Key Facts
- •Caerdav Ltd imported an aircraft into the UK in November 2016 for repairs on behalf of Fastjet plc.
- •The aircraft had previously undergone maintenance in Bulgaria and was destined for the USA after the UK.
- •Caerdav's end-use authorisation had expired, leading HMRC to issue a demand note for £330,633.45 in customs duty and import VAT.
- •HMRC initially suggested no liability arose before changing their view.
- •Caerdav appealed to the First-Tier Tribunal (FTT), which dismissed their appeal.
- •Caerdav appealed to the Upper Tribunal (UT) on six grounds.
Legal Principles
Inward Processing relief
Union Customs Code (UCC) and Commission Implementing Regulation (EU) 2015/2447 (IR)
Remission of duty on grounds of equity
Article 120 UCC
Legitimate expectation (EU and UK law)
EU case law (Hewlett Packard, Firma Söhl, Drax); UK case law (MFK Underwriting Agents, Bancoult, Glint Pay Services)
Proportionality (EU law)
Article 5(4) EU Treaty
Jurisdiction of the FTT to consider public law arguments
Sections 83(1)(b) Value Added Tax Act 1994 (VATA), 13A(2) & 16(5) Finance Act 1994, KSM Henryk Zeman PP Z.o.o. v HMRC [2021] UKUT 182 (TCC)
Outcomes
Ground 1 (Inward Processing): Dismissed
The FTT correctly found that the aircraft was subject to a direct export from Bulgaria to the US, not an indirect export through the EU. The Inward Processing procedure was discharged when the aircraft left EU airspace.
Ground 2 (Remission of duty): Dismissed
Caerdav failed to demonstrate 'special circumstances' under Article 120 UCC and 'obvious negligence' was found on their part for failing to renew their EUA.
Ground 3 (Legitimate Expectation - EU law): Dismissed
Even if the FTT had jurisdiction to consider EU legitimate expectation under Article 120, the conditions were not met. HMRC's statements did not provide the necessary assurances.
Ground 4 (Proportionality): Dismissed
The FTT correctly focused on the proportionality of the legislation as a whole, not its application to this specific case. The overarching system, including provisions for special procedures and remission, was considered proportionate.
Ground 5 (Legitimate Expectation - UK law): Dismissed
The FTT correctly ruled it lacked jurisdiction to consider this ground under the relevant statutory provisions. Even if it had jurisdiction, HMRC's statements were not sufficiently clear and unambiguous to create a legitimate expectation.
Ground 6 (Dispute over aircraft value): Dismissed
The FTT's refusal to allow Caerdav to introduce a new ground of appeal regarding the aircraft's value was a proper exercise of its case management discretion.