Tideswell Case Highlights Key Issues in Excise Duty Liability and Penalties

Citation: [2024] UKFTT 54 (TC)
Judgment on

Introduction

The First-tier Tribunal (Tax Chamber) case of H Tideswell & Sons Limited v The Commissioners for HMRC ([2024] UKFTT 54 (TC)) addresses the critical issues surrounding excise duty liability, the identification of duty points, and the assessment of penalties for excise duty wrongdoing under Schedule 41 of the Finance Act 2008. The case provides insight into the application of legal principles concerning ‘deliberate’ behaviours in the context of excise goods possession and highlights procedural aspects related to the shifting of evidential burdens.

Key Facts

H Tideswell & Sons Limited (Tideswell) faced excise duty assessments and penalties after non-UK duty-paid cigarettes were seized from their premises. Tideswell, handled by director Julian Tideswell (JT), had rented space to an entity identified as McGrath Office Supplies. This entity, through subsequent email communications and bank transfers, arranged for the storage of goods later found to be illicit cigarettes. Upon a raid by HMRC and the arrest of Mr. Stephen Woodcock, Tideswell was assessed for duty liability and penalties on the basis that they held excise goods where duty was unpaid.

The Tribunal closely examined several legal principles, including:

  1. Excise Duty Points: The concept that excise duty becomes chargeable at the ‘first’ excise duty point which HMRC can establish with the evidence they hold. If a person like Tideswell holds goods on which duty has not been paid, they can escape liability if an earlier duty point is established.

  2. ‘Deliberate’ Behaviour: Within Schedule 41 Finance Act 2008, ‘deliberate’ conduct implies that the person knowingly held the goods with duty unpaid. Here, ‘deliberate’ also encompasses ‘Nelsonian blindness’, where an individual deliberately ignores an obvious risk.

  3. Evidential Burden Shifting: The shifting of evidential burden from one party to another during a case, which depends on whether the party initially assumed to bear the burden has made out a prima facie case shifting the need for further proof to the opposing party.

  4. Penalties for Wrongdoing: The penalty framework under Schedule 41 based on the level of culpability and provisions for reductions based on the quality of disclosure after a wrongdoing is established.

Outcomes

The Tribunal’s outcomes were twofold:

  1. Liability Appeal: The Tribunal dismissed the Liability Appeal, holding that Tideswell did not establish an earlier duty point which HMRC could assess against, and that Tideswell bore the burden to prove such an earlier point.

  2. Penalty Appeal: The Penalty Appeal was allowed with penalties reduced to 12% of the potential lost revenue. The Tribunal concluded that Tideswell’s behaviour, while careless, was not ‘deliberate’.

Conclusion

In Tideswell, the Tribunal navigated the complex terrain of excise duty liability and culpability for possessing excise goods with duty unpaid. It reaffirmed the absence of discretion for HMRC when assessing excise duty at the established duty point, the high bar set for proof of a prior duty point by the alleged holder, and the boundaries of ‘deliberate’ behaviour under Schedule 41. Crucially, it affirmed the statutory allocation of the burden of proof in cases under section 16 Finance Act 1994, marking a firm line on the expectations from appellants in proving their cases against HMRC assessments.

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