Simon Charles Newson t/a Whirly Wine v The Commissioners for HMRC [2025] UKFTT 400 (TC)

[2025] UKFTT 00400 (TC)Case No TC09474
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 7 November 2024Date Judgment date: 31 March 2025
By remote video hearing
Appeal reference: TC/2023/08099
Alcohol Wholesaler Registration Scheme – carrying on a controlled activity without approval – deliberate behaviour – no special reduction – appeal dismissed and penalty upheld
Before
TRIBUNAL JUDGE SUSAN TURNERMR SIMON BIRD
Between
SIMON CHARLES NEWSON T/A WHIRLY WINEAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentSimon Newson in person for AppellantPaul Marks, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsA summary decision was issued to the parties on 13 November 2024.  A request for a full decision was subsequently received from the Appellant.  This is our full decision in this appeal.DECISION

Introduction

[1]This is an appeal against a penalty imposed by HMRC under s 88(C)(1) Alcoholic Liquor Duties Act 1979 (ALDA 1979) for contravention of the Alcohol Wholesaler Registration Scheme (AWRS) in an amount of £2,000.[2]The form of the hearing was V (video) and all parties attended remotely using Microsoft Teams. We referred to a bundle of documents of 451 pages, which included a statement of reasons prepared by the Respondents and the Appellant’s notice of appeal; and a skeleton argument submitted by the Respondents. We also heard witness evidence from Caroline Ames, HMRC compliance officer.[3]Alongside the skeleton argument, which was circulated to the Tribunal and Mr Newson on 28 October 2024, the Respondents submitted the case of Mr E v HMRC [2024] UKFTT 00890, which had been decided recently and had not been available at the time the hearing bundle had been prepared, and applied to rely on that case. At the outset of the hearing, the Tribunal admitted the skeleton argument and the case as it was relevant to Mr Newson’s appeal and it was in the interests of justice to do so.[4]Prior notice of the hearing had been published on the gov.uk website, with information about how representatives of the media or members of the public could apply to join the hearing remotely in order to observe the proceedings. As such, the hearing was held in public.

Background Facts and Procedure

[5]Mr Newson had carried on a trade as an alcohol wholesaler for several years. He was a director of a wine business, Whirly Wine Ltd, until 2019 and also operated as a sole trader under the trading name Whirly Wine.[6]The AWRS required alcohol wholesalers to register with HMRC as set out at [18-19] from 1 April 2016.[7]On 27 November 2017, one of Mr Newson’s suppliers first made him aware of the need to register for AWRS.[8]Mr Newson’ accountant applied on his behalf for AWRS approval on 28 June 2022.[9]Between July and August 2022, HMRC and Mr Newson entered into correspondence which involved a pre-approval interview and the provision by Mr Newson of evidence relating to previous attempts to register.[10]On 30 September 2022, Officer Ames wrote to Mr Newson with a notice of intended penalty charge which invited representations by 30 October 2022.[11]On 17 October 2022, Mr Newson replied, saying that he had faced technical problems with the online AWRS system.[12]On 4 November 2022, the penalty notice was issued.[13]Mr Newson requested a review of the penalty on 5 December 2022 and provided further information on 20 March 2023.[14]On 28 March 2023, HMRC issued a review conclusion letter upholding the penalty.[15]Mr Newson submitted a notice of appeal to the Tribunal on 24 April 2023 and provided further grounds of appeal on 27 June 2024.

The Issues

[16]The issues for the Tribunal to determine are as follows:(1) Did Mr Newson trade in controlled liquor without approval?(2) Was the penalty correctly charged, calculated and notified?(3) Is there a defence to the penalty which could displace or reduce the penalty imposed?[17]In this case, there is no dispute that Mr Newson did carry on a controlled activity without AWRS approval between November 2017 and 28 June 2022. Therefore, the Tribunal must consider first whether the penalty was correctly charged, calculated and notified by HMRC. The burden of proof lies with HMRC to demonstrate this on the balance of probabilities. Next, the Tribunal must consider whether the penalty should be displaced or reduced. The burden of proof to show this lies with Mr Newson, also on the balance of probabilities. The Law Trading in controlled liquor without approval

The Law

[18]Section 88C ALDA 1979 provides as follows:
“88C Approval to carry on controlled activity (1) A UK person may not carry on a controlled activity otherwise than in accordance with an approval given by the Commissioners under this section. (2) The Commissioners may approve a person under this section to carry on a controlled activity only if they are satisfied that the person is a fit and proper person to carry on the activity. (3) The Commissioners may approve a person under this section to carry on a controlled activity for such periods and subject to such conditions or restrictions as they may think fit or as they may by or under regulations made by them prescribe. (4) The conditions or restrictions may include conditions or restrictions requiring the controlled activity to be carried on only at or from premises specified or approved by the Commissioners. (5) The Commissioners may at any time for reasonable cause revoke or vary the terms of an approval under this section. (6) In this Part ‘approved person’ means a person approved under this section to carry on a controlled activity.”
[19]It is this section which requires Mr Newson to receive the approval of HMRC to carry on a controlled activity. A controlled activity is defined at s 88A(8) ALDA 1079 as:
“(a) selling controlled liquor wholesale, (b) offering or exposing controlled liquor for sale in circumstances in which the sale (if made) would be a wholesale sale, or (c) arranging in the course of a trade or business for controlled liquor to be sold wholesale, or offered or exposed for sale in circumstances in which the sale (if made) would be a wholesale sale.”
[20]As noted at [17], there is no dispute that Mr Newson did carry on a controlled activity without AWRS approval.

The penalty

[21]Paragraph 1, sch 2B ALDA 1979 provides that a penalty shall be payable by a person who contravenes s 88C(1), and para 2, sch 2B ALDA 1979 sets out how the penalty shall be calculated:
“Amount of penalty 2 (1) If the contravention is deliberate and concealed, the amount of the penalty is the maximum amount (see paragraph 10). (2) If the contravention is deliberate but not concealed, the amount of the penalty is 70% of the maximum amount. (3) In any other case, the amount of the penalty is 30% of the maximum amount. (4) The contravention is — (a) “deliberate and concealed” if the contravention is deliberate and P makes arrangements to conceal the contravention, and (b) ‘deliberate but not concealed’ if the contravention is deliberate but P does not make arrangements to conceal the contravention.”
[22]Under para 10, sch 2B ALDA 1979, the maximum penalty is £10,000.[23]In this case, the penalty was imposed by HMRC in accordance with para 2(2) as deliberate but not concealed. Paragraph 16.4 Excise Notice 2002: AWRC specifies the types of behaviours that determine the level of penalty applicable as follows:
“Non-deliberate This is where you failed to tell HMRC about trading without approval/buying from an unapproved wholesaler, but the failure was not deliberate but not concealed or deliberate and concealed. Deliberatebut not concealed This is where you knew that you should have told HMRC but you chose not to tell them. Deliberate and concealed This is where you knew that you should have told HMRC but you chose not to tell them and, as well as choosing not to tell HMRC, you also took active steps to hide the failure from them.”
Deliberatebut not concealed Deliberate and concealed

Penalty reductions

[24]Paragraphs 3,4 and 5 of sch 2B ALDA 1979 provide that the penalties may be reduced for disclosure:
“Reductions for disclosure 3 (1) Paragraph 4 provides for reductions in penalties under this Schedule where P discloses a contravention. (2) P discloses a contravention by— (a) telling the Commissioners about it, (b) giving the Commissioners reasonable help in identifying any other contraventions of section 88C(1) or 88F of which P is aware, and (c) allowing the Commissioners access to records for the purpose of identifying such contraventions. (3) Disclosure of a contravention— (a) is ‘unprompted’ if made at a time when P has no reason to believe that the Commissioners have discovered or are about to discover the contravention, and (b) otherwise, is ‘prompted’. (4) In relation to disclosure ‘quality’ includes timing, nature and extent. 4 (1) Where P discloses a contravention, the Commissioners must reduce the penalty to one that reflects the quality of the disclosure. (2) If the disclosure is prompted, the penalty may not be reduced below— (a) in the case of a contravention that is deliberate and concealed, 50% of the maximum amount, (b) in the case of a contravention that is deliberate but not concealed, 35% of the maximum amount, and (c) in any other case, 20% of the maximum amount. (3) If the disclosure is unprompted, the penalty may not be reduced below— (a) in the case of a contravention that is deliberate and concealed, 30% of the maximum amount, (b) in the case of a contravention that is deliberate but not concealed, 20% of the maximum amount, and (c) in any other case, 10% of the maximum amount.”
[25]In this case, full mitigation to 20% of the maximum amount for a contravention which was deliberate but not concealed and where the disclosure was prompted was applied by HMRC for telling, helping and giving, which reduced the penalty imposed to £2,000. The £2,000 penalty imposed by HMRC is the minimum that may be charged in such circumstances.

Special Circumstances

[26]Under para 5, sch 2B ALDA 1979, a special reduction, which may include staying a penalty or agreeing a compromise in relation to proceedings for a penalty, may apply if the Commissioners think it right because of special circumstances. This paragraph specifies that inability to pay does not amount to a special circumstance.

Reasonable Excuse

[27]Under para 7, sch 2B ALDA 1979, no liability to a penalty arises in respect of a non-deliberate contravention where a reasonable excuse can be shown for the contravention. In this case, the penalty imposed is for a deliberate but not concealed contravention. If this penalty has been correctly charged, calculated and notified, Mr Newson will not be able to rely on any reasonable excuse as a defence to the penalty.

Discussion

[28]In Mr Newson’s original grounds of appeal, he conveyed the ‘terrible time’ he had faced with his business over the past few years and noted that he relied on an overdraft to finance his business and could not afford the £2000 penalty imposed by HMRC.[29]In Mr Newson’s further grounds of appeal, provided by letter on 27 June 2024, Mr Newson set out that he believed he was being penalised for a system that had been set up incorrectly following Brexit. He referred to system problems and the lack of a helpline to provide support. Mr Newson agreed in this letter that he had been informed about the new system by a client in late 2017, though he had not heard about the AWRS from HMRC. He says that he immediately tried to log on and set up the registration for a sole trader business but that “the system set up by HMRC did not allow me to complete the registration for a sole trader for some reason.” Mr Newson said that he tried to contact HMRC by phone on many occasions and that nobody answered. He says that he tried every week for about three or four months to go online to see if he could complete the form, but the system did not allow him to do so. Mr Newson provided screen shots showing his attempts to log in as evidence that he had attempted to apply for registration. He submits that HMRC was responsible for the system errors that prevented his registration.[30]At the hearing, Mr Newson told the Tribunal that he had known that he was trading in controlled liquor without the necessary AWRS approval. He confirmed that he first became aware of the AWRS approval requirement on 27 November 2017, when he was notified about it by a Nutbourne Vineyards, a customer / supplier. In an email of the same date to his accountant, Mr Newson enquired about applying and stated that he had not been able to apply for AWRS approval through his sole trader business” for some reason”. Mr Newson asked his accountant if it would be possible to wait until January to make an application as he did not want the business to be shut down for December, a crucial trading period, while the application was processed. Unfortunately, Mr Newson’s accountants were unable to provide the help that he needed at that time.[31]We heard, and we accept, that Mr Newson did try on several occasions to apply for AWRS approval via HMRC’s website, including on 27 November 2017. He also contacted his accountant for help with the system and says he called, but failed to reach, HMRC by telephone on a number of occasions.[32]In June 2022, Mr Newson’s accountants succeeded in opening a self-assessment account for Mr Newson and applying for AWRS approval on his behalf. We understand that opening a self-assessment account was a necessary part of the process. Mr Newson had always relied on his accountant to deal with his tax affairs and therefore did not have his own self-assessment account, which would have allowed him to make his own application at an earlier date.[33]At times between 2017 and 2022, as set out in Mr Newson’s further grounds of particulars and as conveyed during the hearing, Mr Newson’s business faced several challenges, not least as a result of a fall in trade during the covid-19 pandemic. He had several conflicting priorities, relating to both his business and his family, which meant that applying for AWRS approval was not at the forefront of his mind throughout this period. We understand that he continued to trade without AWRS approval because he had a family to support and, in late 2017, because he did not want to lose out on sales over the Christmas period.

Did Mr Newson’s behaviour amount to deliberate behaviour?

[34]Mr Marks submitted that Mr Newson’s behaviour in failing to apply for AWRS registration until June 2022 was deliberate. In doing to, he relied on the recent FTT decision in Mr E v HMRC [2024] UKFTT 00890 which discussed a deliberate failure to notify HMRC of a tax liability stating at [93]:
“Case law (such as Tooth [2021] UKSC 17) has considered what amounts to deliberate behaviour. In summary, this deliberate behaviour includes not only actively deliberate behaviour, where a taxpayer simply decides not to comply with tax obligations, but also the situation where a taxpayer suspects that a matter is not correct but then without good reason chooses not to confirm the true position. The suspicion must be more than fanciful.” and then at [99]: “… it remains the case that he chose not to comply with what he knew to be his tax obligations. Case law such as CF Booth Ltd [2022] UKUT 217 (TCC) has established that deliberate behaviour requires intention but not necessarily dishonesty.”
[35]Mr Marks submitted that the discussion of deliberate behaviour in Mr E concerned a failure to inform HMRC about a tax liability rather than the inclusion of misinformation in a document submitted to HMRC and that this makes it analogous to the situation of failing to make the application for AWRS approval by Mr Newson.[36]Mr Marks said that Mr Newson had known about the requirement to apply for AWRS approval and had chosen not to. He said he had known that he needed to register for self-assessment in order to make the necessary application and that he did not do this because he had not had to comply with such requirements in the past and did not see why he should do so now. Therefore, his failure to apply was not accidental and not because he did not understand the requirements.[37]Mr Marks submitted that Mr Newson did nothing to remedy his failure to apply for AWRS approval for four years before completing the process correctly. He said there was no evidence that Mr Newson contacted HMRC by phone in an attempt to remedy this failure and that it is not credible that he was not able to make contact for such a prolonged period.[38]Mr Newson had emphasised to the Tribunal, and we accept, that he had paid all duties relating to any controlled activities. He said that his failure to apply for AWRS registration arose because he could not do it for technical reasons, not because he did not want to.[39]While Mr Marks agreed that there was no dishonesty involved in Mr Newson’s failure to apply for AWRS, he says that it is not necessary for the behaviour to be dishonest to constitute “deliberate” behaviour. On the contrary, he said, it is sufficient that Mr Newson knew of the requirement to be registered and knowingly carried on trading without registration for deliberate behaviour to be established.

Decision

[40]Despite knowing that he did not have the necessary AWRS approval until a successful application was made in June 2022, Mr Newson continued to carry on a controlled activity. While he made no attempt to conceal this from HMRC, and indeed made some attempts to make contact and gain the necessary approval, he did intend to continue with his trade throughout this time. There is no suggestion that this constituted dishonest behaviour. Indeed, we accept that Mr Newson did attempt to apply for AWRS approval and that he did face some technical challenges.[41]However, the penalty has been imposed for deliberate behaviour, not dishonest behaviour. Deliberate behaviour requires intention but not necessarily dishonesty and we find that Mr Newson did know that he was trading without AWRS approval and continued to do so between 27 November 2017 and June 2022. Mr Newson could have done more to pursue the AWRS approval, by following up with his accountants, or by persisting to succeed with the online application. He was met with challenges, and these were allowed to persist for almost four years. During this time, Mr Newson found himself at times either reluctant to pursue an application, such as in December 2017, to avoid losing trade at a busy period, or distracted from pursuing his application because of conflicting priorities in his life.[42]We are not bound by the decision in Mr E and, indeed, there is a clear difference between the failure to notify a tax liability in that case and the failure to apply for AWRS approval in this case, in circumstances where there is no suggestion that Mr Newson stood to incur any additional tax liabilities. Nevertheless, it is the behaviour rather than the outcome which is in question and we agree with HMRC that Mr Newson did know and understand his tax obligations. He did not comply because of other challenges which got in the way. As such, we find that he did have the intention not to comply with his obligations and continued to trade for a prolonged period without approval.[43]We therefore agree that the penalty was correctly assessed as “deliberate and not concealed” and we find that the £2,000 penalty imposed by HMRC for contravention of the AWRS has been correctly calculated and notified. A maximum reduction has already been applied by HMRC as set out at [25] above.

Reasonable Excuse and Special Reduction

[44]As we have found that this is a deliberate and not concealed contravention of s 88(C)(1) ALDA 1979, there is no provision within the legislation to consider a reasonable excuse as set out at [ 27] and unless there are any special circumstances, the penalty must stand.[45]In this case, we find that HMRC’s decision not to make any special reduction to the penalty amount was not flawed.[46]It follows that this appeal is DISMISSED and the penalty of £2,000 is upheld.

Right to apply for permission to appeal

[47]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 this decision 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: 31st MARCH 2025