Umbro International Ltd v Revenue & Customs

On an appeal from a specialist tribunal, the High Court should respect the tribunal’s primary findings and factual inferences. Intervention is justified only where the only reasonable conclusion on the facts is inconsistent with the tribunal’s decision, or where a misconception of law is shown.

For customs valuation, whether an intermediary is a buying agent is determined by the substance of the relationship and objective criteria, applying the Community-law concept rather than technical domestic agency rules. The parties’ description of the relationship is not decisive. Relevant matters include the course of dealings, contractual documents, assumption of risk, payment arrangements, profit or mark-up, services performed and relationships with suppliers. A variable remuneration is not, by itself, inconsistent with buying agency.

Umbro appealed against a decision of the Value Added Tax and Duties Tribunal dated 12 February 2008. The Tribunal had dismissed Umbro’s claim for repayment of customs duty on the basis that Umbro had not proved that PNH Limited acted as its buying agent when purchasing sportswear from China.

The appeal was confined to points of law. The central issue was whether PNH acted for Umbro as an agent, so that its remuneration could be excluded from customs value as buying commission under the Customs Code, or instead acted as principal and retained a mark-up within the transaction price.

1. Appeal dismissed. The Tribunal had been the primary fact-finder. Its factual inferences could be overturned only if no reasonable tribunal, properly instructed in law, could have reached the decision under appeal: the approach stated in Edwards (Inspector of Taxes) v Bairstow and Another [1956] AC 14 and Potter and Another v Customs & Excise Commissioners [1985] STC 45.
2. The relevant concept of agency under the Customs Code was a Community-law concept. Technical domestic agency doctrines should not be applied where the legislation required an autonomous Community-law meaning. The inquiry was objective and concerned substance rather than form, considering the parties’ course of dealings with the assistance of the World Customs Organisation’s explanatory material: De Danske Bilimpotorer v Skatteministeriet Case C-98/05; BVBA Van Landeghem Case C-486/06.
3. The descriptions used by Umbro and PNH, including the word agent, were not determinative. Nor were the services performed by PNH, such as negotiating prices, obtaining samples, quality control and arranging transport. Those services could be performed by either an agent or a principal. The documentary arrangements pointed towards PNH acting as principal: PNH was described as supplier, assumed obligations concerning risk and quality, paid the manufacturer, invoiced Umbro at a higher overall price and retained a variable profit.
4. A variable commission was not by itself inconsistent with buying agency. However, the Tribunal was entitled to find that the absence of an agreed commission, Umbro’s lack of control over the amount retained by PNH, and PNH’s freedom to purchase at whatever price it could obtain were more consistent with a principal applying a mark-up. The fact that PNH handled branded goods did not compel a finding of agency.
5. HMRC’s treatment of a later written agreement did not govern the legal analysis of earlier transactions. Umbro therefore failed to discharge the burden imposed by section 16(6) of the Finance Act 1994, and no ground of appeal justified interference with the Tribunal’s decision.

• High Court (Chancery Division): Appeal dismissed. The decision of the Value Added Tax and Duties Tribunal dated 12 February 2008 was upheld.
• Value Added Tax and Duties Tribunal: Umbro’s appeal from the HMRC review decision was dismissed because it had not proved that PNH acted as its buying agent.
• HMRC review: The Review Officer’s decision dated 9 May 2007 upheld the Higher Officer’s decision dated 19 December 2006.