Universal Cycles Limited & Ors v The Commissioners for HMRC [2025] UKFTT 1208 (TC)

[2025] UKFTT 01208 (TC)

Case No TC09657

FIRST-TIER TRIBUNAL

TAX CHAMBER

Hearing Heard on: 17-18 July 2026

Date Judgment date: 9 October 2025

Taylor House, London

Appeal reference: TC/2017/03077,03080,03081 TC/2019/00597,00599,00601

CUSTOMS DUTY – preliminary issues – (1) Where reliance needs to be placed on Article 221(4) of the Community Customs Code before a customs debt can be notified, on whom does the burden of proof lie? – (2) If HMRC notify a customs debt to a person who was not the “declarant” on the corresponding customs declaration, does the Tribunal have power under section 16(5) of the Finance Act 1994 to make a different person, who is party to proceedings before it and who was the declarant, liable to pay that debt?

Written submissions: various dates up to 19 September2026

Before

TRIBUNAL JUDGE MARK BALDWIN

Between

UNIVERSAL CYCLES LIMITED BRANDS HOLDINGS LIMITED SPORTSDIRECT.COM RETAIL LIMITEDAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

Valentina Sloane KC of counsel, instructed by Eversheds Sutherland (International) LLP for Appellant

Isabel McArdle and Gideon Barth of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for Respondents

DECISION

Introduction

[1]These proceedings concern appeals (the “Appeals”) relating to Post Clearance Demand Notes (“C18s”) issued by HMRC in 2017 that imposed additional customs duty, VAT and anti-dumping duty (“ADD”) on the Appellants in respect of importations of bicycles between 2007 and 2012 (the “Relevant Period”). The sums at issue exceed £23 million.

[2]The C18s relate to roughly 1,300 consignments of bicycles imported into the UK during the Relevant Period. The bicycles were imported from Sri Lanka and at least some were processed (to some extent at least) by City Cycle Industries (“City Cycle”), which was the subject of an investigation, and subsequent report, by the European Anti-Fraud Office (“OLAF”). In its report issued in December 2014 (the “OLAF Report”), OLAF alleged that bicycles exported from Sri Lanka by City Cycle originated from China, rather than Sri Lanka. The primary issue in the Appeals is whether the origin of the bicycles to which the C18s relate is Sri Lanka (as the Appellants contend) or China (as HMRC contend).

[3]I am not concerned with the overall merits of the Appeals. My task is to decide the following two questions of law, which Judge Citron directed should be dealt with as preliminary issues, as follows:(1) It appears that, in relation to one or more of the three C18s, the person to whom the C18 was sent and whose EORI number was stated in box 8 of the C88 Form (being one of the Appellants) was not the person named in box 14 or box 8 of the C88 form for the relevant consignment. In such cases, does the Tribunal have power to decide that the Appellant in question is liable for the customs debt in question?

(2) In relation to the consignments of bicycles involved, it is accepted by the parties, in the light of the documentary evidence, that (a) in some consignments, the consignor of the bicycles was named as City Cycle, and (b) in some, the consignor of the bicycles was named as Asiabike Industrial Limited (“Asiabike”), a bicycle manufacturer based in Sri Lanka which was not subject to the OLAF investigation/report (prior to HMRC revising their debt calculations in their Consolidated Re-Amended Statement of Case and attached spreadsheets); but (c) there is a residual category of consignments which fall into neither of the above categories, i.e. there is no common acceptance by the parties of whether the consignor was City Cycle, Asiabike, or someone else. For consignments in category (c) above, is the legal burden of proof in the relevant appeal on the Appellant or on HMRC?

[4]I refer to the first question (in [3](1) above) as the “debtor issue” and the second (in [3](2)] as the “burden of proof issue”.

[5]Before turning to the preliminary issues themselves, I need to say something about the way these proceedings have evolved. In their application for a preliminary issues hearing, sent the Tribunal on 31 October 2024, the Appellants asked the Tribunal to direct that two issues be dealt with on a preliminary basis:(1) The first related to the fact that the C18s include amounts that cannot be lawfully due from any of the Appellants

(2) The second was an allegation that HMRC had failed to properly determine the debtor in respect of each consignment, such that the C18s had not been issued to the entity liable for any additional duties as a matter of law.

[6]In their skeleton argument for the case management hearing (“CMH”) before Judge Citron on 24 January 2025, the Appellants developed these themes, and formulated the preliminary issues as follows:(1) Firstly, in respect of consignments included in the C18s where there was no evidence that the manufacturer was City Cycle, are those consignments unlawfully included in the C18?

(2) The second issue was divided into two parts, one of which was not proceeded with. The remaining part of the second issue was whether, where HMRC has issued a C18 to an entity which is not the customs debtor, Tribunal has the power to vary the decisions to change the customs debtor?

[7]The Appellants’ skeleton argument for the CMH expanded on these questions by explaining that in many cases there was no evidence as to the identity of the manufacturer of a bicycle and that this gave rise to a legal issue. The Appellants understood HMRC’s case to be that, in the absence of evidence, the assessment is nevertheless valid, as the burden of proof was on the Appellants to prove that City Cycle was not the manufacturer of the bicycles. The Appellants contended that, in the absence of evidence, there was no valid basis for the assessment. As for the second issue, the Appellants said that they had provided evidence that import entries had been included on C18s where the recipient of the C18 was not the entity which was the declarant. The import paperwork showed (they said) that another entity was the declarant.

[8]HMRC objected to the preliminary issues being dealt with in advance of the substantive hearing. They said that the Tribunal should be cautious in dealing with issues on a preliminary basis and in any event they described the Appellants’ issues as ones of quantum and said that, so far as both questions were concerned, the Tribunal has power to vary any decision and to substitute their own decision for any decision questioned on appeal. On that basis, HMRC submitted, the Tribunal could vary the quantum of the debt if the Appellants, on whom the burden of proof lay, could establish errors in HMRC’s calculations and, so far the second issue is concerned, the Tribunal had power to vary the C18s if they contain an error as to the correct declarant.

[9]The CMH duly took place on 24 January 2025 and on 19 February 2025 the Tribunal approved the preliminary issues, as set out above.

[10]HMRC and the Appellants approach the preliminary issues in very different ways. Put very broadly, HMRC’s position in its submissions for the CMH (and which it continues to endorse) is that the Finance Act 1994 (“FA 1994”) gives the power to the Tribunal to vary customs demands and puts the burden of proof on all issues firmly on the Appellants. The Appellants’ approach is very different, focusing instead on the EU customs duty framework, within and subject to which (they say) the FA 1994 provisions must operate.

[11]HMRC complain that the Appellants’ submissions raise points which go far beyond the preliminary issues approved by Judge Citron. Ms McArdle says that Ms Sloane’s submissions on the burden of proof issue go way beyond what was authorised to be determined as a preliminary issue. In effect, she submits, Ms Sloane has introduced a new issue, about how the extended time limit in Article 221(4) of the Community Customs Code, Council Regulation (EEC) No. 2913/92 (“the Code”), operates. On the debtor issue, the Appellants say that the question is asking whether the Tribunal can determine that a different Appellant is the true debtor in a way which makes it liable for the debt. HMRC say that the question is just asking whether the Tribunal can determine that another Appellant is the true debtor and questions of liability/enforcement (Can HMRC do anything with/about the decision?) are a separate issue for another day. In addition to these disagreements over exactly what the preliminary issues are, HMRC say that the Appellants did not properly set out their arguments in advance of the hearing.

[12]Looking at the submissions for the CMH, it is clear to me that, when posing the burden of proof question, Judge Citron was perfectly well aware of the context in which that question was being asked. It was being asked as part of an exercise to determine whether there was a lawful basis for the issue of C18s in relation to bicycles where the manufacturer could not be identified. The Appellants had identified why the burden of proof issue was being raised. It was not being raised in the abstract, divorced from any underlying legal question. As far as the debtor issue is concerned, the question being asked related to the power of the Tribunal to vary C18s if they contain an error, because they had been issued to a person other than the declarant.

[13]Clearly, Judge Citron thought that it was appropriate to direct that these two issues be dealt with on a preliminary basis, and it is inconceivable that he did not clearly understand the context in which those questions were being asked and the differing approaches of HMRC and the Appellants.

[14]Although they developed their position in relation to the preliminary issues in greater detail before me, there is nothing in their skeleton for the CMH which suggests to me that the Appellants are now saying something radically different from, and not trailed in, their submissions for the CMH or in their skeleton for this hearing.

[15]Turning to the Appellants’ skeleton (dated 26 June 2025) prepared for this hearing, relevant background facts are identified, and, so far as the debtor issue is concerned, the skeleton points to the definition of declarant in the Code and article 201 of the Code. At paragraph 49 it describes HMRC’s submission that, if a C18 has been issued to the wrong person, the Tribunal can vary the decisions accordingly as a radical proposition, which would involve the Tribunal not simply amending a decision issued to an appellant; it would in substance and effect be purporting to issue a fresh liability decision against a third-party, in breach of the requirements of the Code on the notification of the debt and the EU law principle of legal certainty.

[16]Turning to the burden of proof issue, at paragraph 52, the Appellants’ skeleton says that “It is HMRC who assert that the conditions for applying the extended time limit under CCC/UCC are met. Under EU law, HMRC therefore bear the legal burden of showing that the conditions are met.” At paragraph 55 the Skeleton suggests that the answer to the burden of proof question is that “the legal burden of proof is on HMRC to show that the conditions for applying the extended time limit are met” in relation to each declaration. Although not expanded as comprehensively as those arguments were before me, I consider that the skeleton perfectly adequately identifies the points which the Appellants proposed to make and, both from that skeleton and from the discussions at and preceding the CMH, none of this should have been a surprise to HMRC. Indeed, in HMRC’s skeleton (dated 9 July 2025), HMRC refer to the EU authorities cited by the Appellants in their skeleton. They say that these cases are irrelevant, but clearly HMRC were aware of the points and authorities being raised.

[17]Nevertheless, consistent with the approach they took at the CMH. HMRC’s skeleton dealt with both preliminary issues as effectively domestic law issues to which FA 1994 provides a complete answer. HMRC’s skeleton did not engage with the EU law points identified by the Appellants in their skeletons both for this hearing and the CMH. That meant that, when she came to reply to Ms Sloane‘s submissions, Ms McArdle was to some extent starting on the back foot. To remedy this, I invited HMRC to make written submissions on the debtor issue after the hearing and gave the Appellants an opportunity to respond to those submissions. Whilst the parties were working on these written submissions, I drafted my decision in relation to the burden of proof issue and sent it to them under embargo inviting a full range of comments, not limited to the usual topographical corrections. I have taken all these written submissions into account in drafting this decision. To the extent they were “blindsided” by anything the Appellants said (which they should not have been if they had properly reflected on the Appellants’ submissions), I consider that those steps were more than sufficient to give HMRC a full opportunity to respond to the points made by the Appellants.

[18]As if all this were not enough, an issue arose towards the end of the written submissions as to whether a C18 is a purely administrative document giving no right of appeal, which now appears to be HMRC’s position even though they sent the C18s out under cover of letters which specifically stated that the relevant Appellant had a right of appeal. The Appellants say that the Appeals always challenged HMRC’s decisions and the C18s, HMRC have always understood this and indeed (in their skeleton for the CMH) HMRC said that “the Tribunal has the power to vary the C18s”, rather suggesting that the C18s were documents of substance. It is not clear to me what (if anything) turns on this issue. HMRC do not seem to be suggesting that the Appeals are somehow invalid or that these proceedings are a house built on sand. Given that, and that this is not an identified preliminary issue, I propose to say no more about it. If it turns out that I have used infelicitous language in describing what it is that the Appellants are appealing against, I can only apologise.

The Customs Duty Framework

[19]During the Relevant Period customs duties were governed by a specific regime laid down in the Code, which was a directly applicable EU regulation. The events with which the Appeals are concerned all took place before the United Kingdom left the European Union (“Brexit”) . It was not suggested that Brexit or any legal changes consequential on Brexit have any relevance for these Appeals. The provisions of the Code which are relevant for us are the following:

[20]Article 4(9) defines “customs debt” as:

“the obligation on a person to pay the amount of the import duties (customs debt on importation) or export duties (customs debt on exportation) which apply to specific goods under the Community provisions in force.”

[21]Article 4(12) defines a “debtor” as “any person liable for payment of a customs debt.”

[22]Article 4(17) defines a “customs declaration” as “the act whereby a person indicates in the prescribed form and manner a wish to place goods under a given customs procedure”.

[23]Article 4(18) defines a “declarant” as “the person making the customs declaration in his own name or the person in whose name a customs declaration is made”.

[24]Article 4(19) defines “presentation of goods to customs” as meaning “the notification to the customs authorities, in the manner laid down, of the arrival of goods at the customs office or at any other place designated or approved by the customs authorities”.

[25]Article 14 imposes an obligation on those involved in trade in goods to provide the customs authorities with requisite documents, information and assistance within any prescribed time limit.

[26]Article 16 requires those concerned to keep the documents referred to in Article 14 for a period of at least 3 years from (so far as relevant for us) the end of the year in which the goods are released to free circulation. However, where a check carried out by the customs authorities in respect of a customs debt shows that the relevant entry in the accounts has to be corrected, the documents shall be kept beyond the time limit provided for in the first paragraph for a period sufficient to permit the correction to be made and checked.

[27]Article 20 provides that duties owed where a customs debt is incurred shall be based on the Customs Tariff of the European Communities. Articles 20(3)(d) and (e) provide for the Tariff to contain preferential tariff measures and Article 24-26 contain rules relating to the origin of goods. Article 24 contains the core rule, that:

“Goods whose production involved more than one country shall be deemed to originate in the country where they underwent their last, substantial, economically justified processing or working in an undertaking equipped for that purpose and resulting in the manufacture of a new product or representing an important stage of manufacture.”

[28]Article 25 provides that:

“Any processing or working in respect of which it is established, or in respect of which the facts as ascertained justify the presumption, that its sole object was to circumvent the provisions applicable in the Community to goods from specific countries shall under no circumstances be deemed to confer on the goods thus produced the origin of the country where it is carried out within the meaning of Article 24.”

[29]Article 26 provides that:

“1. Customs legislation or other Community legislation governing specific fields may provide that a document must be produced as proof of the origin of goods. 2. Notwithstanding the production of that document, the customs authorities may, in the event of serious doubts, require any additional proof to ensure that the indication of origin does comply with the rules laid down by the relevant Community legislation.”

[30]Articles 24 and 25 are very important for the substance of the Appeals themselves. Article 26 is important for us because, for each of the declarations of cycles acquired from City Cycle, there was a certificate of origin issued by the Sri Lankan authorities.

[31]So far as customs declarations are concerned, Article 62 provides:

“1. Declarations in writing shall be made on a form corresponding to the official specimen prescribed for that purpose. They shall be signed and contain all the particulars necessary for implementation of the provisions governing the customs procedure for which the goods are declared. 2. The declaration shall be accompanied by all the documents required for implementation of the provisions governing the customs procedure for which the goods are declared.”

[32]We looked at a blank version of the customs declaration (form C88). These are very detailed forms requiring information about the goods, the importer, the exporter, transportation, and payment details, among other things. The form requires details of the name and number of the consignor/exporter (in box 2), the consignee (in box 8) and the declarant or representative (in box 14).

[33]Article 73 provides that where the conditions for placing the goods under the procedure in question are fulfilled and provided the goods are not subject to any prohibitive or restrictive measures, the customs authorities shall release the goods as soon as the particulars in the declaration have been verified or accepted without verification.

[34]Article 78 allows the customs authorities on their own initiative or at the request of the declarant, to amend the declaration after release of the goods. After releasing the goods, they may inspect the commercial documents and data relating to the import or export operations in respect of the goods concerned or to subsequent commercial operations involving those goods. Article 78(3) provides that:

“Where revision of the declaration or post-clearance examination indicates that the provisions governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information, the customs authorities shall, in accordance with any provisions laid down, take the measures necessary to regularize the situation, taking account of the new information available to them.”

[35]Article 201 provides that a customs debt on importation is incurred at the time of acceptance of the customs declaration in question. Article 201(3) provides as follows:

“The debtor shall be the declarant. In the event of indirect representation, the person on whose behalf the customs declaration is made shall also be a debtor. Where a customs declaration in respect of one of the procedures referred to in paragraph 1 is drawn up on the basis of information which leads to all or part of the duties legally owed not being collected, the persons who provided the information required to draw up the declaration and who knew, or who ought reasonably to have known that such information was false, may also be considered debtors in accordance with the national provisions in force.”

[36]Article 217 provides that:

“Each and every amount of import duty or export duty resulting from a customs debt, hereinafter called ‘amount of duty’, shall be calculated by the customs authorities as soon as they have the necessary particulars, and entered by those authorities in the accounting records or on any other equivalent medium (entry in the accounts).”

[37]Article 220(1) provides that:

“Where the amount of duty resulting from a customs debt has not been entered in the accounts in accordance with Articles 218 and 219 or has been entered in the accounts at a level lower than the amount legally owed, the amount of duty to be recovered or which remains to be recovered shall be entered in the accounts within two days of the date on which the customs authorities become aware of the situation and are in a position to calculate the amount legally owed and to determine the debtor (subsequent entry in the accounts). That time limit may be extended in accordance with Article 219.”

[38]Article 220(2) sets out certain circumstances where a subsequent entry in the accounts is not to occur. These include a case where:

“(b) the amount of duty legally owed was not entered in the accounts as a result of an error on the part of the customs authorities which could not reasonably have been detected by the person liable for payment, the latter for his part having acted in good faith and complied with all the provisions laid down by the legislation in force as regards the customs declaration. Where the preferential status of the goods is established on the basis of a system of administrative cooperation involving the authorities of a third country, the issue of a certificate by those authorities, should it prove to be incorrect, shall constitute an error which could not reasonably have been detected within the meaning of the first subparagraph. The issue of an incorrect certificate shall not, however, constitute an error where the certificate is based on an incorrect account of the facts provided by the exporter, except where, in particular, it is evident that the issuing authorities were aware or should have been aware that the goods did not satisfy the conditions laid down for entitlement to the preferential treatment. The person liable may plead good faith when he can demonstrate that, during the period of the trading operations concerned, he has taken due care to ensure that all the conditions for the preferential treatment have been fulfilled. The person liable may not, however, plead good faith if the European Commission has published a notice in the Official Journal of the European Communities , stating that there are grounds for doubt concerning the proper application of the preferential arrangements by the beneficiary country;”

[39]Article 221 provides that: “1.As soon as it has been entered in the accounts, the amount of duty shall be communicated to the debtor in accordance with appropriate procedures. … 3.Communication to the debtor shall not take place after the expiry of a period of three years from the date on which the customs debt was incurred. This period shall be suspended from the time an appeal within the meaning of Article 243 is lodged, for the duration of the appeal proceedings. 4. Where the customs debt is the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the amount may, under the conditions set out in the provisions in force, be communicated to the debtor after the expiry of the three-year period referred to in paragraph 3.” …

[40]Article 222 sets out the period (usually 10 days) within which “amounts of duty communicated in accordance with Article 221” are to be paid.

[41]Articles 236-239 provide for import duties to be repaid or remitted in certain circumstances.

[42]Article 243 deals with appeal rights. It provides:

“1. Any person shall have the right to appeal against decisions taken by the customs authorities which relate to the application of customs legislation, and which concern him directly and individually. Any person who has applied to the customs authorities for a decision relating to the application of customs legislation and has not obtained a ruling on that request within the period referred to in Article 6 (2) shall also be entitled to exercise the right of appeal. The appeal must be lodged in the Member State where the decision has been taken or applied for. 2. The right of appeal may be exercised: (a) initially, before the customs authorities designated for that purpose by the Member States; (b) subsequently, before an independent body, which may be a judicial authority or an equivalent specialized body, according to the provisions in force in the Member States.” (a) initially, before the customs authorities designated for that purpose by the Member States; (b) subsequently, before an independent body, which may be a judicial authority or an equivalent specialized body, according to the provisions in force in the Member States.”

[43]Article 245 provides that:

“The provisions for the implementation of the appeals procedure shall be determined by the Member States.”

Agreed Facts

[44]The Appellants and HMRC agreed a statement of agreed facts for the purposes of the preliminary issues hearing. The following paragraphs are taken from that statement.

The Parties

[45]The Appellants are all UK-based members of Frasers Group plc (“the Group”).

[46]The principal activity of Universal Cycles Limited (“UC”) and SportsDirect.com Retail Limited (“SDR”) is the retail of sports and leisure products, including bicycles.

[47]Brands Holdings Limited (“BH”) is an investment holding company.

[48]Acctel Limited (“Acctel”) is a supply chain management company based in Taiwan.

[49]City Cycle is a bicycle manufacturer based in Sri Lanka.

[50]Asiabike is a bicycle manufacturer based in Sri Lanka.

[51]Bowhall/Dumar (“Bowhall”) is a buying agent based in Taiwan.

The Bicycles

[52]During the Relevant Period, UC and SDR imported bicycles into the UK (the Appellants contend from Sri Lanka and HMRC contend with Chinese origin). HMRC contend that BH also imported bicycles into the UK with Chinese origin during the relevant period, which the Appellants deny.

[53]The Appellants contend the bicycles were sourced by Acctel from two Sri Lankan manufacturers, City Cycle and Asiabike, while HMRC contend the bicycles had Chinese origin.

[54]Customs agents were used when importing the bicycles.

[55]The bicycles were accompanied by Certificates of Origin issued by the Sri Lankan Department of Commerce stating that the bicycles were of Sri Lankan origin.

The OLAF Investigation

[56]Between 2011 and 2014, OLAF investigated the possible evasion of conventional customs duties and ADD on the importation of Chinese bicycles into the EU. As part of its investigation, OLAF considered the manufacturing/assembly operations of City Cycle.

[57]In the OLAF Report, OLAF concluded, inter alia, that bicycles held out as manufactured by City Cycle during the Relevant Period were of Chinese origin rather than Sri Lankan origin.

[58]The EU subsequently imposed ADD of 48.5% on the import of bicycles from Sri Lanka, including those held out as manufactured by City Cycle.

[59]Asiabike was not subject to the OLAF Report.

The C18 Post-Clearance Demand Notes

[60]Between March and April 2017 and based on the findings set out in the OLAF Report, HMRC issued each Appellant with a decision letter and a C18.

[61]In each case, the decision letter stated that the basis of the alleged liability was that “the bicycles imported by you from CITY CYCLE in Sri Lanka between 2009 and 2011 were of Chinese origin, rather than Sri Lankan”. In relation to UC, HMRC contend that text contained a typographical error and that the period in question began in 2007, as was set out in the supporting debt schedules.

The Burden of Proof Issue

[62]As I have already indicated, an issue arose between Ms McArdle and Ms Sloane about the scope of the burden of proof issue. Ms Sloane spent a large part of the afternoon of the first day of the hearing running through some ECJ/CJEU cases which (she says) tell us that the burden of proof in relation to the question whether HMRC could issue C18s in relation to consignments in category (c) is on HMRC (for now, I call this the “extended time limit” issue). We will come to those authorities in due course.

[63]Ms McArdle says that Ms Sloane’s submissions on the burden of proof issue go way beyond what was authorised to be determined as a preliminary issue. In effect, she submits, Ms Sloane has introduced a new issue, about how the extended time limit operates. She relied upon the complete absence of reference to the extended time limit in the application for a preliminary issues hearing and the Appellants’ skeleton for the CMH in support of her argument that Judge Citron could not have thought that he was ordering that as the preliminary issue question. Ms McArdle says that what Judge Citron allowed to be tried as a preliminary issue was aquantum question: where we have blank entries in the MSS data or entries which do not identify City Cycle, whether those entries are, correctly, part of the calculation of the debts or not. She says that is an issue of quantum, where the Appellants bear the burden of proof; see section 16(6) FA 1994 and the Upper Tribunal decision in Build-A-Bear Workshop UK Holdings Limited v HMRC,

[2021] UKUT 0067 (TCC)

(“Build-A-Bear”). She says the Judge Citron did not approve the “extended time limit” issue as a preliminary issue.

[64]Ms Sloane for her part says that what HMRC are trying to do is apply their case relating to cycles where City Cycle was the consignor to situations where there is no evidence of who the consignor was. The question is, where there is no evidence, can the debt stand? Is it for HMRC to prove based on some evidence that these consignments are more likely than not to be from City Cycle or do the Appellants have to prove a negative? That is exactly what Judge Citron ordered to be decided. To justify any of the customs debts, the customs declaration here must be linked to a criminal act. She says this is a liability and a quantum matter; how it is labelled does not matter and the Appellants have always pleaded that HMRC can only raise a customs debt if they have a basis for liability. A case called Greencarrier (which we will discuss later, but which addresses the authorities’ ability to extrapolate from samples) tells us that, just because some consignments may be liable to duty, it does not follow that all consignments are. More is needed; whether we call that a quantum or liability question does not affect the fundamental need for evidence. Build-A-Bear deals with the detailed calculation of the quantum of duty, not issues of fundamental liability.

[65]I am entirely satisfied that the scope of the burden of proof issue extends to the question whether the requirements for the extended time limit in Article 221(4) to apply are met, and I say this because:(1) It is not at all obvious to me why Judge Citron would have thought it worthwhile having the location of the burden of proof on a “straightforward issue of quantum” determined as a preliminary issue if the position here is as obvious as Ms McArdle says it is.

(2) Judge Citron’s wording of the burden of proof issue just asks where “the legal burden of proof in the relevant appeal” lies; it does not specify any particular question or issue. In his reasons (at [39](3)) he says that resolving the preliminary issues “will materially smoothen the path to the substantive hearing, and the course of the hearing itself, so saving cost and time”, and (at [39](2)) that it will meet the requirement of “basic fairness and justice of enabling a party to know whether it bears the legal burden of proof, when preparing its case”. It seems to me that what Judge Citron wanted us to do was to get to a point where the location of the burden of proof on any relevant issue relating to these “consignorless bikes” in category (c) had been resolved (if it was not already clear) to facilitate efficient preparation for the substantive hearing. Leaving the burden of proof unaddressed on such an important point as the fundamental basis for including such bikes in the C18s would do nothing to meet his objectives.

(3) Looking at the extracts from the pleadings referred to in Judge Citron’s reasons (at [32]-[33]), the fundamental question, whether there is “a lawful basis” for including in the C18s bikes which HMRC could not prove were consigned by City Cycle, was clearly in issue. At [35] he referred to Part E of the amended grounds of appeal which deals with “burden of proof” issues. This acknowledges the provisions of section 16(6) FA 1994, but asserts that “in relation to specific allegations, the burden is upon the Respondents to make out their case”. HMRC’s statement of case responds to this. These passages are not confined to “quantum issues” (whatever they might be – see below) and Judge Citron was clearly conscious of this.

(4) I cannot see Judge Citron drawing any distinction between a “quantum” issue and any other issue when it comes to the burden of proof, nor am I at all persuaded that such a distinction exists. In one sense all open issues in a tax appeal are “quantum” issues as they could impact on the amount found to be owing. If there is a category of minor computational issues where the location of the burden of proof is settled, as I have already observed, I cannot see Judge Citron adverting to it (still less limiting the burden of proof issue to it). For what it is worth, I cannot see any clear blue water between Ms McArdle’s articulation of the question (“where we have blank entries in the MSS data or entries which do not identify City Cycle, whether or not those entries are, correctly, part of the calculation of the debts or not” – see [6] above), which she says Judge Citron approved as a preliminary issue, and the Appellants’ (“The quantum of the C18s is incorrect as it includes […] importations in respect of which HMRC have not identified any basis for liability” – paragraph 14.f of their re-amended grounds of appeal). Both give as the reason why the asserted customs duty debt might be wrong that the “consignorless bikes” should not have been included.

(5) Ms McArdle says that the preliminary issue was explicitly proposed as a quantum issue. As I have just explained, I do not consider that anything turns on this label. In any event, whilst I can see (for example in the Appellants’ re-amended grounds of appeal) that the Appellants have dealt with this question under the heading “Quantum”, it is quite clear what their real ground/complaint is (that the quantum of the C18s is wrong because they include “importations in respect of which HMRC have not identified any basis for liability”) and this goes way beyond the type of issue being considered in the burden of proof discussion in Build-A-Bear.

(6) Ms McArdle says that asking where the burden of proof lies on the extended time limit is a superficial question, because it is nuanced and is dangerous and difficult territory I should skirt around. However, I am not sure that an issue not being straightforward is a reason why it cannot be a preliminary issue (indeed, quite the contrary, a circumscribed but difficult legal issue may be ripe for treatment as a preliminary issue if it eases the parties’ preparation for the substantive hearing) or why I should try to avoid answering it.

Three Case Law Authorities

[66]We discussed three European authorities, and it may be helpful to run through them before embarking on a summary of the parties’ arguments.

Unitrading Ltd v Staatssecretaris van Financiën (Case C-437/13) (“Unitrading”)

[67]In 2007 Unitrading (a UK company) made a declaration to the Netherlands customs authorities for the release into free circulation of 86,400kg of fresh garlic bulbs. In the customs declaration Pakistan was cited as the country of origin and the declaration was accompanied by a certificate of origin from the Pakistani authorities. The Netherlands authorities had doubts over the origin of the goods but released them when Unitrading provided a guarantee. The Netherlands authorities took samples of the goods and had a portion of each sample analysed by a laboratory in the US, which reported that there was a 98% (at least) probability that the garlic had originated in China. At the importer’s request, a different portion of each sample was sent to the US laboratory, which (after examination) confirmed its earlier findings.

[68]The Netherlands authorities assessed Unitrading to customs duties on the basis that the garlic did not originate in Pakistan and Unitrading appealed, disputing the examinations carried out by the US laboratory. The US laboratory said that it had compared the portions of samples it analysed with data it held but refused to disclose which regions of China and Pakistan the samples had been compared with as this was sensitive data to which access was restricted by law. In the context of Unitrading’s appeal against the assessment, the Netherlands court referred three questions to the CJEU. The first was whether Article 47 of the Charter of Fundamental Rights of the EU (“the Charter”) must be interpreted as precluding the proof of the origin of imported goods adduced by the customs authorities resting on the results of an examination carried out by a third party with regard to which that third party refuses to disclose further information either to the customs authorities or to the customs declarant, as a result of which it is made difficult or impossible to verify or disprove the correctness of the conclusions reached.

[69]Fundamentally, Unitrading submitted that, if the judicial review guaranteed by Article 47 of the Charter is to be effective, the person concerned must be able to ascertain the reasons upon which the decision taken in relation to him is based and must have the right to examine all the documents or observations submitted to the court for the purpose of influencing its decision, and to comment on them.

[70]The Czech government pointed out that if the customs authorities intend to base their decision on the fact that the statement by a declarant of the country of origin does not correspond to the reality, they must bear the burden of proof of that allegation. Only an inspection report showing clearly which procedure has been used and the result to which it has led, would be sufficiently clear to enable the customs authorities to assess the credibility and relevance of the results and the person concerned usefully to put forward his view on those results, can be regarded as probative.

[71]The Netherlands government’s position was that it was not possible for the customs authorities, Unitrading or the referring court to learn the full details of the examinations carried out by the American laboratory. Nevertheless, having regard to the reliability of that laboratory, the authorities were entitled legitimately to consider that the reports on the results of the examinations constituted sufficient proof. For the judicial review guaranteed by Article 47 of the Charter to be effective, the person concerned must, inter alia, be able to ascertain the reasons upon which the decision taken in relation to him is based. That requirement was met in that case.

[72]The Court observed that Unitrading knew of the grounds on which the decision concerning it is based, that it was aware of all the documents and observations submitted to the court with a view to influencing its decision and that it was able to comment on them before that court. Having observed (at [23]) that there is no legislation at EU level governing the concept of proof and that any type of evidence admissible under the procedural law of the Member States in proceedings similar to those laid down in Article 243 of the Customs Code is in principle admissible, it said that the results of the US laboratory’s examinations “merely constitute evidence which both the customs authorities and the Netherlands courts, also taking account of the arguments and evidence submitted by Unitrading, were able to regard as adequate to establish the true origin of the goods”. At [26] it held that Unitrading’s right to effective judicial protection, referred to in Article 47 of the Charter, had not, in principle, been infringed as it could challenge the weight to be attached to evidence which the parties and the court could not fully verify.

[73]At [27] the Court observed:

“Since Article 245 of the Customs Code provides, in that context, that the provisions for the implementation of the appeals procedure provided for in Article 243 of that code are to be determined by the Member States, it must be held that it is for the domestic legal system of each Member State to lay down the detailed procedural rules governing those actions, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render in practice impossible or excessively difficult the exercise of rights conferred by Community law (principle of effectiveness). Those considerations also apply with regard, specifically, to evidential rules (see, to that effect, judgment in Direct Parcel Distribution Belgium, C-264/08, EU:C:2010:43, paragraphs 33 and 34 and the case-law cited).”

[74]The Court held that Unitrading’s right to effective judicial protection would not necessarily be precluded by admitting the evidence from the US laboratory, provided that the principles of effectiveness and equivalence were upheld, which was for the national court to decide. At [28] and [29] it explained:

“In order to ensure compliance with the principle of effectiveness, if the national court finds that the fact of requiring the person liable for the customs debt to prove the place of origin of the goods declared, in that the onus is on him to refute the relevance of indirect evidence used by the customs authorities, is likely to make it impossible or excessively difficult for such evidence to be produced, since inter alia that evidence relates to data which the person liable could not possess, it is required to use all procedures available to it under national law, including that of ordering the necessary measures of inquiry (see, to that effect, judgment in Direct Parcel Distribution Belgium, EU:C:2010:43, paragraph 35 and the case-law cited). Nevertheless, where the national court, after having used all procedures available to it under national law, concludes that the true origin of the goods concerned is different from that declared and that the imposition on the declarant of additional customs duties, or even a fine, is therefore justified, Article 47 of the Charter does not preclude a decision to that effect being adopted by that court.”

Greencarrier Freight Services Latvia SIA v Valsts ieņēmumu dienests (Case C-571/12) (“Greencarrier”)

[75]The preliminary question referred here was about the extent to which customs authorities are entitled to apply the results of the examination of samples taken from the goods covered by customs declarations to earlier declarations covering goods, to all appearances identical, from which samples were not and can no longer be taken. Greencarrier imported crackers, biscuits and chocolate bars from Russia. In 2007 the tax authorities carried out an inspection of the customs duties paid by Greencarrier based on 35 declarations. It took and analysed samples relating to 6 declarations and, based on those results and its assertion that the other 23 declarations related to identical goods, it concluded that 29 declarations were incorrect.

[76]The Advocate General in his Opinion referred to Article 78 of Code, which provides for post clearance examinations. He noted that the Code did not deal with extrapolating the results of examinations of one declaration to others but considered that it is essential to allow the authorities to do this where identical goods are concerned. In the context of a discussion of the need for the goods to be identical, the Advocate General commented (at [51]-[52]):

“I would add, so far as this point is relevant, that there is not a shadow of a doubt that the burden of proof of the identity of those goods, a question also debated before the Court, rests on the party which seeks to rely on that identity for the purpose of revision of the declarations, namely, the customs authorities. Where, as in the case in the main proceedings, the goods can no longer be physically examined, those authorities are entitled, under Article 78(2) of the Customs Code, to rely on all the documentary evidence which they have been able to obtain and which supports that identity.”

[77]By “identity” the Advocate General here means “identicality”. So, the authorities must prove identicality; if they want to extrapolate, they need an evidential basis. The alleged debtor does not need to prove a negative.

[78]At [31] the Court agreed that extrapolation was permitted where goods are identical to those examined. It said:

“There is nothing to prevent the customs authorities from applying, for that purpose, the results of a partial examination of goods covered by a customs declaration to goods covered by earlier customs declarations which have already been released by those authorities where those goods are identical, which it is for the referring court alone to ascertain. A finding that the goods are identical may be based, inter alia, on the inspection of the commercial documents and data relating to the import or export operations in respect of the goods concerned or to subsequent commercial operations involving those goods and, in particular, on the particulars supplied by the customs declarant stating that the goods come from the same manufacturer and are identical as regards their name, appearance and composition to the goods covered by those earlier customs declarations.”

[79]At [38] the Court stressed the importance (“essential” was its word) of the putative debtor being able to challenge the extrapolation.

[80]In 1997, before the accession of Estonia to the EU, butter was shipped from Estonia to the European Community and imported at a preferential rate of duty. This preferential treatment was based on the free trade agreement between the European Community and the Republic of Estonia.

[81]Beemsterboer was a Dutch customs agent and it ‘cleared’ the butter through customs. To this end, it submitted to the Dutch authorities on behalf of Hoogwegt International BV (‘Hoogwegt’) a number of declarations for the release of the goods for home use (‘free circulation’). The customs declarations all referred to Estonia as the country of origin of the butter. Attached to each declaration as evidence of origin was an EUR.1 certificate, issued by the Estonian customs authorities at the request of the exporter, the Estonian firm AS Lacto Ltd (‘Lacto’).

[82]Representatives of Hoogwegt had visited Lacto on a number of occasions before business relations were established in order to verify Lacto’s reliability. Hoogwegt also stipulated in the contracts which it concluded with Lacto that the butter to be exported must always be transported with documents showing its Estonian origin, that it must be accompanied by an EUR.1 certificate and that the Estonian origin of the butter must be clearly shown on the packaging.

[83]It emerged during a customs inspection, jointly carried out by EU and Latvian authorities, that Lacto was no longer able to prove that the butter exported to the Community was of Estonian origin; in particular, it had not kept the original documents which could have confirmed the origin of the butter. It also transpired that the Estonian customs authorities had never carried out a proper inspection of Lacto but had just requested some general documents from time to time.

[84]The Estonian customs inspectorate declared the EUR.1 certificates to be void and withdrew them. Later, following an objection lodged by Lacto, the Estonian Customs Board declared that administrative decision to be unlawful on formal grounds. Subsequently, the Dutch customs authorities sought recovery from Beemsterboer of customs duties.

[85]A number of questions were referred to the CJEU, in one of which the Dutch court asked about the burden of proof in respect of the conditions laid down in the third subparagraph of Article 220(2)(b) of the Code, in other words, who bears the burden of proving that an EUR.1 certificate is based on an incorrect account of the facts provided by the exporter and who must prove that the issuing authorities were aware or should have been aware that the goods did not satisfy the conditions laid down for entitlement to preferential treatment.

[86]The Advocate General began by observing (at [47]) that “Under the generally accepted rules of procedural law, the party relying on the conditions laid down in a provision must as a general rule prove that they have been satisfied.”

[87]He went on to observe:

“48. Normally, the authority responsible for the subsequent entry in the accounts of the amount legally owed will rely on the derogation laid down in the first part of the third subparagraph of the new version of Article 220(2)(b) of the Customs Code. In principle, then, that authority – as a rule, the customs authority of the importing Member State – bears the burden of proving that the exporter has indeed provided an incorrect account of the facts and that the incorrectness of the certificate arose as a result of that account. 49. Allocation of the burden of proof along those lines is also justified, since, as a general rule, the authority is better able to provide evidence than, say, the importing undertaking. Through administrative cooperation with the authorities of the third country, it can establish what statements were actually made during the procedure there and on what, in the final analysis, the contents of the EUR.1 certificate were based. … 50. It is also evident from the obligation on the exporter to keep his documents, however, that the production of proof by the competent authorities depends on the exporter’s cooperation. If, despite his obligation, the exporter does not keep the documents needed to verify the originating status of the exported goods, it becomes impossible for the customs authorities – for reasons beyond their control – to demonstrate whether correct or incorrect information has been provided. In such circumstances, it would be unfair to place the burden of proof on the customs authorities. According to settled case-law, the Community cannot be made to bear the adverse consequences of the wrongful acts of the suppliers of importers. 51. If, then, the information originally provided by the exporter cannot be verified because he himself has not kept the appropriate documents, despite his obligation to do so, it is reasonable to reverse the burden of proof. The burden of proof in the context of the first part of the third subparagraph of the new version of Article 220(2)(b) of the Customs Code must then be placed on the debtor (the person liable for payment). In other words, it is then for the debtor to prove that the EUR.1 certificate issued by the third-country authorities was based on a correct account of the facts, since misconduct or error on the part of the exporter are among the normal commercial risks to which the person liable for payment is exposed and cannot be regarded as unforeseeable in the context of his commercial relations.”

[88]At [53] the Advocate General deals with the situation where the authorities who issued an EUR.1 certificate were aware or should have been aware that the goods concerned did not satisfy the conditions for entitlement to preferential treatment. At [54] he observed that:

“As a rule, the person liable for payment, from whom import duties are to be recovered, will rely on this subsidiary exception. Thus, under the generally accepted rules of procedural law, that person must bear the burden of proof in respect of the second part of the third subparagraph of the new version of Article 220(2)(b) of the Customs Code.”

[89]He discussed various policy arguments around this proposition (e.g. that it is difficult for a person liable for payment who is resident in the Community to assess, let alone prove, the information internally available to the competent authorities of a third country), but concluded (at [57]) that, “In these circumstances, the burden of proof can remain allocated in accordance with the generally accepted rules of procedural law: a reversal of the burden of proof is unnecessary.”

[90]Turning to the ECJ’s judgment, at [39] it endorsed the general rule that:

“It must be stated in this respect that, in accordance with generally accepted rules on the allocation of the burden of proof, it is the responsibility of the customs authorities which wish to rely on the beginning of the third subparagraph of Article 220(2)(b) of the Customs Code to carry out post-clearance recovery to adduce, in support of their claim, evidence that the issue of incorrect certificates was due to an inaccurate account of the facts provided by the exporter.”

[91]However, where, as was the case here, it was impossible for the customs authorities to establish whether the information provided for the issue of an EUR.1 certificate was correct or not, since the exporter had not retained possession of the supporting documents, despite being under an obligation to keep the appropriate documents for at least three years, the burden would be reversed.

[92]Turning to the question who bears the burden of proving that the customs authorities which issued the EUR.1 certificate were aware or should have been aware that the goods did not satisfy the conditions laid down for entitlement to the preferential treatment, the Court held (at [45]-[46]) that “the person who relies on the third subparagraph of Article 220(2) (b) of the Customs Code, …, must adduce the evidence necessary for his claim to succeed.”

The Burden of Proof Issue: The Parties’ Arguments

[93]HMRC say that the starting point here is section 16(6) of FA 1994, which provides: “(6) On an appeal under this section the burden of proof as to—(a) the matters mentioned in subsection (1)(a) and (b) of section 8 above,

(b) the question whether any person has acted knowingly in using any substance or liquor in contravention of section 114(2) of the Management Act, and

(c) the question whether any person had such knowledge or reasonable cause for belief as is required for liability to a penalty to arise under section 22(1), (1AA), (1AB) or (1AC) or 23(1) of the Hydrocarbon Oil Duties Act 1979 (use of fuel substitute or road fuel gas on which duty not paid), shall lie upon the Commissioners; but it shall otherwise be for the appellant to show that the grounds on which any such appeal is brought have been established.” (a) the matters mentioned in subsection (1)(a) and (b) of section 8 above, (b) the question whether any person has acted knowingly in using any substance or liquor in contravention of section 114(2) of the Management Act, and (c) the question whether any person had such knowledge or reasonable cause for belief as is required for liability to a penalty to arise under section 22(1), (1AA), (1AB) or (1AC) or 23(1) of the Hydrocarbon Oil Duties Act 1979 (use of fuel substitute or road fuel gas on which duty not paid),

[94]Ms McArdle refers us to the Upper Tribunal decision in Build-A-Bear, which dealt (albeit as a small part of its overall decision) with the question of the burden of proof in customs duty cases. Where it had insufficient records to identify precisely the goods which had been imported under a particular customs duty code, the taxpayer had used various methods to estimate its customs duty liability. The FTT had reached a decision in principle on the correct classification of various items, but it made no decision on the quantum of liability. Instead, it invited the parties to reapply to the Tribunal if, having obtained a decision on the classification of the various items in principle, they were unable to agree on questions of quantum. HMRC said that the FTT had made an error of law in not finding that Build-A-Bear had failed to discharge the burden of proof in relation to those matters for which it could not produce evidence of the goods which were imported and that, if the taxpayer was not in a position to identify the nature of the goods imported under the declarations referred to in these categories, it could call into question the validity of the C18s. As to this, the Upper Tribunal commented:

“244. Pursuant to s16(6) Finance Act 1994, the burden of proof in customs and excise appeals is on the appellant other than in relation to the specific matters which are set out in subparagraphs (a) to (c) of that sub-section. 245. The burden is therefore on BAB to show on the balance of probabilities that the assessments contained in the C18s were wrong, in whole or in part. 246. We therefore agree with Mr Thomas that, to the extent that BAB has failed to provide any evidence of the nature of the goods that were imported under a particular EPU code, the assessment in the relative C18 must stand. 247. As a matter of principle, however, we do not go any further than that. It is for the FTT in appropriate cases to examine the evidence that is put forward by an appellant to challenge an assessment and to determine if it meets the appropriate standard of proof.”

[95]Ms McArdle says that the question about who the consignor is goes to quantum and Parliament clearly intended that an appellant, who wishes to challenge the quantum of a sum which a decision of HMRC has found it to be liable for, should bear the burden of proof in relation to issues of quantum. Parliament has explicitly provided for a limited number of exceptions to the usual rule that an appellant bears the burden of proof, and the quantum issues which the Appellants raise do not fall into those exceptions. There is no reasonable interpretation of the legislation which indicates otherwise, and Build-A-Bear confirms the position.

[96]In any event, she says, the Appellants plead a positive case (that the calculations are wrong) and so they bear the burden of proof on ordinary principles.

[97]Article 243 of the Code provides for a right of appeal before an independent body in accordance with the provisions in force in Member States and Article 245 clearly leaves “the implementation of the appeals procedure” to Member States. Ms McArdle says that this embraces domestic rules, such as the burden of proof and rules of evidence.

[98]Ms McArdle says that the ECJ/CJEU cases referred to by Ms Sloane essentially say no more than that the national court must adopt a fair procedure and do not disclose any general rule on where the burden of proof lies in customs duty cases.

[99]Starting with Unitrading, this case is dealing with a very specific evidential problem and how Community law requires the courts to address that problem to avoid unfairness. The answer was that the national court should use all procedures available to it to try to make the procedures fair. Ms McArdle says that, to the extent Ms Sloane is suggesting that this discussion stands for the proposition that, where the customs authorities challenge proof of origin, they must provide evidence to have a prima facie case, that is not what this case says at all. Instead, Ms McArdle says that it is talking about how to avoid breaching the principle of effectiveness against the background of a very particular evidential problem. It does not tell us anything about the answer to our preliminary issue.

[100]Turning to Greencarrier, this case is about what, as a matter of EU law, is acceptable in terms of how far sampling evidence can be extrapolated. It tells us that, in principle, there is nothing to prevent the customs authorities using a sampling methodology if the goods are identical. Ms McArdle says that this is not relevant to the question that confronts us. She says that is because the case does not create any general evidential burden or burden of proof for anyone. All it says is that it is perfectly acceptable to use sampling in certain circumstances. Although the Advocate General made some general comments on the burden of proof, Ms McArdle says there is nothing in the Court judgment that confirms whether his opinion was thought to be correct or not.

[101]Ms Sloane’s response to this is to say that EU law, both the Code itself and ECJ/CJEU authorities, establish which party bears the burden of proof on specific issues and FA 1994 cannot override this. In fact, she says, there is no conflict here. The Appellants accept that, if they want to say that a C18 is issued in breach of EU law, they need to establish that. But one must then look at European law to see what it says about each of the relevant issues and the grounds which are raised. The rule there (which applies to the customs authorities as much as anyone else) is that he who asserts must prove, unless there is a specific reversal of the burden.

[102]A general placing of the burden of proof on the Appellants here would, she says, breach the requirements of effectiveness and equivalence with which any UK procedural rules must comply. On equivalence she points out that, even in the context of UK domestic direct tax cases, where the burden of disproving an assessment normally lies on the taxpayer, this is not the case where extended time limits are concerned, where it is well established that the onus in on HMRC to prove that the conditions for the issue of a discovery assessment or an assessment outside the normal 4-year time limit are met.

[103]She also referred us to paragraph 6-06 of Phipson on Evidence (20th Ed) which states the general rule that the burden of proof lies on the party who substantially asserts the affirmative of an issue. This aligns, she says, with the general rule to be derived from the EU customs duties cases.

[104]As to effectiveness, HMRC’s position could give rise to an unjust and plainly absurd scenario, for example where HMRC raise a demand asserting that some customs declarations 20 years ago were wrong and requiring the taxpayer to disprove or prove the negative in circumstances where records only need to be kept for 3 years.

[105]In her skeleton argument she says that the ordinary position is that HMRC may raise an assessment for customs duties within 3 years of the date upon which the debt was incurred: Article 221(3) of the Code. This dovetails with the requirement for customs traders to retain their records for 3 years.

[106]HMRC are permitted to communicate the “amount” of a customs debt after the expiry of the 3-year limit only where the customs debt is “the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings” (Article 221(4) of the Code).

[107]HMRC allege that the Appellants delivered, or caused to be delivered, to HMRC declarations, false certificates of origin (which City Cycle obtained from the Sri Lankan authorities by making false declarations), which were untrue in a material way. Section 167(3) of the Customs and Excise Management Act 1979 creates a strict liability offence of making, signing or delivering (or causing to be made, signed or delivered) a document which is untrue in any material particular. So, Ms Sloane says, if HMRC can show that the City Cycle certificates of origin were false, the relevant Appellant/s will have committed a (strict liability) criminal offence and HMRC will no longer be bound by the 3-year period for communicating a customs duty liability (in other words, issuing a C18).

[108]Ms Sloane says that, if HMRC want to defend the C18s, then as the CJEU explained in Beemsterboer, the burden is on them to establish a lawful basis for the amounts allegedly due. It is HMRC who assert that the conditions for applying the extended time limit under the Code are met. Under EU law, HMRC therefore bear the legal burden of showing that the conditions are met.

[109]Ms Sloane points us to the opinion of the Advocate General in Beemsterboer and the decisions in Greencarrier and Unitrading, where (she says) the CJEU explained that, whilst it is for the domestic legal system of each Member State to lay down the detailed procedural rules around evidence, they must not render in practice impossible or excessively difficult the exercise of rights conferred by Community law (the principle of effectiveness).

[110]Ms Sloane asks us to note that the Advocate General’s comments in Beemsterboer indicate that the burden of proof lying on the person who asserts a position is an EU law rule, not a matter for the Member State, although in specific circumstances it may be reasonable to reverse the usual rule.

[111]Those comments and those of the Court, says Ms Sloane, show that the burden of proof is not a matter for national legislation. The general rule is that he who asserts must prove for the purposes of the customs duty regime under EU law. And the court is not saying in any of these cases that the customs authorities are free to raise a customs debt and then the debtor bears the burden of proving a negative. The general rule is quite the opposite.

[112]Unitrading, Ms Sloane says, is built on the premise that, where customs authorities are challenging the proof of origin, they are the ones who are asserting goods have a different origin and they must provide the evidence to have at least a prima facie case. Even where they do that, it is important to ensure that the debtor can refute that in compliance with principles of effectiveness and equivalence.

[113]Greencarrier she sees as supporting the idea that there must be an evidential basis for extrapolation put forward by the authorities. The putative debtor must have a right to challenge that, but that is challenging the authority’s evidence, not having to prove a negative.

The Burden of Proof Issue: Discussion

[114]Our starting point, of course, must be section 16(6) FA 1994, which very clearly puts the burden of proof on the appellant; it states unequivocally that, subject to certain exceptions which are not in point here, it is for the appellant to show that the grounds on which its appeal has been brought have been established. That approach was, not surprisingly, applied by the Upper Tribunal in Build-A-Bear.

[115]Ms McArdle says that the Appellants need to prove that no criminal act was committed in connection with the customs debt incurred when the bikes were imported to the UK to show that the extended time limit is not available to HMRC and so make out their case that HMRC‘s calculations are wrong. This (she says) is the natural result of the general principle that the person who asserts a case must prove it, and so the burden of proof rests on the Appellants even without section 16(6) FA 1994.

[116]As far as general principles are concerned, I am not with Ms McArdle. What has happened here is that HMRC have communicated a customs debt after the normal three-year period, and the Appellants are saying that HMRC have not shown that there was a lawful basis for their action. HMRC are relying on Article 221(4) to authorise what they have done. The essential part of the Appellants’ case is that more than three years have elapsed since the customs debt was incurred. They do not need to show that a criminal act has been committed, whereas it is an essential part of HMRC’s case that a criminal act has been committed. They are the party who is asserting the affirmative of the issue here, that a criminal act was committed and so their act was authorised under Article 221(4), and on general principles they should bear the burden of proving that. The position on general principles is not particularly important, however, because section 16(6) FA 1994 applies here and, as we have seen, that provides that the Appellants must show that the grounds on which they brought the Appeals are satisfied.

[117]In principle, the UK is entitled under Article 245 of the Code to adopt its own procedural rules for customs duty appeals. Unitrading confirms this, but we can also see from Unitrading at [27] that the latitude Article 245 allocates to Member States is limited by the requirements that the rules they adopt(i) are not less favourable than those governing similar domestic actions (equivalence) and

(ii) do not make the exercise of rights conferred by Community law impossible or excessively difficult in practice (effectiveness).

[118]In addition, the Code is an EU regulation and as such has general application and is binding in its entirety and directly applicable in all Member States; Article 288 of the Treaty on the Functioning of the European Union. A regulation being directly applicable means that it applies immediately as the norm in all Member States, without needing to be transposed into national law, and can create rights and obligations for individuals, who can invoke the regulation directly before national courts and use it as a reference in their relationship with other individuals, Member States or EU authorities.

[119]Pausing here, we can see that in principle the UK has freedom under Article 245 to adopt its own procedural rules (of which section 16(6) FA 1994 is clearly one) in customs duty cases, but those rules must comply with the requirements of effectiveness and equivalence and will automatically yield if they conflict with the Code.

[120]Like Ms McArdle, I have not found the three ECJ/CJEU authorities we looked at in detail to offer explicit authority for a general rule on the burden of proof in customs duty cases. Such general observations as the Advocate General or Court make are, however, consistent with the idea that, where a tax authority wants to base an assertion of liability on a particular fact or provision, it is for the authority to make out its case.

[121]So, we see in Unitrading the Czech government pointing out that, if the customs authorities assert that the statement by the declarant of the country of origin does not correspond to reality, they must bear the burden of proving that. Beyond that, I agree with Miss McArdle that Unitrading is addressing a different point, how to secure a fair and effective trial where the way in which an important piece of evidence is provided makes it difficult to review or challenge it. Beyond the Czech government’s submission, however, I cannot find anything in this case to give support to the idea that there is a general burden of proof on tax authorities on all points they assert or any real debate around the burden of proof at all.

[122]I find Greencarrier to be more helpful. The question in that case was the extent to which customs authorities could sample and then extrapolate from their sample. The court was happy that they could do that if the goods in question were identical with those sampled. We have a broadly similar situation here. HMRC say they have evidence that, where bikes were consigned by City Cycle, an incorrect declaration of origin was given (which gives rise to the criminal act which justifies late notification). The question is can they extrapolate what they say they have learned (that the City Cycle declarations of origin are wrong) to other bikes, where the consignor’s identity is unknown? Based on Greencarrier, they can only extrapolate from City Cycle to other consignments if they are identical. At [31] the Court discussed what identical meant and considered that it might include goods coming from the same manufacturer. This case does not, of course, tell us in terms where the burden of proof lies, rather it tells us when a party which is seeking to establish something can extrapolate from the evidence they already have. Of more general relevance to us is the Advocate General’s ready acceptance “that there is not a shadow of a doubt that the burden of proof of the identity of those goods, a question also debated before the Court, rests on the party which seeks to rely on that identity for the purpose of revision of the declarations, namely, the customs authorities”.

[123]Beemsterboer deals with the detailed provisions in Article 220(2)(b). We are not concerned with these, and we need to remember that this provision is very detailed, nuanced was Ms McArdle’s description, and very different in structure from the provision we are concerned with. We do, however, see the Advocate General making a very general statement (at [47]) that “Under the generally accepted rules of procedural law, the party relying on the conditions laid down in a provision must as a general rule prove that they have been satisfied.” He does not express any doubt about that being a rule of general application or seemingly entertain any doubt about it being the starting point in the Code. We see that approach being followed in paragraphs [48]-[51], but not slavishly; it is departed from where there are good policy reasons for doing so. He takes the same approach at [54]-[57].

[124]We see the Court observing (at [39]) that “… in accordance with generally accepted rules on the allocation of the burden of proof, it is the responsibility of the customs authorities which wish to rely on [a particular provision] to carry out post-clearance recovery to adduce, in support of their claim, evidence that the issue of incorrect certificates was due to an inaccurate account of the facts provided by the exporter.” Although this case is concerned with the detailed provisions of Article 220(2)(b), both the Advocate General and the Court acknowledge the generally accepted rule that a person who wishes to rely on a provision must prove their entitlement. That is not the inevitable end point at every turn of Article 220(2)(b), but it is the unquestioned starting point.

[125]If we turn to the language of the provision we are concerned with, Article 221(4), we see that it provides an exception to the general rule (that communication of a custom debt must take place within three years of the date on which the debt was incurred) where the customs debt is the result of a criminal act. Read naturally, it restricts communication of a customs debt after three years to circumstances where the debt is the result of a criminal act.

[126]If we accept HMRC‘s assertion about where the burden of proof lies, however, it changes the way Article 221(4) works quite radically. The practical effect of holding that the burden of proof lies on the debtor would be that the only limitation on late communication would be if the debtor could show that the debt did not result from a criminal act. Effectively, what (read naturally) is a precondition for late communication (that the customs debt results from a criminal act) would have turned into a limited defence.

[127]Whilst Article 245 gives Members freedom to introduce their own procedures for dealing with appeals, they should not affect the fundamental rights and obligations the Code, as a directly applicable EU regulation, gives rise to. Allowing section 16(6) FA 1994 to shift the burden of proof in the way HMRC suggest would turn the way Article 221(4) works on its head, from what appears to be its straightforward reading (that there can only be late notification if the customs debt results from a criminal act) to a strained, unnatural reading (that there can always be late notification unless the debtor can show that the customs debt did not result from a criminal act).

[128]I was not addressed on how this issue is approached in other Member States or at EU level, and of course the procedure for referring this type of issue to the CJEU for a preliminary ruling is no longer available. Whilst I cannot be sure that Article 221(4) does not operate across the EU in the way HMRC claim for it in the UK, I am wary of adopting an analysis which appears to allow a domestic procedural rule to have such a radical and unexpected effect on the natural reading of the Article, particularly when the natural reading of the Article and what seems to be the generally accepted approach to how the burden of proof operates in scenarios like this (see [137] below) point in the same, but entirely opposite, direction.

[129]As well as completely reframing the provision, putting the burden of proof on the debtor would put a high burden on the debtor (to prove that the debt did not result from any criminal act at all). It would require the debtor to scour the criminal code of the relevant jurisdictions (certainly the jurisdiction of import and possibly the jurisdiction of export too) and try to find out whether it, or anyone else involved in the importation, might have committed a crime which impacted on the customs debt and only if they could prove a complete negative could they resist late communication of the customs debt. In that connection, we should bear in mind that the criminal act HMRC rely on here is a strict liability offence. For obvious reasons, it may be difficult for a debtor to identify every criminal act (particularly those where there is no mens rea requirement) which might have been committed and then establish that it was not.

[130]I was not addressed in detail on the operation of the principle of effectiveness, but it seems to me that placing the burden of proof on the debtor and taking the burden seriously (putting the debtor to proof of the total negative, which it seems to me we must do – we cannot proceed on the basis that the burden of proof is on the debtor but that this requirement will generally not be taken very seriously) must come very close to breaching, if it does not breach, the principle of effectiveness.

[131]Ms McArdle says that determining whether it is impossible or excessively difficult to protect one’s rights in an appeal is a question involving consideration of evidence and there is no evidence before me on this point. In the absence of persuasive evidence, there can be no finding that it is excessively difficult or impossible for the Appellants to argue their position on appeal.

[132]I do not consider that evidence is needed to establish that it is harder to prove a negative than a positive. The authors of Phipson on Evidence (20th ed at 6-06) explain that the reason why the burden of proof rests on the person who asserts the affirmative of the issue is because, in the nature of things, a negative is more difficult to establish than an affirmative. Putting the burden of proof on the debtor would be a very onerous and potentially very expensive thing to do, which could very likely result in debtors not challenging, or unjustifiably failing to challenge successfully, the late notification of customs debts which do not result from any criminal act at all, which is the exact opposite of the natural reading of Article 221(4), that late notification should only take place in circumstances where the customs debt is the result of a criminal act.

[133]Ms McArdle also says that the Appellants are large and sophisticated businesses profiting from importation, and so they ought to know that the possibility of being liable for debts arising over three years ago is a very real one, and so they should retain evidence beyond the three-year time limit to be able to support their position if subsequently challenged. She also says that the Appellants have produced a lot of evidence (not before me in this preliminary issues hearing) on the question of whether “the customs debt the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings” and this necessarily undermines any argument of procedural unfairness if the burden of proof is applied following section16(6) FA 1994. Finally, she says that the Appellants had plenty of time to make any arguments or produce any evidence before and during an extensive Right to be Heard Process, but no dispute as to the consignments in question was raised by them until 2023.

[134]I do not agree that the position of a particular debtor in a particular case (its size/sophistication and whether it has been able to produce evidence) is relevant to the abstract question where the burden of proof lies generally. Similarly, I cannot see why (or how) the Appellants not raising this issue during the Right to be Heard Process affects where the burden of proof lies on the issue once it has been raised.

[135]The Code imposes a minimum period of 3 years for the retention of records, and this dovetails neatly with the basic period for notifying customs debts in Article 221. In the UK the retention period is 4 years (see regulation 9 of the Customs Traders (Accounts and Records) Regulations 1995), but I do not consider that anything turns on this when we are looking at the way the Code functions. There is an obvious symmetry between the minimum period for preserving records and the ordinary three-year period for notifying customs debts. Once that period has expired, as a matter of EU law, there is no expectation that a trader has retained any records. It would seem odd (to put it mildly) against such a background for customs authorities to be able to notify a debt to a trader without any evidential basis for their action and for the trader, who by then is entirely free to dispose of their records, to bear the burden of proving that no debt had arisen. I do not think that it is controversial to say that legal certainty is an important principle of EU law. I cannot see how any ability on the part of customs authorities to act in the way I have just described could comply with the requirement of legal certainty.

[136]Turning to the concept of equivalence, although in UK direct tax cases the burden of proof is generally on the taxpayer to displace an assessment, the burden of proof on the validity of assessments (issues such as whether there has been a discovery, whether the conditions that assessments may only be brought if the loss of tax was brought about carelessly or deliberately or there was insufficient disclosure, and the extended time limits for careless or deliberate behaviour) generally lies on HMRC; the position here is usefully summarised in Pump Court Tax Chambers: Tax Litigation Handbook at 12.10 et seq. I was not addressed in detail on all forms of UK tax, particularly indirect tax, litigation. Interestingly, although this position is not free from doubt, the burden of proof on the validity of VAT assessments (whether the assessment is made to best judgment and whether HMRC have failed to meet the test that allows assessments to be made up to a year after facts justifying the assessment come to their knowledge) tends to sit on the taxpayer; Tax Litigation Handbook at 4.49-4.52, 4.57-4.61 and 12.33-12.34. Given the doubt expressed in relation to the VAT position and that the authorities discourage focus on the “best judgment” (as opposed to quantum) aspects of an appeal against a VAT assessment, it seems to me that a fair (if high level) summary of the effective UK approach to the burden of proof on matters such as extended time limits and other factors which go to the validity of an assessment is that the burden of proof is generally on HMRC rather than the taxpayer.

[137]We have seen in the three ECJ/CJEU authorities we have reviewed that there seems to be a ready acceptance that the ordinary approach to the burden of proof (put colloquially, If you want to rely on a provision, it’s your job to prove your entitlement to do so) should apply in the Code unless there is a good reason for it not to. Taking such an approach to the burden of proof here would also be consistent with the natural reading of Article 221(4) (that late notification is only allowed if the customs debt resulted from a criminal act) and its interaction with Article 16, and my initial conclusions on effectiveness and equivalence suggest that there is every reason to keep with that approach rather than reverse the burden of proof.

[138]For these reasons, I consider that, where reliance needs to be placed on Article 221(4) before a customs debt can be notified, the legal burden of proof is on the customs authorities to establish that they are entitled to rely on it.

[139]I am not sure that there really is any conflict between section 16(6) FA 1994, which can be construed (as Ms Sloane suggests) as saying no more than that, if it is a part of the Appellants’ case that the burden of proof on the extended time limit issue is on HMRC, it is for them to make good that argument. However, to the extent there is any conflict between Article 221(4) construed in the way I have just described and the way section 16(6) FA 1994 would otherwise operate, the directly applicable provisions of the Code must prevail. There was no suggestion in Build-A-Bear that section 16(6) FA 1994 conflicted with any relevant directly applicable provision of the Code, and I do not consider that my conclusion is in any way in conflict with (or not consistent with) the Upper Tribunal’s decision on the burden of proof in that case.

The Answer to the Burden of Proof Issue

[140]For the reasons discussed at [9](2), it is not possible to say in terms that the legal burden of proof in relation to the cycles in category (c) rests generally on HMRC or the Appellants; the question needs to be answered separately for each issue in the Appeals where this is relevant.

[141]The issue we are concerned with is whether the amounts claimed in the decision letters and C18s are incorrect as they include consignments in category (c) where reliance needs to be placed on Article 221(4) to show a basis for liability.

(c) The Debtor Issue

[142]The Appellants say that HMRC’s alleged errors include issuing a decision letter/C18 to an Appellant in respect of importations of products for which the Appellant was not the declarant on the corresponding customs declaration. The Appellants say they have provided evidence that import entries have been included on C18s where the recipient of the C18 is not the entity which was the declarant, and the import paperwork shows that another entity was the declarant. Whether this is the case or not is a matter for determination at the substantive hearing. What I need to decide is whether, if HMRC have in fact issued a C18 to the “wrong” Appellant, the Tribunal can correct that.

[143]Perhaps unusually, the Tribunal is seized of appeals by three Appellants which will all be heard together, and so it is likely that, if HMRC did issue a C18 to the “wrong” person, the “right” person (to whom HMRC should have issued the C18) will be party to proceedings before the Tribunal at that time. It is against that background that I need to decide whether, if the Appellants are right and HMRC has notified a customs debt to the wrong entity (which happens to be an Appellant which is appealing that notification), the Tribunal can determine that another Appellant (which is the declarant on the corresponding customs entry and therefore is the entity to which HMRC should have notified the debt) is the true debtor. The exact question Judge Citron posed is: In such cases, does the Tribunal have power to decide that the Appellant in question is liable for the customs debt in question? This occasioned yet another disagreement between HMRC and the Appellants about the scope of a preliminary issue. The Appellants say that the question is asking whether the Tribunal can determine that a different Appellant is the true debtor in a way which makes it liable for the debt. HMRC say that the question is just asking whether the Tribunal can determine that another Appellant is the true debtor and questions of liability/enforcement (Can HMRC do anything with/about the decision?) are a separate issue for another day.

[144]I am with the Appellants on this point. The question Judge Citron posed very clearly asks whether the Tribunal can decide that a particular Appellant is liable for the customs debt in question, not just whether a particular Appellant is the declarant/customs debtor. We can see that if we compare the final version of the question with the initial version in the Appellants’ skeleton argument for the CMH:

“Where HMRC has issued a C18 to an entity which is not the customs debtor, does the Tribunal have the power to vary the decisions to change the customs debtor?”

To the extent there is ever anything between being a customs debtor and being liable, the final version of the question clearly focuses on whether the Tribunal can decide that a particular Appellant is liable for the customs debt, not just whether they are a customs debtor. The preliminary issue is linked to HMRC’s pleaded case that, to the extent that they had identified the wrong declarant, “the Respondents will invite the Tribunal to vary the decisions accordingly so that Universal Cycles is liable for the additional duties in respect of such importations”: paragraph 105 of HMRC’s Consolidated Re-Amended Statement of Case.

[145]As I have already hinted, there is a separate issue between the parties about who the declarant is in certain circumstances, but this is not something I need to decide as a preliminary issue. I am concerned only with the situation where A turns out to be the declarant, the customs debt was notified to B by HMRC, and A and B are both Appellants. The question for me, in such a situation, is whether the Tribunal can decide that A is liable for the customs debt.

[146]For completeness, I should say that I do not agree with HMRC’s complaint that it had no notice that it would have to address the issues of entry in the accounts and communication of a customs debt, which I will turn to in a moment. As Ms Sloane observed, HMRC pleaded the purported power of the Tribunal to render a person liable to pay a new amount without identifying any basis for it. The Appellants, whose skeleton was filed first, noted HMRC’s failure to give any explanation for their radical (as they described it) proposition and submitted that any such “variation” by the Tribunal “would, in substance and effect, be purporting to issue a fresh liability decision against a third party, in breach of the requirements of the CCC or UCC on the notification of a debt and the EU law principle of legal certainty” This notwithstanding, as set out above, I invited HMRC and the Appellants to send written submissions on this issue after the hearing.

The Debtor Issue: The Parties’ Arguments

[147]The Appellants say that a customs debt must be communicated to the declarant (as the person liable to pay the duty) within three years of the time the debt was incurred unless the extended time limit in Article 221(4) applies. Where HMRC have communicated a customs debt which arose more than three years ago to a person who is not the declarant, it is now too late for HMRC to notify the declarant (except where the extended time limit in Article 221(4) applies) and there is no mechanism for the Tribunal to impose liability on the declarant even where that person is another Appellant.

[148]Ms Sloane says that each entry of goods is accompanied by its own customs declaration and must be analysed separately. An Appellant appealing a decision/C18 in relation to one importation does not give the Tribunal jurisdiction to impose a liability on it in relation to another importation where it was the declarant, and which is not the subject of its appeal.

[149]The Appellants say that the Tribunal might well find that a decision letter was wrong, and that the decision should have been that a different Appellant was liable for customs duty on a particular importation. However, there is a procedural mechanism for imposing a customs duty liability, which involves the communication of the debt by the authorities, and HMRC cannot ask the Tribunal to do its job for it and potentially circumvent time limits by amending a C18 issued to an Appellant in relation to a different importation to include duty the Tribunal determines HMRC could/should have notified to the Appellant in relation to this importation.

[150]Ms Sloane says that HMRC’s position is plainly incompatible with the scheme of the EU legislation. The clear and detailed sequence under EU law involves a customs debt being incurred with the declarant as the debtor. Each amount of duty is entered by the customs authorities in the accounts, although the authorities do not have to enter an amount in the accounts if they are out of time to communicate the debt to the debtor: Article 217. As soon as the customs amount has been entered into the accounts, it is to be communicated to the debtor in accordance with appropriate procedures: Article 221. There are time limits applicable to communication of the debt, which are set out in Article 221. If there is an appeal, the time limit for communication of the debt is suspended from the time an appeal is lodged, for the duration of the appeal proceedings: Article 221(3). It is a clear requirement of EU law that the amount of duty is to be entered in the accounts before it is communicated to the debtor: Case Belgische Staat v Molenbergnatie NV (

Case C-201/04

) (“Molenbergnatie”). Once (and only if) a debt has been communicated in accordance with these requirements, the debtor is liable to pay with a certain period: see Article 222 of the Code.

[151]The detailed and coherent scheme of the EU legislation makes it clear, Ms Sloane says, that if it emerges during an appeal that the amount entered into the accounts and communicated to the debtor was too low, the customs authorities must enter the new amount in the accounts and then communicate it to the debtor, subject to time limits (and if they are out of time, they do not need to enter it in the accounts). The time limit for communication is suspended for the duration of the proceedings, so this requirement should not generally be a problem.

[152]HMRC say that they would enter the debt into the accounts following a variation of the C18 by the Tribunal. However, Ms Sloane submits, their proposed sequence is a breach of the clear requirement of the “chronological order” that a customs debt must be entered into the accounts before it is communicated; see Molenbergnatie.

[153]Section 16(5) FA 1994 confers a power to vary or substitute a decision. However, that wording does not assist HMRC. That legislative provision must be read in light of, and compatibly with, the scheme of the EU legislation.

[154]Section 16(5) is different from (and far more limited than) section 84(5) of the Value Added Tax Act 1994 which confers a specific power on the Tribunal, where the Tribunal finds that the amount specified in a VAT assessment is less than it ought to have been, to give a direction specifying the correct amount and that “the assessment shall have effect as an assessment of the amount specified in that direction, and that amount shall be deemed to have been notified to the appellant”. Section 16(5) FA 1994 contains no equivalent which could be applicable to the customs duties in a C18. That absence is not surprising considering the very different requirements of the EU scheme relating to customs duties.

[155]HMRC say that Articles 243(2)(b) and 245 of the Code explicitly provide that all matters concerning appeals (including enforcement) are to be determined by the Member States, and so the Tribunal has power, conferred by section 16(5) FA 1994, to determine that one of the Appellants is liable for a debt attributed by HMRC’s decisions under appeal to another Appellant and vary those decisions accordingly (they say this was belatedly accepted by the Appellants).

[156]There is, they say, no legislation or rule requiring a Tribunal to engage in any notification process. Following a finding that one of the Appellants is liable for a debt attributed by HMRC’s decisions under appeal to another Appellant, the Tribunal has power to vary the decisions, which includes the quantum of the debts to be paid, to reflect the correct amounts owed by each debtor which give rise to the legal obligation to pay.

[157]HMRC say there is no basis (and the Appellants have not argued for one) for reading the power under section 16(5) to exclude variation of the quantification of the debt upwards. Those decisions, if so varied by the Tribunal, give rise to the right to enforce by HMRC.

[158]The requirement to communicate to the debtor “as soon as it has been entered into the accounts”’ (Article 221) does not apply to a subsequent determination by the Tribunal once that original entry and communication has occurred. Such a requirement would be an absurdity. The Appellants are aware of HMRC’s position and have been since this position was pleaded in April 2024; they have a suitable opportunity to challenge HMRC’s position and can put arguments to the Tribunal as to whether the debts should be varied. Procedural fairness cannot require further notification following determination by the Tribunal that the debts are legally due.

[159]HMRC would still enter the debt into the accounts following a variation by the Tribunal, which (in simple terms) means entry into the accounts that HMRC submits to the European Union of debts issued to traders. They would also delete the previous entry in the accounts in relation to the same debt where the incorrect debtor had been named. This regularises the position between the Member State (or former Member State) and the European Union.

[160]HMRC say that the Appellants’ reliance on the suspension of the three-year ordinary time limit in Article 221(3) of the Code is without merit. The Appellants say that this provision exists because of the requirement to communicate the debt after the appeal process, if it is to be increased, and that it would not serve a useful purpose if the Tribunal could simply vary the enforceable debt without the need for a new notification of the debt. Ms McArdle says that this does not follow logically. First, Article 221(3) cannot narrow the very broad nature of Article 243 of the Code permitting Member States to prescribe the form an appeal procedure takes, which must include the powers of the Tribunal on making findings of liability. If the EU legislature intended a fetter on that power (beyond the general principles) it would have expressly said so. Secondly, it may be that in other Member States, there is no power of the equivalent tribunal/court to vary a domestic customs authority’s enforceable decision, or to substitute its own, and consequently the national procedure in those jurisdictions would require the customs authorities to engage in a process of re-notification where the amount of a debt increases. The fact that the suspension of time limits may be of less utility in the UK procedure as it stands today is not a reason to read Article 243 as much more limited than it appears on its face.

[161]When the EC legislature enacted the Code in 1992, it was legislating for the whole of the Community, whose appeal procedures likely varied significantly. The Appellants’ approach takes the incorrect starting point that the EC legislature must have had in mind that there is a need in the UK procedure to perform a re-notification of a debt where it is increased in amount, for which there is no basis.

[162]HMRC do not accept that there was necessarily an equivalent power to section 16(5) allowing variation of HMRC’s decision by the Tribunal in UK procedure, given that FA 1994 came into force in 1994, after the Code. HMRC have been unable to identify the scope of the powers on an appeal prior to FA 1994 coming into force. In summary, they say, the EU legislation permits Member States to prescribe their own procedures, including in relation to variation of decisions and enforcement in appeals concerning customs debts.

[163]The domestic legislature has given the Tribunal very wide powers, including to vary enforceable HMRC decisions. There is no requirement for any further notification of the newly attributed additional debt. No legislation requires such a procedure, and it is contrary to the plain wording of the EU and domestic legislation, which confines the need to engage in a process of communicating the debt to customs authorities, not the Tribunal upon an appeal.

[164]In the alternative, if I conclude that the notification requirement applies in principle, HMRC would say:(1) The Tribunal has the power under section 16(5) FA 1994 to determine that one of the Appellants is liable for a debt attributed by HMRC’s decisions under appeal to another Appellant and vary those decisions.

(2) Upon that happening, HMRC would enter that debt into the accounts, which (in simple terms) means entry into the accounts that HMRC submits to the European Union of debts issued to traders. They would also delete the previous entry into the accounts in relation to the same debt, but where the incorrect debtor had been named.

(3) HMRC would then communicate the debt newly attributed to the relevant Appellant.

(4) Whether HMRC could enforce the debt newly attributed to the Appellant in question would depend upon whether they could communicate it to the debtor in time.

(5) Consequently, following the entry in the accounts of the debt newly attributed to one Appellant, HMRC could communicate the debt to the debtor if (but only if) the extended time limit conditions were met.

[165]The Appellants broadly agree with that proposition.

The Debtor Issue: Discussion

[166]The debtor issue arises here in very unusual circumstances. The Appeals are being heard together and, therefore, if the Tribunal finds that an Appellant to whom a C18 was addressed is not the declarant/debtor, but that another Appellant is, it is potentially able to do something about it, in that the Tribunal will have before it the entity to whom the amount should have been notified and FA 1994 would appear to give the Tribunal wide powers in relation to the liability of that person. That must be an unusual circumstance. HMRC were quite clear that, if a debtor successfully appealed a notification of a debt because it was not the declarant/debtor and it was the only party to the appeal, nothing in FA 1994 would enable the Tribunal to fix liability on a correct declarant/debtor which was not involved in the proceedings. That must be right; under section 16(5) FA 1994, the Tribunal has power to do certain things “on an appeal under this section” and that cannot extend to empowering it to act in relation to persons not involved in the appeal.

[167]It might be thought strange that their appeals being heard together exposes the Appellants to a worse outcome than if they were being heard separately. We will come back to this point, but first we need to look at two features of the way the Code works which might suggest that the Tribunal does not have jurisdiction to increase the customs duty liability of any Appellant in the way HMRC suggest.

[168]First, it is fundamental to the operation of the Code that separate customs debts arise in relation to individual importations. Article 201 provides that a customs debt is incurred on importation and the debtor is the declarant. Article 217 requires “each and every amount of import duty resulting from a customs debt” to be calculated and entered into the records, and Article 221 requires that amount to be notified. The Appellants are not each appealing a single composite customs duty notification/assessment, but rather each is appealing several notifications each of which relates to a particular amount of duty referable to a particular importation.

[169]If HMRC are right and section 16(5) allows the Tribunal to substitute its own decision in the way they assert and it went on to do so, the Tribunal would be making an Appellant liable for customs duty on an importation in relation to which that Appellant had not brought an appeal. Moreover, so far as that Appellant is concerned, it would not be substituting its decision for one made (in relation to that Appellant and that importation) by HMRC but would be making a decision in relation to that Appellant and that importation for the first time. The Tribunal’s power to vary a decision of HMRC or substitute its own decision can only be exercised “on an appeal” and I am far from satisfied that, if Appellant A is appealing notification 1, the Tribunal would be acting “on an appeal” if it decided that, whatever the outcome of that appeal, Appellant A was liable on notification 2 (which Appellant A had never appealed because notification 2 was made to Appellant B, who was appealing that decision). I do not think that the answer to this question changes just because the appeals of Appellant A and Appellant B are being heard together.

[170]The next issue to consider is the procedure set out in the Code for notifying amounts of customs duty to debtors. I do not agree with HMRC’s argument that the requirement for prior entry into the accounts or notification can be dispensed with (or that entry into the accounts can be addressed by writing up the accounts after a Tribunal decision). Firstly, in Molenbergnatie the ECJ was very clear (at [46]-[49]) that “Article 221(1) of the Customs Code requires the amount of import or export duty to be entered in the accounts before it is communicated to the debtor.” The ECJ also held that that on expiry of the period prescribed by Article 221(3) of the Code the debt is time-barred and, consequently, extinguished. At [39] it explained:

“It is beyond question that expiry of the three-year period laid down in Article 221(3) of the Customs Code, for the customs authorities to notify the debtor of the amount of the customs debt, is a bar on the right of those authorities to recover the debt, unless it is as a result of an act that could give rise to criminal court proceedings that the customs authorities were unable to determine the exact amount legally due. However, the provision at issue at the same time enacts a rule governing the customs debt itself, and thus establishes a rule on limitation in respect of the debt.”

[171]Secondly, Article 220 lists three circumstances where, despite the authorities becoming aware that no entry was made in the accounts as respects an amount of duty resulting from a customs debt or the amount entered was too low, an entry into the accounts “shall not occur”. At this point Article 220 is providing the trader with valuable safeguards, but those protections only work if a debt needs to be written up in the accounts before it can be notified.

[172]As Molenbergnatie makes clear, the concepts of writing up an amount in the accounts and notifying the debtor are very important features of the customs duty regime and contain important protections for the debtor. The notification requirement is effectively a limitation period; if a debt has not been correctly notified by the end of the prescribed period, it is “time-barred and consequently extinguished”. As recorded at [157], HMRC’s submission is that it would be absurd to require a notification to an Appellant if the Tribunal decided it was liable as the Appellant is perfectly well aware of HMRC’s position. That ignores the point that the requirements to write up an amount in the accounts and notify the debtor provide protections (most importantly a limitation period). Simply saying that the debtor is now aware of HMRC’s case is not a good answer to a failure by HMRC to notify the debtor in line with the requirements of the Code.

[173]This also addresses the points HMRC raised (recorded at [159]-[161]) about the appeal procedures in different Member States. The requirement (or lack of requirement) for notification has got nothing to do with the appeal procedures in particular Member States. It is a fundamental requirement of universal application: if the amount of a customs debt is not properly notified to the declarant/debtor by the end of the prescribed period, it is “time-barred and consequently extinguished”.

[174]I agree with the Appellants that it would be very surprising if the result of a debtor bringing an appeal in relation to a particular amount of duty which has been notified to it is that those safeguards cease to exist as regards other amounts of duty which have not been notified to it and the court or tribunal hearing its appeal could impose a liability on it for other amounts of duty in circumstances where the authorities could not notify the amounts themselves.

[175]If we look at the (I imagine much more common) situation of a debtor appealing against a notified amount where only the amount of duty due in relation to a single import is in point, the court or tribunal could declare that the amount notified was too low. In such a case, the authority would enter the shortfall in the accounts and notify it to the debtor provided nothing in Article 220 stopped it entering the amount in the accounts and the authority was in time to notify the amount. Because the time limit is extended where an appeal is on foot, the only situation where the authority is likely to be out of time is where it notified the amount sufficiently close to the end of the three-year notification period that the period had expired before the debtor gave notice of appeal. Pausing here, I agree with the Appellants that this suspension of the time-period for notifying amounts of customs duty whilst an appeal is live is a powerful indicator that a decision of a court or tribunal that a (or a greater) amount of duty is due is not sufficient and the general requirements of the Code, that the amount of a customs debt must be reflected in the accounts and notified, do not fall away just because a debtor has brought an appeal.

[176]I agree with the Appellants that the Code provides a carefully constructed procedure for notifying customs duty debts arising on an importation. Although the debtor is the declarant, the Code makes it very clear that payment is only due once the debt has been notified and notification must be preceded by an entry of the debt into the accounts. As we have seen, these are not unimportant procedural details. Although the Code does not circumscribe the procedures member states can introduce to deal with appeals, those procedures cannot take away basic protections such as the limitation period the Code affords; see the discussion of Unitrading above, where we noted that Unitrading makes it clear that the latitude Article 245 allocates to Member States is limited by the requirement that the rules they adopt do not make the exercise of rights conferred by Community law impossible or excessively difficult in practice. Clearly, a procedural regime which takes away basic protections (such as a limitation period) afforded by the Code is going to stumble on that requirement.

[177]However unusual the fact pattern here might be, that is not a reason for departing from the requirement in the Code, that the amount of a customs debt must be correctly notified to the declarant/debtor before the end of the limitation period.

[178]HMRC referred me to the decision of the Court of Appeal in BUPA Purchasing Ltd v HMRC (“BUPA”),

[2007] EWCA Civ 542

, where the Court of Appeal rejected an argument that section 84(5) of the Value Added Tax Act 1994 was limited to computational errors and did not apply where there was a different legal or factual basis for the assessment. Arden LJ rejected that argument on the basis that there was no justification for such an approach in the legislation, which was clearly seeking to ensure that the taxable person accounts for the correct amount of tax. Section 84(5) provided that:

“(5) Where, on an appeal against a decision with respect to any of the matters mentioned in section 83(1)(p) or (rb) – (a) it is found that the amount specified in the assessment is less than it ought to have been, and (b) the tribunal gives a direction specifying the correct amount, the assessment shall have effect as an assessment of the amount specified in the direction, and that amount shall be deemed to have been notified to the appellant.”

Ms McArdle submits that the Court of Appeal, considering statutory powers analogous to section 16(5) FA 1994, considered it inappropriate to impose a limitation preventing the sum to be paid by the taxpayer from being increased, where that resulted in the correct sum being paid, in the absence of express language imposing such a limitation. There is no good reason why the same reasoning ought not to apply in this case. She also referred me to the general approach (endorsed by the Supreme Court in Tower MCashback LLP 1 v HMRC

[2011] UKSC 19

) that “There is a venerable principle of tax law to the general effect that there is a public interest in taxpayers paying the correct amount of tax”.

[179]I agree with Ms McArdle’s comments completely. There is clearly a public interest in taxpayers paying the correct amount of tax, and there was no good reason to restrict the operation of section 84(5) in BUPA in the way the taxpayer suggested. However, even in purely domestic tax appeals, the correct amount of tax includes not only the substantively correct amount but also the procedurally correct amount, and taxpayers will regularly challenge not only whether HMRC have correctly assessed their liability to tax but also whether the assessment is procedurally correct (Was it raised in time? Has the officer made a discovery? Etc). Our equivalent of the UK requirements which can make an assessment procedurally incorrect is the Code so far as it requires an amount to be recorded in the accounts and notified to a debtor and the effective limitation period it imposes. The Code is a directly applicable EU regulation and, to the extent section 16(5) FA 1994 gives the Tribunal power to do what HMRC suggest here (which I am not at all sure it does – see [169] above), the Tribunal’s powers under section 16(5) FA 1994 are subject to the provisions of the Code. The Answer to

The Debtor Issue

[180]My answer to the debtor issue is that:(1) While deciding an appeal by a particular Appellant (“Appellant 1”) against a decision of HMRC/C18 in relation to a particular importation, the Tribunal may decide that a different Appellant (“Appellant 2”) was the declarant/debtor. The Tribunal has jurisdiction to make that determination and state that Appellant 2 is the declarant/debtor in relation to that importation rather than Appellant 1.

(2) However, the Tribunal cannot remove the requirements in the Code for HMRC to make the correct entries in the accounts and notify the amount of duty to Appellant 2 so far as that importation is concerned.

(3) So, Appellant 2 will only be liable to pay the amount of customs duty related to the importation in question if HMRC properly and in time take all the required steps to notify the amount of duty to Appellant 2. Most importantly, given the passage of time here, HMRC will only be able to notify the amount of duty to Appellant 2 where it can rely on the extended time limit in Article 221(4) of the Code.

Right to apply for permission to appeal

[181]This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after the date on which a decision which disposes of all issues in these proceedings is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice. Release date: 09th OCTOBER 2025

Cited in 1 later judgment

Universal Cycles Limited & Ors v The Commissioners for HMRC 2026