Hill Dickinson has succeeded in persuading Her Majesty’s Revenue and Customs (HMRC) to withdraw Assessments and Penalty Notices to the value of £1 million against two North West businesses in the logistics sector.
The assessments and penalties arose from the transportation and delivery of alcohol and tobacco on which HMRC alleged that Excise Duty had not been paid. The goods in question in both cases had originated in Europe and had been imported into the UK.
The businesses had been deemed to be ‘holding’ the goods after they had been transported into the UK and HMRC sought to hold them responsible for paying the Excise Duty, even though they lacked any knowledge that the duty had not been paid.
HMRC has enjoyed increasing success in recovering Excise Duty against hauliers under The Excise Goods (Holding, Movement and Duty Point) Regulations 2010, which, if strictly interpreted, can mean that anyone holding alcohol or tobacco can be made liable for any unpaid duty. For hauliers, the problem is particularly serious given that a full container of cases of wine can attract duty of £29,000 and a container of tobacco upwards of £1 million.
Simon Ellis from Hill Dickinson’s commercial litigation team said: “These are two significant victories for our clients and for businesses operating in the logistics sector. It represents a serious setback for HMRC’s attempts to recover Excise Duty from companies involved in the legitimate transportation of alcohol and tobacco.
“The impact on legitimate businesses in this sector has been severe. In the well-known case of Abbey Forwarding v HMRC, HMRC put the company into liquidation through Duty Assessments for £5 million and sought personal liability orders against the directors, only to withdraw the Assessments without explanation 2 years later. Only now is compensation being addressed. To overturn Assessments at the earliest possible stage can therefore be a matter of survival for an SME and it is vital to obtain good legal advice from the outset.”
Following a thorough investigation of the circumstances surrounding the movement of the goods, Hill Dickinson was able to demonstrate that HMRC was vulnerable in both cases to claims of abuse of process in its application of the Regulations.
Against that background, HMRC withdrew the duty assessments of over £1 million against the two companies in question, rather than risk proceedings in the First Tier Tax Tribunal.