Terence Stinson (t/a Stinson Transport) v The Commissioners for HMRC

On an appeal against an assessment under Hydrocarbon Oils Duties Act 1979, section 13, the First-tier Tribunal must determine the correct amount of duty. It has full fact-finding jurisdiction and is not confined to deciding whether HMRC’s estimates, inferences or methodology were reasonable.

Section 13 does not impose a statutory requirement of “best judgment”. Although HMRC may infer wider use of rebated fuel and estimate its quantity, a taxpayer may challenge the factual basis of the assessment. The taxpayer bears the burden of proving the facts relied upon. A material failure to exercise that jurisdiction is an error of law requiring the decision to be set aside; remittal for a complete rehearing may be appropriate where the effect extends beyond one discrete issue.

Terence Stinson (t/a Stinson Transport) appealed against the First-tier Tribunal’s dismissal of his challenge to an excise-duty assessment of £21,665. HMRC had assessed duty under section 13 of the Hydrocarbon Oils Duties Act 1979 after finding rebated fuel in one lorry and inferring its use more widely in his fleet.

The appellant contended that the assessment overstated the use of rebated fuel because of purchases of derv in the Republic of Ireland. He also disputed assumptions concerning particular vehicles. The central issue was whether the First-tier Tribunal had treated its task as reviewing the reasonableness of HMRC’s assessment, rather than determining the correct amount of duty.

1. Appeal allowed. The First-tier Tribunal’s decision was set aside and the appeal was remitted to a differently constituted First-tier Tribunal for a complete rehearing.

2. HMRC could make an assessment under section 13 of the Hydrocarbon Oils Duties Act 1979 by inferring use of rebated fuel throughout a fleet from evidence relating to one vehicle, and by estimating the amount used. Those powers did not establish that the resulting assessment was correct.

3. On an appeal against such an assessment, the First-tier Tribunal had jurisdiction to decide the correct amount of duty. It was required to determine factual challenges to the assumptions underpinning the assessment, including mileage, fuel efficiency and purchases of dutiable fuel. It was not restricted to asking whether HMRC had acted reasonably or made an assessment to “best judgment”. There was no statutory best-judgment requirement under section 13. The taxpayer bore the burden of proving facts relied upon to challenge the assessment.

4. The First-tier Tribunal’s repeated conclusion that HMRC had acted reasonably and to best judgment, particularly when rejecting the asserted derv purchases, showed a material misunderstanding of its jurisdiction. Reading the decision as a whole did not cure that error. Its treatment of Thomas Corneill v HMRC [2007] EWHC 715 (Ch) and Gora & Ors v HMRC [2003] EWCA Civ 525 did not demonstrate that it had applied the correct approach.

5. The error clearly affected the derv issue and might also have affected findings about the vehicles. The Upper Tribunal could not safely remake the decision because the material before it was incomplete and the calculation of the assessment remained disputed. Under section 12 of the Tribunals, Courts and Enforcement Act 2007, the proper course was a complete rehearing without restricting the evidence to that previously served.

• Upper Tribunal (Tax and Chancery Chamber): Allowed the appeal, set aside the First-tier Tribunal’s decision and remitted the case to a differently constituted First-tier Tribunal for reconsideration: [2020] UKUT 51 (TCC).

• First-tier Tribunal: Dismissed the appellant’s challenge to HMRC’s section 13 assessment, in a decision released on 15 April 2014.