The Commissioners for HMRC v Martyn Glen Perfect

A person who physically holds or delivers excise goods may be liable for duty without knowing that duty is unpaid, if the applicable EU and domestic provisions impose liability by reference to objective possession or control. Whether that strict-liability interpretation is required by Council Directive 2008/118/EC was not acte clair and required a preliminary reference. Fairness and proportionality do not necessarily exclude strict tax liability, although they may bear differently on criminal sanctions and penalties. A penalty requires separate consideration. Where conduct was not deliberate and the person had no practical means of discovering the irregularity, the reasonable-excuse defence may apply.

HMRC assessed Martyn Perfect, an HGV driver, for excise duty and imposed a penalty after he brought beer into the United Kingdom from another Member State using invalid movement documentation. The First-tier Tribunal discharged both the assessment and penalty, finding that he had no actual or constructive knowledge of the attempted duty evasion and was an innocent agent. The Upper Tribunal (UT/2016/0038) dismissed HMRC’s appeal on the assessment and upheld the discharge of the penalty on reasonable-excuse grounds. HMRC appealed on whether regulation 13 of the Excise Goods (Holding Movement and Duty Point) Regulations 2010 imposed strict liability, and whether the absence of knowledge constituted a reasonable excuse under Schedule 41 to the Finance Act 2008.

1. First ground: reference to the CJEU. The appeal raised a question of EU law that was not acte clair. The policy of Council Directive 2008/118/EC was to ensure that excise duty was paid on goods released for consumption and that untaxed goods did not circulate alongside goods on which duty had been paid. That policy supported HMRC’s contention that the natural meaning of “holding” and “making delivery” did not require awareness of the goods’ tax status. Strict liability appeared to be an accepted feature of the regime.
2. There was substantial countervailing authority. In Taylor and Wood v R [2013] EWCA Crim 1151 and Tatham v R [2014] EWCA Crim 226, the Criminal Division had treated actual or constructive knowledge of the duty payable as relevant to whether a person was a holder. Those observations were not obiter because they had been factors in deciding whether confiscation orders should be imposed.
3. The Court formulated two questions concerning whether a fee-paid carrier in physical possession of excise goods is liable under Article 33(3), where the carrier knows the goods are excise goods but does not know, and has no reason to suspect, that duty has become chargeable, and whether the answer differs where the carrier does not know the goods are excise goods. The first ground was adjourned pending the CJEU’s preliminary ruling.
4. Second ground: penalty. The Upper Tribunal was plainly correct to discharge the penalty under paragraph 20 of Schedule 41 to the Finance Act 2008. Mr Perfect had no interest in the goods, was not involved in the conspiracy, followed instructions, had apparently valid documentation, and had no means of checking whether the administrative reference code had already been used. His conduct was not deliberate and was capable of giving rise to a reasonable excuse.
5. HMRC’s appeal concerning the penalty was refused.

• Court of Appeal (Civil Division) — [2019] EWCA Civ 465: first ground adjourned pending a preliminary ruling from the CJEU; HMRC’s appeal concerning the penalty refused.
• Upper Tribunal (Tax and Chancery Chamber) — UT/2016/0038: HMRC’s appeal dismissed as to the assessment; the penalty was discharged on reasonable-excuse grounds.
• First-tier Tribunal (Tax Chamber) — decision dated 19 October 2015: Mr Perfect’s appeal allowed and the assessment and penalty discharged.