“(8) Since it remains necessary for the proper functioning of the internal market that the concept, and conditions for chargeability, of excise duty be the same in all Member States, it is necessary to make clear at Community level when excise goods are released for consumption and who the person liable to pay the excise duty is. … (10) Arrangements for the collection and reimbursement of duty have an impact on the proper functioning of the internal market and should therefore follow non-discriminatory criteria. … (15) Since checks need to be carried out in production and storage facilities in order to ensure that the tax debt is collected, it is necessary to retain a system of warehouses, subject to authorisation by the competent authorities, for the purpose of facilitating such checks. (16) It is also necessary to lay down requirements to be complied with by authorised warehousekeepers and traders without authorised warehousekeeper status. (17) It should be possible for excise goods, prior to their release for consumption, to move within the Community under suspension of excise duty. Such movement should be allowed from a tax warehouse to various destinations, in particular another tax warehouse but also to places equivalent for the purposes of this Directive.”
“(1) Whether the domestic law requirement for a non-UK established business to have a “duty representative” in order to own warehoused goods and the corresponding imposition of an excise duty point if there is no such duty representative have a basis in EU law or are contrary to EU law on excise duty. (2) Whether [the same provisions] are contrary to the EU law prohibition on discrimination and the principle of freedom of establishment. (3) Whether the due diligence requirements imposed on duty representatives and/or authorised warehousekeepers by HMRC, inter alia, through their interpretation of Excise Notice 196 are contrary to EU law.”
“Financial health of the company you intend trading with Identity of the business you intend trading with Terms of any contracts, payment and credit agreements Transport details of the movement of the goods involved whether or not you are directly involved in this Existence/provenance of goods – where goods are said to be duty paid you should normally seek sufficient detail to satisfy yourself of the status of the goods The Deal, understanding the nature of the transaction itself, including: • how the cost of the goods is built up, for example, whether it includes appropriate taxes, transport etc • why is it being offered • whether it is too good to be true • how the deal compares to the market generally”
“I do not think it is realistic to say that the claimant should have put up or shut up as soon as the regulations came into force. It was not obliged to confront the question of their lawfulness unless or until the Commissioners took a decision which would result in the provisions now impugned having an adverse impact on its business.”
“1. “authorised warehousekeeper” means a natural or legal person authorised by the competent authorities of a Member State, in the course of his business, to produce, process, hold, receive or dispatch excise goods under a duty suspension arrangement in a tax warehouse; … 7. “duty suspension arrangements” means a tax arrangement applied to the production, processing, holding or movement of excise goods not covered by a customs suspensive procedure or arrangement, excise duty being suspended; … 11. “tax warehouse” means a place where excise goods are produced, processed, held, received or dispatched under duty suspension arrangements by an authorised warehousekeeper in the course of his business, subject to certain conditions laid down by the competent authorities of the Member State where the tax warehouse is located.”
“(1) Excise duty shall become chargeable at the time, and in the Member State, of release for consumption. (2) For the purposes of this Directive, “release for consumption” shall mean any of the following: (a) the departure of excise goods, including irregular departure, from a duty suspension arrangement; (b) the holding of excise goods outside a duty suspension arrangement where excise duty has not been levied pursuant to the applicable provisions of Community law and national legislation; (c) the production of excise goods, including irregular production, outside a duty suspension arrangement; (d) the importation of excise goods, including irregular importation, unless the excise goods are placed, immediately upon importation, under a duty suspension arrangement.” (a) the departure of excise goods, including irregular departure, from a duty suspension arrangement; (b) the holding of excise goods outside a duty suspension arrangement where excise duty has not been levied pursuant to the applicable provisions of Community law and national legislation; (c) the production of excise goods, including irregular production, outside a duty suspension arrangement; (d) the importation of excise goods, including irregular importation, unless the excise goods are placed, immediately upon importation, under a duty suspension arrangement.”
“Registered owners 5(1) For the purposes of section 100G of the Act, the Commissioners may approve revenue traders who wish to deposit relevant goods that they own in an excise warehouse and register them as registered excise dealers and shippers in accordance with section 100G(2) of the Act. (2) A revenue trader who has been so approved and registered shall be known as a registered owner. Duty representatives 6(1) For the purposes of section 100G of the Act, and subject to paragraph (3) below, the Commissioners may approve revenue traders who wish to act as the agent of revenue traders who deposit relevant goods that they own in an excise warehouse and register them as registered excise dealers and shippers in accordance with section 100G(2) of the Act. (2) A revenue trader who has been so approved and registered shall be known as a duty representative. (3) The Commissioners shall not approve a revenue trader as a duty representative unless he – (a) has a business establishment or other fixed establishment in the United Kingdom, or (b) if he is an individual, has his usual place of residence in the United Kingdom. … Holding dutiable goods 9(1) Dutiable goods shall not be deposited in an excise warehouse or kept in an excise warehouse unless the occupier of that warehouse – (a) is an authorised warehousekeeper, and (b) is permitted by the terms of his approval to hold dutiable goods of that class or description. (2) Relevant goods shall not be kept in an excise warehouse for more than the initial period beginning with their deposit in that warehouse unless the owner of those goods – (a) is not a revenue trader, or (b) is the authorised warehousekeeper, or (c) is a registered owner who resides or has a business establishment or other fixed establishment in the United Kingdom, or (d) has a duty representative acting as his agent in respect of those goods. … [the “initial period” is defined in regulation 2 as (broadly) a period of 72 hours, excluding Saturdays, Sundays and specified public holidays] … Excise duty points – ownership of goods 21(1) Subject to paragraph (2) below, if at any time after relevant goods are deposited in an excise warehouse either – (a) those goods cease to be owned by a registered owner, or (b) there is no duty representative acting as the owner’s agent, the time when those goods ceased to be owned by a registered owner or there ceased to be a duty representative acting as the owner’s agent shall be the excise duty point for those goods. … (3) The persons jointly and severally liable to pay the duty at the excise duty point shall be – (a) the authorised warehousekeeper for the excise warehouse in which the goods were kept, (b) the owner of the goods immediately before the excise duty point, (c) if different, the owner of the goods immediately after the excise duty point, and (d) the duty representative of the owner of the goods immediately before the excise duty point.”
“Duty representatives must have a business or other fixed establishment in the UK and may only represent non-UK based owners. HMRC refers to such owners as your “principals”
“Due diligence is the appropriate reasonable care a company exercises when entering into business relations or contracts with other companies, and how it responds in a deliberate reflexive manner to trading risks identified. Without effective safeguards in place, there are considerable risks to all businesses along alcohol supply chains of becoming implicated in illicit trading. This condition requires that all excise registered businesses operating in the alcohol sector consider the risk of excise duty evasion as well as any commercial and other risks when they are trading. Doing so will help to drive illicit trading out of alcohol supply chains, and reduce the risk to businesses of financial liabilities associated with goods on which duty has been evaded. From1 November 2014 it becomes a condition of your approval as an excise warehousekeeper, registered owner, duty representative or registered consignor that you must: • objectively assess the risks of alcohol duty fraud within the supply chains in which you operate • put in place proportionate checks, in your day to day trading, to identify transactions that may lead to fraud or involve goods on which duty may have been evaded • have procedures in place to take timely and effective mitigating action where a risk of fraud is identified • document the checks which you intend to carry out and have appropriate management governance in place to make sure that these are, and continue to be, carried out as intended.” • objectively assess the risks of alcohol duty fraud within the supply chains in which you operate • put in place proportionate checks, in your day to day trading, to identify transactions that may lead to fraud or involve goods on which duty may have been evaded • have procedures in place to take timely and effective mitigating action where a risk of fraud is identified • document the checks which you intend to carry out and have appropriate management governance in place to make sure that these are, and continue to be, carried out as intended.”
“Assessing risks and carrying out checks The fraud risks within a supply chain are unique to each business, and objective assessment of the likelihood of your trading activities contributing to fraud is an essential first step to developing effective due diligence procedures. You will need to consider the full range of trading relationships you have established and the potential for fraud in each. The main risks within the alcohol sector include: • involvement in the supply of goods for fraud • receiving goods that have been smuggled or diverted into the UK • inadvertently facilitating fraud by providing import or warehousing services A key feature of the smuggling or diversion of alcohol to the UK market is the ability to source product either where the excise duty has been suspended or it has been refunded under drawback provisions. To assess your exposure to this risk you will need to objectively assess if there is potential for duty evasion resulting from your trading activity. You will need to know who you are selling to and where the goods are destined for and understand the market for these products. Without this, there is a risk of supplying goods directly or through a third party into illicit supply chains. Import and warehousing procedures are often exploited to provide cover for the illicit movement of goods. Fraudsters will seek to distribute duty evaded goods as well as counterfeit alcohol into legitimate retail supply chains. To assess your exposure to this risk you will need to objectively consider whether the supply chain and trading activity is credible which includes knowing who you source goods from and provide a service to. High level indicators of risk include goods being received from unusually complex or apparently uneconomic supply routes, for example, regular supplies of UK produced goods that have been shipped out to another Member State and then reimported. If you are sourcing duty paid goods you will also need to consider the credibility of suppliers and the level of evidence you can obtain to demonstrate the provenance and duty status of goods. Section 10.5 of this notice provides further detail on risk indicators. Once you have established the main risks of fraud you may be exposed to, your regular checks during trading should be of a type and level sufficient to establish the integrity of the excise transactions and supply chains you are trading in. This level needs to be reasonable and proportionate to the risk. Depending on the nature of your business and complexity of your transactions, checks will need to be individually tailored. In particular, they must be sufficiently sensitive, yet robust enough, to pick up potential fraud risks. These checks should provide protection from the threat of fraud or you becoming inadvertently involved in fraudulent activity. As a general rule “FITTED” checks should normally focus on: [see the passage which I have already quoted at [7] above] Section 10.6 of this notice provides more examples.” • involvement in the supply of goods for fraud • receiving goods that have been smuggled or diverted into the UK • inadvertently facilitating fraud by providing import or warehousing services As a general rule “FITTED” checks should normally focus on: [see the passage which I have already quoted at [7] above] Section 10.6 of this notice provides more examples.”
“Section 10.5 and 10.6 of this notice provide further details on risk indicators and outline some of the checks that you may carry out to identify high risk transactions. Please note that these are not intended to be prescriptive or exhaustive. Once you have established the most appropriate due diligence tests for your business, these should be used to test both new and existing transactions and supply chains linked to your business. Some checks may be more appropriate to your business than others.”
“During the June 2014 meeting of the JAAT, it became apparent that most of the businesses represented in the group already had similar due diligence policies in place to those suggested in HMRC’s draft guidance and that the terms of the then-draft Due Diligence Condition [i.e. what became section 10 of Excise Notice 196] were, in the main, acceptable to the attendees of this meeting.” “During the June 2014 meeting of the JAAT, it became apparent that most of the businesses represented in the group already had similar due diligence policies in place to those suggested in HMRC’s draft guidance and that the terms of the then-draft Due Diligence Condition [i.e. what became section 10 of Excise Notice 196] were, in the main, acceptable to the attendees of this meeting.”
“51. Thus since excise duty is a tax levied on consumption and not on sale, the time at which it becomes chargeable must be very closely linked with the consumer. 52. Accordingly, so long as the goods in question remain in the tax warehouse of an authorised warehousekeeper, there can be no consumption, even if those goods have been sold by that authorised warehousekeeper.”
“It follows that excise duties are not chargeable so long as the goods concerned are held by the authorised warehousekeeper in its tax warehouse, since they cannot be regarded, in that situation, as having been removed from a duty suspension arrangement within the meaning of Article 7(2)(a) of Directive 2008/118.”
“The approval and registration of every registered owner shall be subject to the conditions and restrictions prescribed in a notice published by the Commissioners and not withdrawn by a further notice.”
“37. According to the case-law of the Court, the concept of establishment within the meaning of the Treaty is a very broad one, allowing an EU national to participate, on a stable and continuous basis, in the economic life of a Member State other than his State of origin and to profit therefrom, so contributing to economic and social inter-penetration within the European Union in the sphere of activities as self-employed persons (Centro di Musicologia Walter Stauffer, paragraph 18 and caselaw cited). 38. However, in order for the provisions relating to freedom of establishment to apply, it is generally necessary to have secured a permanent presence in the host Member State… It must be possible to establish the existence of that permanent presence on the basis of objective factors which are ascertainable…”
“It should however be said at the outset that the only authoritative interpreter of that principle is the Court of Justice… It has also to be said that any attempt to identify general principles risks conveying the impression that the court’s approach is less nuanced and fact-sensitive than is actually the case. As is the case of other principles of public law, the way in which the principle of proportionality is applied in EU law depends to a significant extent on the context. This summary will range beyond the type of case with which this appeal is concerned, in order to demonstrate the different ways in which the principle of proportionality is applied in different contexts. It will provide a number of examples from the case law of the court, in order to illustrate how the principle is applied in practice.”
“The point is also well made by Professor Tridimas in The General Principles of EU Law (2nd ed, OUP: 2006) where he states (at p 139): “The court assesses the adverse consequences that the measure has on an interest worthy of legal protection and determines whether those consequences are justified in view of the importance of the objective pursued.”
“In any proportionality enquiry the relevant interests must be identified, and there will be some ascription of weight or value to those interests, since this is a necessary condition precedent toany balancing operation.””
“33. Proportionality as a general principle of EU law involves a consideration of two questions: first, whether the measure in question is suitable or appropriate to achieve the objective pursued; and secondly, whether the measure is necessary to achieve that objective, or whether it could be attained by a less onerous method. There is some debate as to whether there is a third question, sometimes referred to as proportionality stricto sensu: namely, whether the burden imposed by the measure is disproportionate to the benefits secured. In practice, the court usually omits this question from its formulation of the proportionality principle. Where the question has been argued, however, the court has often included it in its formulation and addressed it separately… 34. Apart from the questions which need to be addressed, the other critical aspect of the principle of proportionality is the intensity with which it is applied. In that regard, the court has been influenced by a wide range of factors, and the intensity with which the principle has been applied has varied accordingly. It is possible to distinguish certain broad categories of case. It is however important to avoid an excessively schematic approach, since the jurisprudence indicates that the principle of proportionality is flexible in its application. The court's case law applying the principle in one context cannot necessarily be treated as a reliable guide to how the principle will be applied in another context: it is necessary to examine how in practice the court has applied the principle in the particular context in question. 35. Subject to that caveat, however, it may be helpful to describe the court's general approach in relation to three types of case: the review of EU measures, the review of national measures relying on derogations from general EU rights, and the review of national measures implementing EU law. … 37. Proportionality as a ground of review of national measures… has been applied most frequently to measures interfering with the fundamental freedoms guaranteed by the EU Treaties. Although private interests may be engaged, the court is there concerned first and foremost with the question whether a member state can justify an interference with a freedom guaranteed in the interests of promoting the integration of the internal market, and the related social values, which lie at the heart of the EU project. In circumstances of that kind, the principle of proportionality generally functions as a means of preventing disguised discrimination and unnecessary barriers to market integration. In that context, the court, seeing itself as the guardian of the Treaties and of the uniform application of EU law, generally applies the principle more strictly. Where, however, a national measure does not threaten the integration of the internal market, for example because the subject-matter lies within an area of national rather than EU competence, a less strict approach is generally adopted… 38. Where member states adopt measures implementing EU legislation, they are generally contributing towards the integration of the internal market, rather than seeking to limit it in their national interests. In general, therefore, proportionality functions in that context as a conventional public law principle. On the other hand, where member states rely on reservations or derogations in EU legislation in order to introduce measures restricting fundamental freedoms, proportionality is generally applied more strictly, subject to the qualifications which we have mentioned.”
“50. It is necessary to turn next to measures adopted by the member states within the sphere of application of EU law. In that context, issues of proportionality have arisen most often in relation to national measures taken in reliance on provisions in the Treaties or other EU legislation recognising permissible limitations to the “fundamental freedoms”: the free movement of goods, the free movement of workers, freedom of establishment, freedom to provide services, and the free movement of capital. Compliance with the principle of proportionality is also a requirement of the justification of other national measures falling within the scope of EU law, including those which derogate from other rights protected by the Treaties, such as the right to equal treatment or nondiscrimination…”
“national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a nondiscriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it.”
“56. The justification for the restriction tends to be examined in detail, although much may depend on the nature of the justification, and the extent to which it requires evidence to support it. For example, justifications based on moral or political considerations may not be capable of being established by evidence. The same may be true of justifications based on intuitive common sense. An economic or social justification, on the other hand, may well be expected to be supported by evidence.”
“This interference with the free movement of capital was argued to be necessary in order to prevent tax evasion, money laundering and other offences. The court noted that the requirement of a prior declaration was less restrictive than that of prior authorisation, since it did not entail suspension of the transaction in question. It nevertheless enabled the national authorities to exercise effective supervision. The Spanish Government contended that it was only by means of a system of prior authorisation that non-compliance could be classified as criminal and hence criminal penalties imposed. That contention was however rejected by the court, on the basis that the Spanish Government had failed to provide sufficient proof that it was impossible to attach criminal penalties to the failure to make a prior declaration. It was therefore held that EU law precluded [the relevant rules].”
“73. Member states must also comply with the requirement of proportionality, and with other aspects of EU law, when applying EU measures such as Directives. As when assessing the proportionality of EU measures, to the extent that the Directive requires the national authority to exercise a discretion involving political, economic or social choices, especially where a complex assessment is required, the court will in general be slow to interfere with that evaluation. In applying the proportionality test in circumstances of that nature, the court has applied a “manifestly disproportionate” test… The court may nevertheless examine the underlying facts and reasoning… 74. Where, on the other hand, the member state relies on a reservation or derogation in a Directive in order to introduce a measure which is restrictive of one of the fundamental freedoms guaranteed by the Treaties, the measure is likely to be scrutinised in the same way as other national measures which are restrictive of those freedoms…”
“51. It has to be remembered that the reasons which may be invoked by a member state in order to justify a derogation from the principle of freedom to provide services must be accompanied by appropriate evidence or by an analysis of the expediency and proportionality of the restrictive measure adopted by that state, and precise evidence enabling its arguments to be substantiated … 52. Therefore, in order to enable the court to determine whether the measures at issue are necessary and proportionate to the objective of safeguarding public policy, the Grand Duchy of Luxembourg should have submitted evidence to establish whether and to what extent the [contested measure] is capable of contributing to the achievement of that objective.”
“59. Mr Blundell [counsel for the Secretary of State] submits that in fact this case falls between categories 2 and 3, but is closer to category 3. Paragraph 53 of the Secretary of State’s skeleton argument states: “The basis upon which the member states agreed to Latvia (and other Accession states) joining the European Union was a matter of political choice of the highest order, the precise terms of which involved a considerable amount of economic, social and political judgment.” 60. That paragraph is a perfectly valid comment about Annex VIII of the Accession Treaty. But this court is not reviewing the proportionality of that Annex. We are looking at measures taken by the UK Government pursuant to paragraph 5 of that Annex. 61. Mr Blundell submits that the decision to extend the WRS was a highly political decision. It involved the interpretation of an international treaty. It may affect the reciprocal rights of any UK citizens working in Latvia. The extension of the WRS was a high level political compromise on a very sensitive issue. 62. In my view, Mr Blundell puts his submissions rather too high. The decision to extend the WRS involved consideration of economic, social and political factors. But it is an overstatement to say that this was a high level political decision. I accept that by reference to Lumsdon’s case, para 35, the decision falls between categories 2 and 3, but I do not accept that it is closer to category 3. 63. It is not a consequence of Lumsdon’s case that every case must be put into one of three boxes, each with its own label affixed. Decisions which the court may be called upon to review are infinitely varied. The intensity of review depends upon the nature of the decision. Lumsdon’s caseprovides helpful guidance in determining the extent of that scrutiny. In the present case the degree of scrutiny should not be intense, but I would not go so far as to say that the “manifestly disproportionate” test applies.” “The basis upon which the member states agreed to Latvia (and other Accession states) joining the European Union was a matter of political choice of the highest order, the precise terms of which involved a considerable amount of economic, social and political judgment.”
“79. When that small benefit is weighed against the profound consequences for individuals such as the respondent in this case, it is hardly surprising that the Upper Tribunal found the extension to be disproportionate, whether applying a moderate degree of scrutiny or the “manifestly disproportionate” test most favourable to the Secretary of State.”
“However, we cannot accept Mr Chamberlain’s wider submission that Judge Ward and the Court of Appeal erred in their assessment regarding the third stage of the proportionality analysis (proportionality stricto sensu). The position was stark. The extension of the WRS would have only a small and rather speculative mitigating effect in relation to the serious disturbances in the UK’s labour market, as found by the MAC, whereas the burdens and detriments it would impose on employers and A8 nationals working in the UK were substantial and serious. We should say that we have some reservations about whether Rupert Jackson LJ was right to criticise the level at which Judge Ward pitched the intensity of review which he considered to be appropriate in this case. Although, obviously, Judge Ward did not have the benefit of the analysis by this court in Lumsdon when he made his assessment, we think that in broad terms the level of intensity he judged to be appropriate in this case is compatible with the guidance given in Lumsdon. In particular, the extension of the WRS was rightly regarded by Judge Ward as a national measure which was restrictive of the fundamental freedom of movement for A8 nationals as protected by the Treaties, taken in reliance on a reservation or derogation in an EU instrument, in relation to which a relatively demanding intensity of review is appropriate: see Lumsdon at para 74. However, this is not a case which turns on the precise calibration of the intensity of review to be applied in relation to the decision to extend the WRS in 2009. Both Judge Ward and the Court of Appeal considered that this measure failed to pass muster even if the markedly more generous “manifestly inappropriate” test was applied. In our view, they were plainly entitled to come to that conclusion in the circumstances of this case, particularly in the absence of any attempt by the Secretary of State to explain why the very limited and rather speculative benefits associated with the extension of the WRS in addressing labour market disturbances outweighed the considerable detriments for employers and workers from A8 States associated with the scheme. We agree with their conclusion.”
“The national measures at issue do not appear to be manifestly disproportionate to the objective pursued. That conclusion cannot be invalidated by the mere fact that the United Kingdom chose those measures in preference to others, as it was entitled to do by virtue of the discretion conferred on it by the Commission decision.”
“As the Commission rightly states, the obligation to appoint a tax representative in Spain is likely to involve additional costs for pension funds established in Member States, other than the Kingdom of Spain, offering occupational pension schemes in that Member State, and for insurance companies operating in Spain under the freedom to provide services. Consequently, that obligation makes the provision of services by those entities to persons residing in Spain more difficult and less attractive than the provision of similar services to the same persons by entities established in Spain which are not subject to that obligation. Furthermore, the fact that that representative must reside in Spain impedes the freedom to provide services for persons and undertakings established in Member States other than the Kingdom of Spain and wishing to provide tax representation services to entities or natural persons operating in Spain.”
“42. However, according to the Court’s well-established caselaw, national measures, capable of hindering the exercise of fundamental freedoms guaranteed by the FEU Treaty or of making it less attractive, may nonetheless be allowed provided that they pursue a legitimate objective in the public interest, are appropriate to ensuring the attainment of that objective, and do not go beyond what is necessary to attain the objective pursued… 43. It is for the national authorities, where they adopt a measure derogating from a principle affirmed in EU law, to show in each individual case that that condition is satisfied. The reasons which may be invoked by a Member State by way of justification must be accompanied by an analysis of the appropriateness and proportionality of the measure adopted by that State and by specific evidence substantiating its arguments (see judgment in Commission v Belgium EU:C:2014:24, paragraph 33 and the case-law cited.)”
“However, it is clear from the case-law of the Court that administrative difficulties do not constitute a ground that can justify a restriction on a fundamental freedom guaranteed by EU law…”
“Such authorisation shall be subject to the conditions that the authorities are entitled to lay down for the purposes of preventing any possible evasion or abuse.”
“A tax representative may be appointed by the authorised warehousekeeper of dispatch. This tax representative must be established in the Member State of destination and authorised by the tax authorities of that State. He must, instead of and in the place of the consignee without authorised warehousekeeper status, comply with the following requirements…”
“The person liable to pay the excise duty in the Member State of destination shall be the vendor. However, the Member State of destination may provide that the liable person shall be a tax representative established in the Member State of destination and approved by the competent authorities of that Member State…”
“Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited. The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt rules designed to prohibit such discrimination.”
“Operational colleagues had cited their inability to identify the actual owners of goods held in excise warehouses as a barrier to implementing effective anti-fraud measures. Many of those perpetrating outward diversion fraud were shadowy figures who were buying and selling warehoused goods without the warehousekeepers’ knowledge. When irregularities occurred after the goods were removed from warehouse and enquiries were made to establish the ownership of the goods (and thereby the person liable to pay excise duty), the audit trail invariably led to missing traders. The [WOWGR] provide for the authorisation of warehousekeepers. They also require UK revenue traders (the owners of the warehoused goods) to be registered with Customs if they wish to deposit duty suspended goods in an excise warehouse or deal in warehoused goods. To prevent fraudsters from avoiding the need to be registered by moving their operations overseas (nominally at least) the Regulations require UK duty representative[s] to be appointed to act on behalf of non-UK owners. The benefits of [WOWGR] are: - Customs can identify those persons dealing in warehoused goods. Credibility checks are carried out on owners and warehouse keepers by Customs prior to authorising them. We have an opportunity to reject applications for registration; - A UK based person is always liable to pay the duty whenever the [WOWGR] requirements are not met.”
“The fact that it took me so long, with difficulty, to examine one supply chain demonstrates with clarity how unreasonable and disproportionate HMRC’s approach to due diligence is. It is completely disproportionate to the fees which we charge and the role which a warehousekeeper plays. If we did what is demanded, it would be completely uncommercial and business would grind to a halt.”
“(i) impermissibly seek to shift the burden of monitoring duty suspended traders away from themselves and onto the duty representative or authorised warehousekeeper; (ii) are discriminatory: for UK-established businesses, HMRC will assess for themselves the credibility and viability of the business seeking to own goods in a warehouse. For non-UK established businesses, this burden is shifted to the duty representative; [and] (iii) are disproportionate: a duty representative or authorised warehousekeeper does not have sufficient knowledge and awareness to be able to carry out the checks and reviews demanded of them. It is, accordingly, not appropriate to impose the burden on them nor proportionate to the roles of either a duty representative or an authorised warehousekeeper. The due diligence requirements fundamentally fail to recognise that the warehousekeeper is not a party to the trade transactions and has no contractual relationship other than with those using its services.”
“We will aim to establish whether you have objectively assessed the risks in your supply chain, and you must be able to demonstrate that you have put in place reasonable and proportionate checks and effective procedures to respond to fraud risks when they arise”
“53. According to the Court’s case-law, traders who take every precaution which could reasonably be required of them to ensure that their transactions are not connected with fraud, be it the fraudulent evasion of VAT or other fraud, must be able to rely on the legality of those transactions without the risk of losing their right to deduct the input VAT… 54. On the other hand, it is not contrary to European Union law to require a trader to take every step which could reasonably be required of him to satisfy himself that the transaction which he is effecting does not result in his participation in tax evasion… 55. Moreover, in accordance with the first paragraph of Article 273 of Directive 2006/112, Member States may impose obligations, other than those provided for by that directive, if they consider such obligations necessary to ensure the correct levying and collection of VAT and to prevent evasion.”
“59. In those circumstances, it follows from the case-law referred to in paragraph 53 and 54 of the present judgment that determination of the measures which may, in a particular case, reasonably be required of a taxable person wishing to exercise the right to deduct VAT in order to satisfy himself that his transactions are not connected with fraud committed by a trader at an earlier stage of a transaction depends essentially on the circumstances of that particular case. 60. It is true that, when there are indications pointing to an infringement or fraud, a reasonable trader could, depending on the circumstances of the case, be obliged to make enquiries about another trader from whom he intends to purchase goods or services in order to ascertain the latter’s trustworthiness. 61. However, the tax authority cannot, as a general rule, require the taxable person wishing to exercise the right to deduct VAT, first, to ensure that the issuer of the invoice relating to the goods and services in respect of which the exercise of that right to deduct is sought has the capacity of a taxable person, that he was in possession of the goods at issue and was in a position to supply them and that he has satisfied his obligations as regards declaration and payment of VAT, in order to be satisfied that there are no irregularities or fraud at the level of the traders operating at an earlier stage of the transaction or, second, to be in possession of documents in that regard. 62. It is, in principle, for the tax authorities to carry out the necessary inspections of taxable persons in order to detect VAT irregularities and fraud as well as to impose penalties on the taxable person who has committed those irregularities or fraud.”
“Those questions concern, in essence, the balancing, on the one hand, of the right to deduct, which is an essential component of the VAT scheme, and, on the other hand, of the fight against tax evasion, which is an objective recognised and encouraged by Directive 2006/112.”
“51. On several occasions, the Court has held that the authorities may not oblige a taxable person to undertake complex and far-reaching checks as to that person’s supplier, thereby de facto transferring their own investigative tasks to that person (see, to that effect, judgments of21 June 2012 , Mahagében and Dávid, C-80/11 and C-142/11, EU:C:2012:373, paragraph 65, and of31 January 2013 , Stroy trans, C-642/11, EU:C:2013:54, paragraph 50). 52. By contrast, it is not contrary to EU law to require a trader to take every step which could reasonably be required of him to satisfy himself that the transaction which he is carrying out does not result in his participation in tax evasion (see, to that effect, judgments of27 September 2007 , Teleos and Others, C-409/04, EU:C:2007:548, paragraphs 65 and 68, and of21 June 2012 , Mahagében and Dávid, C-80/11 and C-142/11, EU:C:2012:373, paragraph 54). 53. In this regard, it must be noted that the national rules at issue in the main proceedings do not transfer to the taxable person the monitoring tasks devolving on the authorities, but inform him of the outcome of an administrative investigation from which it is apparent that the taxpayer declared inactive can no longer be monitored by the competent authority, either because that taxpayer no longer met the statutory reporting obligations, or because it has declared information identifying its registered office that does not enable the tax authority concerned to identify it, or because it does not carry on its activity at the registered office or declared tax domicile. 54. The only obligation imposed on the taxable person is, in fact, to consult the list of taxpayers declared inactive displayed at the NAFA’s headquarters and published on its website, such a verification being, in addition, straightforward to carry out. 55. It thus appears that, by obliging the taxable person to carry out that verification, the national legislation pursues an objective that is legitimate and even imposed by EU law, namely that of ensuring the proper collection of VAT and the prevention of VAT evasion, and that such a verification can reasonably be required of an economic operator. It is, however, necessary to determine whether that legislation does not go beyond what is necessary to achieve the objective pursued.”