Charlene Hughes v The Commissioners for HMRC

Where unpaid excise goods have passed through a supply chain, HMRC must assess the earliest excise duty point which can be established. A person challenging an assessment on the basis of an earlier duty point bears the burden of proving the material facts needed to identify that point and the person liable.

For the duty point arising from holding unpaid goods outside duty suspension, physical possession establishes holding. A beneficial interest in the goods, and knowledge that excise duty is unpaid, are not required. Strict liability under the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 does not, without more, infringe EU fairness or proportionality principles.

HMRC assessed Charlene Hughes for excise duty of £213,332 on 953,260 non-duty-paid cigarettes seized from a shed at her property. She had pleaded guilty to an offence under section 170(1)(b) of the Customs and Excise Management Act 1979, on the basis that she had harboured the cigarettes for another person.

The First-tier Tribunal dismissed her appeal in a decision released on 3 November 2022. It found that she had physical possession of the cigarettes, knew they were duty unpaid, and had not established an earlier duty point.

On appeal, she challenged the findings on holding, the alleged earlier duty point, the relevance of her criminal plea, and the compatibility of the assessment with fairness and proportionality. The central issue was whether an earlier assessable duty point had been established so as to displace liability arising from her holding of the cigarettes.

1. Appeal dismissed. The First-tier Tribunal made no error of law in upholding the assessment.

2. HMRC must assess the first duty point that it can establish, rather than a later point merely because it is more convenient. However, an earlier release for consumption cannot displace an assessment unless sufficient facts establish it. A challenger must establish the identity of the earlier holder, the relevant control, time and place. The appellant bore that burden under section 16(6) of the Finance Act 1994.

3. The existence of an earlier supply-chain event was logically possible, but did not establish an earlier assessable duty point. The First-tier Tribunal was entitled to find that HMRC had investigated that possibility unsuccessfully and that the appellant had supplied virtually worthless identifying evidence. The fact that HMRC's assessment officer lacked personal knowledge of the criminal investigation did not show an error: the relevant knowledge was that of HMRC as a body. If the appellant considered that HMRC held undisclosed material, she could have sought disclosure or witness directions before the First-tier Tribunal.

4. The First-tier Tribunal correctly held that the appellant was holding the cigarettes. Under HMRC v WR Case C-279/19, as confirmed as binding in HMRC v Martyn Perfect [2022] EWCA Civ 799, physical possession was sufficient. Her lack of a beneficial interest, and the limited basis on which she had pleaded guilty, did not negate that finding.

5. The assessment did not breach EU principles of fairness or proportionality. Strict liability under the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 was not inherently unfair or disproportionate. The appellant's knowing involvement in harbouring the goods and the findings that no earlier duty point was established reinforced that conclusion.

• Upper Tribunal (Tax and Chancery Chamber): dismissed the appellant's appeal and upheld the First-tier Tribunal's dismissal of the challenge to the excise-duty assessment.
• First-tier Tribunal (Tax Chamber): dismissed the appeal against HMRC's assessment in a decision released on 3 November 2022.