not offered any third party evidence.
21. It was accepted for the Appellants that the burden of proof about vehicle usage and fuel used was on them, the standard of proof being that of probability.

JG's evidence of his vehicle use

22. JG told the tribunal that he had been a truck driver throughout his working life. He made the point in the formal interview that until the current examination he had never previously been accused of using red fuel. He contended that he had had his tanks dipped on numerous occasions when coming and going from Britain, and that none of those checks had led to any charge or assessment. HMRC was unable to comment usefully on that, but the tribunal is prepared to accept it as JG put it on record at an early stage and HMRC had an adequate opportunity to challenge it if it wished. The tribunal therefore assumes that on foreign trips JG used only foreign purchased fuel or taxed British diesel.
23. JG's evidence was that he knew he could not use red fuel on road and that he had ensured that he did not do that. But he had not realised that it was also illegal to use red diesel in a vehicle off road if that vehicle retained its excise licence. As to use on road with red diesel, there would in any event be no reason for him to do so on a run to the Continent because it was as cheap or cheaper to buy taxed white fuel perfectly legally in Belgium or France than to buy red diesel in Britain. He acknowledged that he had purchased red diesel at the time that he had been tested, and on two previous occasions at that site, and that he now accepted that he was liable for the duty on those purchases. That might be the equivalent of taxed fuel costing £500.
24. JG gave evidence that throughout the period he had undertaken three kinds of work. He made long runs with loads to mainland Europe. He made runs within Britain. And he undertook contract work shunting at the local steel works on the same site as his son.
25. He made trips to mainland Europe with his truck, sometimes going as far as eastern Germany. He could not produce receipts for fuel bought on those trips, or tachographs to confirm the trips, because they had been sent to the Commissioners in the missing jiffybag. Nor could he produce any accounts, bank accounts, card vouchers, correspondence, diaries, invoices, statements or any other form of indirect evidence of his activities and the journeys he had taken. He had no such records. He stated that he kept his receipts in a black box in the lorry cab. He did have an invoice book, but that had been sent in the jiffy bag and he had no similar records.
26. His evidence about the number of long trips he did was inconsistent. His general approach was that he had partly retired from the business of long haul driving at the time his vehicle was stopped, and for some time before. His health was not too good and he found long runs tiring. There were periods of weeks when he did no work. But he liked keeping his truck as he had always had one, and he would use it from time to time. At the time of the formal interview that usage was "a couple of trips" to mainland Europe that year, which he corrected to be "more than a couple". This was in addition to the two other kinds of work. In oral evidence to the tribunal he inconsistently first indicated that his approach was as above but then that he did anything up to two trips abroad a month and that some of these trips would see him on the road for five days. Such a run could involve up to about 1,000 miles to be driven. JG was hesitant in his evidence about distances. He relied on times instead, and would assume the distances covered from the times spent driving, as he was a steady driver. He could not confirm those statements because he had no tachograph evidence. While on foreign trips, he would buy his fuel abroad, frequently in France. He would pay cash. He would ensure that he filled his tanks while abroad because the fuel prices were so much lower than in the UK.
27. The tribunal accepts that JG bought fuel abroad when on foreign trips, but does not accept the extent of those trips to be as great as his final evidence. It is prepared to accept that JG undertook about six foreign trips a year, that each involved driving about 1,000 miles, that he would have only taxed diesel in his tanks when leaving Britain and that at the end of each foreign trip JG would fill his tanks before joining the ferry.
28. It is clear that JG also undertook shunting work, and that he worked in cooperation with LG while doing so. The location of the vehicles when stopped by HMRC is evidence of this. Accepting JG's evidence that he thought he was entitled to use red diesel when working off road, the tribunal may draw the conclusion that JG used red diesel whenever working off road. He told the tribunal he had purchased red diesel on site on the occasion when he was stopped and on two previous occasions, to a value of perhaps £500. The tribunal considers it more likely that JG would use red diesel whenever needing fuel to work off road. The tribunal was given no clear indication of the amount of shunting undertaken by JG, or the fuel consumption while shunting. In so far as this was part of JG's driving activities, the tribunal concludes that it was more likely than not that JG used red diesel for shunting work. He is therefore correctly assessed by HMRC – as in principle he accepts – for this use.
29. There was limited evidence of third use of the truck, namely use on British roads for haulage. There was evidence of receipts found by HMRC in JG's vehicle on seizure. The interview between Fenton and JG suggests that HMRC may have known the identity of some of JG's customers. But the tribunal was given no detail of this by either party so cannot draw sound conclusions from it.
30. The limited evidence was of the purchase of 6 quantities of taxed diesel in UK garages over a 21 day period. The total purchased was 118 gallons of diesel. If fuel use is taken, in round figures based on JG's evidence, at 10 miles per gallon, then this represents fuel for 1180 miles. The tribunal is able to deduce little else from this evidence other than that the garages suggest UK runs being undertaken and that JG did buy some fuel in UK garages in addition to that purchased abroad or bought as red diesel. The only other confirmed detailed evidence is that the vehicle was driven for 8,683 miles between 31 08 2004 and the day of seizure, 13 10 04.

HMRC's view of JG's vehicle use

31. HMRC based its assessment of JG on (a) the limited documentary evidence it had of vehicle usage, (b) the assumption that JG's mileage for three years was consistent with the final weeks' usage evidence from 31 08 2004 and (c) an assumption that JG ran his vehicle on red diesel save for the receipts produced. Those assumptions took no account of the oral evidence of JG.
32. The tribunal considers that HMRC should have taken into account the oral evidence of JG as to foreign use, at least to the extent that he had given evidence of that use in the formal interview and also taking into account the later loss of primary evidence, a loss that HMRC accepts, after the interview but at an early stage in the investigation, and the negative evidence that JG had not been recorded as having red diesel in his tanks on any previous occasion. While HMRC acted reasonably in demanding available documentary evidence of tachographs and fuel receipts, and also in demanding secondary evidence such as credit card statements, it was not acting reasonably in entirely excluding the formal oral evidence. Its contention that "there was no evidence" is all too commonly taken to mean no independently sourced documentary evidence. Mr Carless rightly contended that they are not the same thing.
33. The tribunal heard evidence from two officers of Revenue and Customs, but they added little to the overall picture. Mr Carless stated that he hoped that Mr Fenton, who conducted the interviews, would attend. The tribunal accepted that HMRC had served witness statements in the proper way and that no request had been made that Mr Fenton attend. The evidence of Officer Sked confirmed the records of the testing of the vehicles and the basis of the assessments raised against both Appellants. Officer Manley had reviewed the decisions. But she was unable to answer specific questions put by either Mr Carless or the tribunal in any detail at all. In particular, she was unable to assist the tribunal with the missing details of the invoices taken from JG that were not put in evidence. The tribunal took into account this failure of HMRC to produce copies of even the limited documentary evidence that it had seen when assessing the overall evidence. It also records that it put no weight at all on allegations in this evidence about the structure of the fuel tanks on the seized vehicles as Officer Manley was unable to assist the tribunal with any detail of the allegations and HMRC had failed to produce any specific evidence about them. However, it is not in dispute that the secondary tanks were in existence and increased the tank capacity of the vehicles.

The tribunal's decision on JG's vehicle use

34. The tribunal finds itself with not only a lack of primary documentary evidence but also inconsistent evidence from JG and an unreasonable assessment by HMRC. For JG it was accepted that some red diesel had been used, and that an assessment of £500 might be reasonable. For HMRC the contention is that JG must pay £49,171 after adjustments for red diesel assumed to be used during the period 1 02 2002 to the date of seizure on 13 10 2004.
35. The tribunal finds that JG owned his vehicle, and drove it commercially with regularity, throughout the three years covered by the assessment. It does not accept that he was ill or had retired to the extent that he was inactive for any long period during those years. It was offered no medical evidence either of any general inability to sustain driving or of any individual significant period of illness, and it does not find that there was any such period. Nor was it offered any evidence of any lengthy period when the vehicle was out of action or any long period of holiday. The one period of which it had evidence, the six weeks leading to the seizure, showed average usage of just under 200 miles a calendar day. But the tribunal is prepared to accept that for a month or so a year, though not in any one period, JG was not fully fit to drive. It is also prepared to accept that for a similar period a year he was not driving for other reasons – either lack of work or through choice.
36. HMRC estimate of vehicle use was 197.34 miles a day over the period for which it had evidence (43 calendar days). The Appellants did not offer any other detailed evidence. JG's own estimate in oral evidence was that he would drive about 200 miles a day. He gave evidence that his driving speed on fast roads was usually limited to 50 miles per hour. He also gave evidence that he was conscious of the tachograph records of hours. And he gave evidence that a round trip of about 1,000 miles to mainland Europe would take him about 5 days. The tribunal accepts the HMRC estimate as the starting point for its own calculation. It does so not only because it is for the Appellants to show that the estimate is wrong, and they have not done so, but also because such evidence as was produced for the Appellants suggested that the estimate was fair rather than unfair. For convenience of calculation, the tribunal rounds that to 200 miles a calendar day. This does not assume that JG drives on each of those days. It assumes that he may drive on some weekends and not others, just as he may have work on some weekdays and not others. It also assumes that there will be days of much higher mileage offsetting days of low mileage. On a long haul at JG's speed, the daily average would only take four hours of driving time so could easily be exceeded during a full working day. The tribunal therefore considers that JG is to be treated as driving 200 miles a calendar day for 10 months of the year, but not more. Again rounding, it takes that as 300 days, or 60,000 miles a year. This mileage is assumed to have included 6 foreign trips of 5 days each in a year. Again rounding the calculation, that is 300 days driving of which 30 are out of the UK and 270 in the UK.
37. The tribunal takes fuel use to be 10 miles per gallon. Both sides suggested 9.5 miles per gallon (on figures put at 9 to 10 miles per gallon in evidence), but this rounding offsets the rounding up of daily mileage and makes for a clear estimate. On that basis, in broad terms, JG drove 200 miles for each of 270 calendar (not working) days in the UK so using 20 gallons a day, or a total of 5,400 gallons. If it is assumed that JG used taxed British fuel to run to Dover and a minimum of British purchased fuel while abroad, and that he returned from each of his six trips with full tanks, then it is correct to exclude not only the mileage abroad, but also fuel for the run to Dover for each of the six annual foreign trips, say 20 gallons a trip, and the use in Britain of the full tanks on return to Britain. The tank size was said to be 140 gallons when full. So the net use of taxed fuel or foreign fuel on British roads for these trips would be some 960 gallons. If that 960 gallons is excluded from the 5,400 gallons, then the remaining use of non-foreign diesel amounts to 4,440 gallons a year.
38. How much of the non-foreign fuel was red diesel rather than taxed white fuel? It is for the Appellants to disprove the HMRC assessment. That the Appellants have completely failed to do. JG admitted some red diesel use, and an ignorance of the need to avoid using red fuel off road. It is consistent with JG's admission that where he could he would have used red diesel off road. The tribunal agrees that HMRC is fully justified in assuming, in the absence of any other evidence, that shunting or similar work would be done on red diesel. And it is consistent with JG's own evidence that his fuel use would have been significantly higher in gallonage for the miles driven while off road. JG's evidence as a whole gives no indication of the extent of off road vehicle use as against on road vehicle use. However, he mentioned in his formal interview and in evidence to the tribunal that there were periods when the vehicle was used non-stop for three or four days at a time loading a ship. That would add up to significant fuel use if there were a similar number of shunting contracts as there were foreign trips.
39. The third kind of work was delivery runs in Britain. The only direct documentary evidence of expenditure on fuel for these runs is the group of fuel receipts for British taxed white diesel taken into account when calculating total vehicle mileage. However, these were not produced to the tribunal, and it can only accept what HMRC accepted in the assessments. These show the purchase of 118 gallons of taxed fuel in April and May 2004. JG stated that he did not use red diesel on road, but he could produce no evidence of this.
40. The tribunal also finds that it does not accept JG's evidence without any corroboration that he did not use red diesel for on road work. By his own admission he purchased red diesel from an informal source available where his vehicle was based. And he was clearly aware both of the prices of the various fuels he could buy and also of the risks of being checked for fuel use. Further, the complete inability of JG to produce any records or evidence even after taking account of the loss of the packet and the records it contained, combined with a repeated lack of detail that could be confirmed or checked in the formal interview and in the total presentation of evidence to the tribunal renders the oral evidence of JG generally open to question. The tribunal has accepted his evidence on foreign trips because that clearly makes business sense even in the absence of any records, and it has accepted his uncorroborated evidence that his diabetes, age, other problems and some disinclination stop him working full time. The tribunal finds that both are probable in the light of all the evidence. It also finds it probable that JG did use taxed white fuel once the foreign fuel had been used up during periods other than the short period covered by the receipts seized in his vehicle. It does not regard that short sample pattern of purchases as being totally outside the usual pattern of use, and it is also concerned that HMRC relied on those receipts but did not produce them to the tribunal. The tribunal is therefore unable to form an accurate or firm view about partial use on the basis of that evidence. It must therefore rely on its best judgment on all the evidence. It finds that the Appellant has not persuaded it on the balance of probabilities that that aspect of the HMRC assessment was entirely wrong. But the fairest result, taking into account the loss of evidence and the failure of HMRC both to accept further evidence and to produce the evidence it did accept, is to make a broad assumption that JG used red diesel for one half only of his non-foreign mileage.
41. Balancing all these aspects the tribunal's decision on JG's fuel use is as follows. The tribunal accepts that foreign trips occurred, with foreign fuel purchases, as set out above. The tribunal sees no evidence to rebut its assumption that all off road work was done by JG, where possible, with red diesel. There was evidence that the JG purchased 118 gallons of taxed fuel during the only period for which any receipts were available. Taking those gallons into account, JG is to be treated as using red diesel for two thirds of the mileage not undertaken on foreign fuel.
42. The tribunal therefore finds that JG is assessable to duty on the use of rebated fuel between 01 01 2002 and 13 10 2004 on the basis that he used on average 2,960 gallons of rebated fuel (2/3rds of 4,440) purchased in Britain per year. This includes credit for invoices produced. JG's appeal is allowed to that extent.
43. The tribunal directs HMRC to calculate the amount of duty payable by JG on that basis. If JG and his representative do not agree that calculation, then it is to be referred to the tribunal to decide the precise sum payable.

LG's evidence of his vehicle use

44. LG owned three vehicles at the time that the HMRC Road Fuel Unit made its inspections. Vehicle N3 LEX was inspected on the same day as JG's vehicle was inspected. It is accepted that this vehicle was acquired by LG on 18 07 2004. 12 tachographs were seized at the same time as the vehicle. These indicated that the vehicle had travelled 3,227 miles between 22 07 2004 and the day of seizure, though somewhat unevenly. For example, the tachographs suggested that the vehicle travelled 615 miles on 21 and 22 09 2004, but only 4 miles in the final two weeks before seizure. HMRC calculated that 339 gallons of fuel were used between acquisition and seizure. LG produced no fuel receipts at all. HMRC therefore assumed that the fuel used was all rebated red fuel, and assessed LG for £610.31 duty on that fuel.
45. Vehicle L840 RLG was acquired on 2 12 2002. It was seized after inspection on 20 10 2004. On seizure, invoices and tachographs indicated that the vehicle had travelled 61,961 miles between 13 01 2004 and seizure on 20 10 2004. Again, no fuel receipts or invoices could be produced. HMRC calculated fuel use of 15,929 gallons over the ownership of the vehicle, and assessed the duty payable on that fuel at £35,057.64. LG stated that he had sold L840 RLG. In the formal interview, he stated that he had sold the vehicle maybe a year ago to someone whose name he could not recall. Later in the same interview he stated that it was his vehicle until "a couple of months ago". He was also asked if he had a receipt for the sale, and replied that he might have – he was not quite sure. He did not suggest that the receipt was put in the jiffy bag. LG gave evidence to the tribunal that L840 RLG was tested after he had sold the vehicle to his brother, and that therefore this assessment was nothing to do with him. Under cross-examination, he stated again that it had been sold to his brother in one of the two months before the seizure. When he was told that according to the Driving and Vehicle Licensing Agency ("DVLA") he was still registered as owner, he commented that he had asked DVLA to change the registration twice, but in his view HMRC had stopped them registering the sale. The tribunal accepted the evidence given by Officer Sked that the vehicle had remained registered in LG's name and that he had been told this by HMRC on at least two occasions during the conduct of the appeal. It completely rejected the suggestion that HMRC had anything to do with any failure of DVLA to register the change of vehicle. It noted that it would have been very easy for LG to get evidence from his brother that he had sold the vehicle if that was the case, but that LG had himself given completely inconsistent evidence about whether there had been a sale in the formal interview and had given an explanation that the tribunal felt lacked all credibility to the tribunal itself. Further, if HMRC had seized a vehicle that had recently been purchased by his brother or anyone else, why had he not taken steps to involve them in the appeal? The tribunal does not accept that LG was not responsible for L840 RLG when it was seized.
46. There is some evidence that LG also had a third vehicle of which the tribunal was given limited detail by either party. The tribunal was not told of any assessment for use of rebated fuel in any other vehicle, but the text of the interview between Mr Fenton and LG suggests that another vehicle was also checked and found not to have rebated fuel in it. If that is so, it is evidence about the nature of LG's business and the way he ran it, and the tribunal is surprised that neither party gave the tribunal more details of that aspect of the case. In particular, if HMRC had tested the vehicle as part of the same investigation then that should have been included in the evidence from the officers of Revenue and Customs about LG.
47. LG gave evidence to the tribunal about posting the package and the loss of evidence that corresponded to that of his father. As noted above, he volunteered less about the evidence provided by him at the formal interview. He stated that he had put fuel receipts in the bag, but mentioned no other specific evidence. In oral evidence to the tribunal, LG stated that HMRC had been sent "the lot" of the evidence he had. The tribunal does not accept the evidence given to it, and prefers the more contemporary evidence given by LG at the time of the formal interview. As with the evidence given by JG, there was much scope for LG to produce evidence to the tribunal from indirect sources about his expenditure, his contracts, and his vehicle use. While LG's evidence to the tribunal was not uncooperative as LG had clearly been in conversations with HMRC officials, there was little concrete detail in either the formal interview or the evidence to the tribunal.
48. In the interview LG described N3 LEX as the vehicle he used for off road shunting. Shunting amounted to half the total work he did in some months. But he accepted, when shown the tachographs, that the vehicle had been used on road. But he stated that the tachographs produced were the only ones available. And the tachographs confirmed his statements that the vehicle had been used
49. The tribunal has already indicated that it does not accept LG's evidence that he did not own L840 RLG. But the consequence of the approach of LG that the test on that vehicle was nothing to do with him is that the tribunal has even less evidence about that vehicle, and must consider that very limited evidence against the background of the decision that it has rejected as not believable LG's account of why the vehicle was still registered in his name. There are therefore formidable obstacles in the tribunal's relying further on LG's scant evidence about this vehicle.

HMRC's view of LG's vehicle use

50. HMRC's assessment for N3 LEX is, in the view of the tribunal, fully acceptable as it stands. It is based on ownership of the vehicle from 18 7 2004 to seizure on 13 10 2004. Twelve tachographs were found with the vehicle, the first from just a few days after the vehicle was acquired by LG. So the mileage is established clearly at 3,227. HMRC assumed that the vehicle performed at 9.5 miles per gallon, and based its assessment of £610.31 on that evidence.
51. HRMC established that LG acquired L840 RLG on 2 12 2002. It decided, and the tribunal agrees, that it was still in the ownership of LG when tested and seized on 20 10 2004. An invoice showed usage as at 13 01 2004, and a series of tachographs showed usage between 17 10 2004 and 20 10 2004. During those four days the vehicle covered 2,700 kilometres, or about 1,677 miles. It covered 62,000 miles in the 282 days from the date of the invoice. This was obviously a vehicle covering considerable distances. HMRC established its average to be 219.7 miles per calendar day. If its diesel use was 9.5 miles a gallon (the figure adopted by HMRC for each assessment) then, assuming all the fuel used was red diesel, the total diesel used was 15,929 gallons and the duty due was £35,204. Allowing 66 gallons for unused fuel in the tank, the total assessment was £35,057.64.

The tribunal's decision on LG's vehicle use

52. The tribunal has little hesitation in accepting the HMRC assessment on N3 LEX as it stands. LG's appeal against that assessment is dismissed. LG admitted purchasing red diesel for this vehicle on more than one occasion, and produced no evidence of other use. It was used, he said, for off road shunting work, although he accepted that the tachograph evidence established that it had made long runs also. The tribunal finds that LG has failed to show on the balance of probabilities that the HMRC assessment was wrong in any detail.
53. The tribunal accepts the principle of the HMRC assessment of L840 RLG against LG. Although the assessment figure is high, the only available independent evidence shows a high level of vehicle use. There is no evidence at all apart from the oral evidence of LG about fuel purchase. LG offered no evidence of use of the vehicle abroad, so there is no evidence that suggests the possibility of foreign fuel purchase. And there is evidence of LG's use of red diesel off road. Nonetheless, the tribunal finds it improbable that LG would be in a position to use red diesel for the whole of the mileage covered. But it is not in a position to make more than a best judgment estimate of that amount. And it makes that estimate against the background of the failure of LG to provide more than a minimum of evidence to HMRC or the tribunal. It also has in mind that the purpose of the assessment is not to penalise LG but to make good the loss of duty to the Crown. This is not a prosecution but an assessment based on probability. It is probable, in the tribunal's view, that LG did use both red diesel and tax white diesel. Following the view it took in JG's appeal, its best judgment is that it should be assumed that LG used taxed white fuel one third of the time. LG is therefore to be assessed on use of red diesel for two thirds of the total. The HMRC assessment on this vehicle is therefore to be reduced from the current figures on that basis. The tribunal directs HMRC to calculate that reduction. If the parties do not agree that calculation is correct, then the matter is to be referred to the tribunal to make a specific decision. LG's appeal succeeds to that extent.

Costs

54. The tribunal finds therefore that JG's appeal succeeds in part, but against an admitted background that the principle of the assessment was valid. One of LG's appeals is dismissed, and the other allowed in part. But again the Appellant admitted that the principle of the assessment was correct. Taking the overall results into account, the tribunal makes no order for costs.
55. If figures cannot be agreed, the parties are at liberty to apply to the tribunal to determine the precise amounts of the assessments to be made on JG and LG in the light of this decision.
DAVID WILLIAMS CHAIRMAN RELEASED: 23 June 2006

LON/05/8042