Qais Majeed Ali v The Commissioners for HMRC

Where excise goods have been released for consumption, HMRC must assess the earliest person liable whom the evidence enables them to identify. The question is whether that person can be assessed, not whether recovery is commercially likely. A trader’s lack of business activity or resources does not prevent assessment.

A person’s physical possession is not conclusive of whether they are “holding” goods under the Excise Goods (Holding, Movement and Duty Point) Regulations 2010. The tribunal must consider the circumstances of possession, including legal or de facto control and the allocation of entrepreneurial risk. An appellate error is immaterial where, on the evidence, the statutory outcome could not have differed.

The appellant appealed against the First-tier Tribunal’s dismissal of his appeal against a £55,470 excise duty assessment concerning duty-unpaid shisha tobacco seized while he was unloading it from a van into a lock-up unit.

The FTT held that he was holding the tobacco under regulation 10 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010. It also considered that HMRC could assess him because the alleged earlier supplier was no longer in business. The Upper Tribunal considered whether the FTT had erred concerning an earlier duty point, whether Palm Palace Limited rather than the appellant was holding the tobacco, and whether the FTT had given sufficient reasons.

1. Earlier duty point. The FTT erred in treating the alleged supplier’s lack of business activity as relevant to whether HMRC could assess that person. Under Davison & Robinson Limited v HMRC [2018] UKUT 0437 (TCC), HMRC must assess the earliest duty point which they can establish on the evidence. That obligation is not merely discretionary and is unaffected by the prospects of recovery.
2. The error was immaterial. The appellant bore the burden of identifying an earlier liable person and had produced insufficient evidence to establish who or what “The Price 30” was, who held the tobacco, or the relevant timing and control. The invoices covered only part of the tobacco and did not identify an assessable earlier holder. The FTT’s decision therefore did not require setting aside.
3. Meaning of “holding”. Physical possession is not determinative. The circumstances of possession must be examined, including whether it would be inappropriate to regard the person with physical possession as the holder. The FTT was entitled to find that the appellant was holding the tobacco because he had physical possession, responsibility for the van and lock-up, had rented and insured the unit, and had bought and paid for the goods.
4. Those features distinguished the appellant from an employed delivery driver who merely possessed goods for an employer. The later authorities also confirmed that knowledge that the goods were duty unpaid was irrelevant.
5. Reasons and disposition. The FTT gave sufficient reasons for rejecting the case that the appellant was merely Palm Palace’s employee and for explaining why he was holding the tobacco. The appeal was dismissed.

• Upper Tribunal (Tax and Chancery Chamber): appeal against the FTT decision dismissed.
• First-tier Tribunal: appeal against the excise duty assessment dismissed in [2019] UKFTT 306.