The UT in Davison & Robinson followed the reasoning in B&M Retail, but, during the course of the proceedings, HMRC qualified the limits of its discretion to issue assessments, confirming that it had a legal obligation to assess the earliest identified holder of the goods, subject to its ability to recover the duty payable.
Two recent UT cases have confirmed that a retailer who acquires goods in respect of which payment of the required duty cannot be evidenced, can be held liable for that duty.
Excise duty is payable on any excise goods that are made available for consumption in the UK and are held outside of a duty-suspension regime but on which there is no evidence that excise duty has been paid.
The duty becomes due at an 'excise duty point'. An excise duty point arises "at the time when excise goods are released for consumption in the United Kingdom”.
Regulation 6(1) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (the 2010 Regulations) sets out four situations when excise goods are 'released for consumption' in the UK.
Recent case law has focussed on the second of these situations (Regulation 6(1)(b)) which provides that excise goods are released for consumption in the UK at the time when they “are held outside a duty suspension arrangement and UK excise duty on those goods has not been paid, relieved, remitted or deferred under a duty deferment arrangement”.
B&M Retail Ltd v HMRC  UKUT 429 (TCC)
HMRC seized beer and wine purchased by retailer, B&M Retail. HMRC maintained that excise duty had not been paid on the goods and issued B&M with an excise duty assessment, pursuant to Regulation 6(1)(b).
In 2014 the First-tier Tribunal (FTT) dismissed the assessment, deciding that:
- there could not be more than one excise duty point;
- after goods had been released for consumption at an identified point (as HMRC had conceded that there had been in this case), there could not be a further release for consumption and therefore the goods could not be charged again with excise duty; and
- pursuant to Regulation 6(1)(b) of the 2010 Regulations, a person could not be liable for excise duty if, before that person held the goods, an identified excise duty point arose pursuant to Regulation 6(1)(a), (c) or (d).
However, the UT disagreed, and overturned the decision. The UT confirmed that once an excise duty point had been triggered following the occurrence of one of the four events referred to in Regulation 6(1), then it was incumbent upon HMRC to ensure that the excise duty was paid. Where HMRC was unable to assess anyone responsible for a prior release for consumption, it had discretion to assess any person found to be holding the goods within the meaning of Regulation 6(1)(b).
The UT said that in the absence of evidence to show that another person is liable, HMRC can exercise its discretion to assess by reference to the earliest point in time at which they are able to establish that the goods were held at a static location. The assessment will be issued against any person found to be holding the goods at that time (Regulation 10(1)), and any other persons involved in the holding of the goods (on a joint and several liability basis – Regulation 10(2)).
The UT decided that HMRC’s policy was not inconsistent with the legislation, and its application meant that the policy objective of the legislation is achieved – namely to ensure that excise duty that becomes chargeable is paid. It said that any challenge to the lawfulness of HMRC's policy, and the way in which decisions were taken in respect of it, was to be bought by way of judicial review.
B&M did not appeal the UT's decision.
Davison & Robinson Limited v HMRC  UKUT 437 (TCC)
In July 2017, in a case involving retailer Davison & Robinson Limited, the FTT considered the same issue that was determined in the B&M Retail case.
The FTT was bound to follow the precedent established by the UT in B&M Retail and decided the case in favour of HMRC. However, the judge gave permission to Davison & Robinson to appeal the decision to the UT, in order to test whether the UT's decision in the B&M Retail case was wrongly decided.
At the hearing, Davison & Robinson's primary case was that the B&M Retail ruling was wrongly decided; or, in the alternative, that the issue of whether there could be more than one excise duty point ought to be referred to the Court of Justice of the European Union (CJEU).
Perhaps unsurprisingly, as the UT hearing the appeal included Judge Timothy Herrington, who had been one of the judges in the B&M Retail case, the UT found that that case had been correctly decided. Further, the UT also held that the relevant principles of EU law were sufficiently clear from existing CJEU decisions such that they could determine the Davison & Robinson appeal with "complete confidence". Therefore, no reference to the CJEU was required.
However, it is worth noting that although the Davison & Robinson judgment agreed with the decision in the B&M Retail case, the judgment nevertheless provided a clarification concerning the limits on HMRC's ability to assess other participants in the supply chain for unpaid duty. The B&M Retail case had proceeded on the basis that HMRC had discretion as to who it assessed, with an assessed person's ability to challenge the reasonableness of that exercise of discretion being limited to judicial review. However, in the Davison & Robinson case, the UT confirmed that HMRC had accepted in argument that, as a matter of law, HMRC was obliged to assess against the earliest point in time at which they are able to establish on the evidence before them that excise goods have been held outside a duty suspension arrangement – in other words, in those circumstances, HMRC did not have a unfettered discretion as to who to assess. The UT concluded that the EU Directive requires an assessment to be issued in relation to the first established excise duty point.
Implications for other retailers
There are two main points to note. Despite confirming that HMRC may issue assessments to persons holding goods on which excise duty has not been paid at the time of the first duty point arising, HMRC discretion to do so is not unfettered – they must assess the earliest holder of the goods that they identify. Accordingly, if retailers can evidence an earlier holder of the goods, they should be able to challenge an assessment for which they have primary liability. Second, the question of who is a "holder" remains open. HMRC have proceeded on the basis that "holder" means a physical holder of goods; and that it does not extend to persons who own or control (but do not physically hold) the goods. This position is likely to be tested in future court proceedings.
Davison & Robinson have applied for permission to appeal to the Court of Appeal, and have also applied for a certificate to appeal to the Supreme Court which, if successful, will leapfrog the Court of Appeal). It remains to be seen whether the case will actually reach the Court of Appeal or Supreme Court. If it does, any appeal is not likely to be heard until mid 2020 – with a decision expected later that year. Absent a further challenge, the position as determined by the UT will remain binding on persons with similar issues.