HMRC Excise Duty Assessment on Importation of Tobacco into UK

The case of Eveleigh v HMRC [2023] UKFTT 356 (TC) has reaffirmed the resilience of excise duty assessments, emphasising their validity even in the face of criminal sanctions and forfeiture. The FTT upheld a significant excise duty assessment despite concurrent criminal charges and seizures. The appellant was found liable for smuggling 1,160 kg of undeclared tobacco into the UK, resulting in an 18-month suspended sentence. The decision reinforced the principles underpinning excise duty assessments, underscoring the importance of strict liability and the non-disproportionate nature of such levies, even when combined with other penalties. High quality legal representation in this area remains crucial.

What is Excise Duty?

Excise duty, or excise tax, is an indirect tax applied to specific goods, such as tobacco, alcohol, and gasoline. It is collected from manufacturers, producers, or importers but is ultimately paid by consumers through higher product prices. This tax serves multiple purposes, including revenue generation for government funding, discouraging the use of harmful or luxury items, and regulating certain industries and environmental concerns. The complexity of excise duty lies in varying tax rates for different products and its use as a regulatory tool. It can also be applied to imported goods, ensuring consistent tax treatment. Excise tax revenue may be earmarked for specific purposes, depending on government policies. It’s essential for businesses and consumers to stay informed about regional excise tax regulations, which can differ significantly from one country to another.

Eveleigh v HMRC

Eveleigh v HMRC was a high-stakes legal encounter where the appellant challenged HMRC’s decision to impose a substantial excise duty assessment of £121,666. This assessment arose from the appellant’s importation of a substantial 1,160 kg of tobacco from France into the United Kingdom. However, the narrative took a dramatic turn when UK Border Force intercepted the appellant’s vehicle at the UK Zone Coquelles. Inside the vehicle, they discovered a significant quantity of undeclared tobacco, prompting an investigation.

The appellant found himself liable for half of the assessed duty, with another passenger held accountable for the remaining half. The tobacco and the vehicle were seized under section 139 of the Customs and Excise Management Act 1979, as it was believed that the tobacco was intended for commercial purposes. Furthermore, criminal charges were brought against the appellant for knowingly participating in the fraudulent evasion of excise duty, and on April 24, 2018, he pleaded guilty to these charges, resulting in an 18-month suspended prison sentence.

What is an Excise Duty Assessment?

An excise duty assessment is an official calculation made by a government tax authority (i.e. HMRC) to determine the amount of excise duty owed by an individual or business. The assessment involves calculating the amount of tax owed based on predetermined rates and notifying the taxpayer of their obligation to pay. Taxpayers must adhere to the assessment, maintain records of relevant activities, and have the option to appeal if they disagree with the assessment. Excise duty assessments are crucial for governments to collect taxes on specific goods and regulate their consumption while generating revenue.

HMRC Excise Duty Evasion Dispute

At the heart of the appellant’s argument was the assertion that issuing an excise duty assessment after criminal penalties had already been imposed was disproportionate. The argument was grounded in the contention that, while chargeability to excise duty is mandated by Council Directive 2008/118/EC, the manner of levy and collection is within the discretion of the Member State. The pivotal wording in Section 12 of the Finance Act 1994 stated that “the Commissioners may assess the amount of duty due from that person and notify that amount to that person.” The appellant argued that Parliament’s use of “may” instead of “shall” meant that HMRC had the discretion to assess and had the power to waive collection if doing so would result in disproportionality.

The First-tier Tribunal (FTT) Ruling

Despite the appellant’s compelling arguments, the FTT dismissed the appeal, referencing the precedent set in HMRC v Perfect [2019] EWCA Civ 465. This pivotal case affirmed several key principles:

• HMRC must assess the person found to be holding the goods when that is the only excise duty point that can be established.

• The public interest in ensuring excise duty payment may necessitate strict liability for anyone holding the goods.

• Strict liability is an accepted feature of the excise duty regime.

• Fairness and proportionality are foundational in EU law and common law, but they do not automatically exclude the imposition of strict liability.

The FTT also drew upon Kevan Denley v HMRC (2017) UKUT 340 (TCC), wherein the Upper Tribunal noted that the cumulative effect of forfeiture, assessment, and penalty might be relevant in exceptional cases but not in ordinary ones. In their view, this case did not qualify as an exceptional one, as the appellant had engaged in smuggling for financial gain, and the law was designed to deter such activities.

The Significance of the Decision

The decision in Eveleigh v HMRC carries profound significance for the field of excise duty and taxation law. It reiterates that criminal sanctions, the forfeiture of goods, and the seizure of property do not render an excise duty assessment disproportionate or invalid. This ruling emphasises that strict liability remains a cornerstone of the excise duty system, a principle that has been affirmed time and again in jurisprudence.

Moreover, the decision clarifies that proportionality is a relevant factor when assessing penalties, but it does not apply to the duty itself. This nuanced understanding separates the core excise duty from the associated penalties, underlining the importance of legal precision in this complex field. This case underscores the need for careful and precise legal representation in matters of excise duty, and it serves as a beacon of clarity in a complex and evolving area of law. The outcome of this case is a reminder that legal precision and an understanding of the core legal principles are essential in navigating the intricacies of excise duty law. It is exactly the type of precision and understanding our lawyers at LEXLAW have to assist you with your excise or any other duty taxes.

Expert London Duty Evasion Lawyers

If you need HMRC Duty Evasion advice, we are available to aid you at every stage of the HMRC investigate process. Members of our legal team have first-hand experience and knowledge of the internal workings of HMRC. We can provide you with the very best representation in negotiations with HMRC and defending all forms of HMRC fraud, tax inquiry, tax fraud investigation, criminal tax evasion and HMRC enquiries and investigations. Our team specialises in successfully challenging HMRC decisions and will assist you in every aspect of the investigation.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and respected advice, which can make a pronounced difference to eventual tax penalties, charges and liability.

HAVE YOU BEEN CHARGED WITH DUTY EVASION FRAUD? We provide urgent advice and representation to clients from our unique expert team of established Tax and Duties specialist solicitors and barristers with a proven track record of delivering authoritative results. Just call us on 0207 1830 529, or email [email protected].