HM Revenue & Customs v Perfect [2017] UKUT 476
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HM Revenue and Customs v Perfect [2017] UKUT 476 (TCC) is an appeal by HMRC, heard by Mrs Justice Whipple and Judge Ashley Greenbank, against a First‐tier Tribunal decision allowing the appeal of a lorry driver assessed to excise duty and a penalty after he was found carrying undischarged excise goods; the Upper Tribunal dismissed the appeal save for setting aside the FTT’s reasoning on the penalty, which it remade to the same effect. Mr Perfect, a self‐employed driver, was stopped at Dover on 6 September 2013 carrying 26 pallets of beer on which duty was unpaid. HMRC assessed him to £22,790 excise duty under regulation 13 of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 and imposed a penalty of £4,897.48 under paragraph 4 of Schedule 41 to the Finance Act 2008. The paperwork accompanying the goods was invalid; the goods were not covered by a valid Administrative Electronic Document and duty was due. Mr Perfect’s appeal to the FTT succeeded on the ground that he was an “innocent agent” lacking actual or constructive knowledge of the fact that the goods were liable to excise duty that had not been paid. HMRC upheld the assessment and penalty on review but Mr Perfect appealed. The FTT found that Mr Perfect had neither actual nor constructive knowledge of the smuggling attempt and that HMRC had conducted only a very limited investigation, making no effort to trace those actually responsible for the fraud. The FTT allowed both the assessment and penalty appeals, treating the penalty as falling with the assessment. HMRC’s primary case was that regulation 13 imposes strict liability on anyone “holding” or “making delivery of” goods, including someone in Mr Perfect’s position who knew he was carrying beer (goods of a kind liable to duty) even if he did not know duty was unpaid. HMRC also argued that even if the assessment failed, the penalty under Schedule 41 operated independently and applied to Mr Perfect on its terms. The Upper Tribunal examined the scheme and purpose of Council Directive 2008/118/EC (which the 2010 Regulations implement) and relevant case law, in particular R v Taylor and Wood [2013] EWCA Crim 1151 and R v Tatham [2014] EWCA Crim 226. In Taylor and Wood the Court of Appeal had held that hauliers Yeardley and Heijboer, who believed they were carrying textiles but were in fact carrying smuggled cigarettes, were “innocent agents” and not liable for the unpaid duty because they had no knowledge, actual or constructive, of the nature of the goods or the duty unpaid on them; by contrast, those exercising control over the goods and orchestrating the fraud were liable. In Tatham the Court summarised the principles, stating that a courier or person in physical possession who lacks both actual and constructive knowledge of the goods or the duty payable cannot be the “holder” within regulation 13. The Upper Tribunal rejected HMRC’s submission that the innocent agent exception applies only where the agent does not know the nature of the goods as excise goods. It held that the exception extends to anyone who lacks actual or constructive knowledge of the criminal enterprise or the fact that duty is unpaid, regardless of whether the person knows the goods are of a kind subject to excise duty. The Tribunal emphasised that the regulations aim to impose liability on those who are responsible for the goods and that it would be neither fair nor proportionate to fix liability on drivers in possession at the point of discovery who have no involvement in or knowledge of the evasion. The Tribunal considered itself bound by the Court of Appeal’s conclusion in Taylor and Wood that imposing liability on entirely innocent agents would run contrary to the objectives of the directive and domestic legislation. It found that HMRC’s interpretation was unsupported by authority or principle and that the exception for innocent agents, as established by the case law, covers those without knowledge (actual or constructive) that goods are or will be duty unpaid. Such persons are not “making the delivery” or “holding” the goods within the meaning of regulation 13. The Tribunal declined to refer a question to the Court of Justice of the European Union, considering the matter clear as a matter of EU law. On the penalty, the Tribunal noted that the FTT had wrongly assumed that discharge of the assessment automatically led to discharge of the penalty, when in fact both parties had agreed below that the penalty regime in Schedule 41 operated independently. The Tribunal accepted Mr Bedenham’s alternative submission that Mr Perfect had a reasonable excuse within paragraph 20 of Schedule 41, namely that he was innocent of wrongdoing and lacked any knowledge, actual or constructive, of the criminal enterprise. It set aside the FTT’s decision to discharge the penalty (because the FTT’s reasoning was wrong in law) but remade the decision to the same effect, discharging the penalty on the ground of reasonable excuse. In short, the appeal succeeded only to the extent of correcting the legal basis on which the penalty was discharged; the assessment and penalty both remained quashed because Mr Perfect was an innocent agent without knowledge, actual or constructive, of the duty evasion.
Others v HMRC [2016] UKUT 0479
CCE v B&M Retail Ltd [2016] UKUT 0429
Taylor and Wood [2013] EWCA Crim 1151
Re Atlantic Computer Systems plc [1990] BCC 899
Tatham [2014] EWCA Crim 226
May [2008] UKHL 28, [2008] AC 1028
Mitchell [2009] EWCA Crim 214
White and Others [2010] EWCA Crim 978
R v Bajwa [2012] 1 WLR 601
Greenalls Management Ltd v Customs and Excise Commissioners [2005] 45 UKHL 34; [2005] 1 WLR 1754