Roseline Logistics Limited v The Commissioners for HMRC [2025] UKFTT 427 (TC)

[2025] UKFTT 00427 (TC)Case No TC09490
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 2-3 December 2024Date Judgment date: 15 April 2025
Taylor House, London
Appeal reference: TC/2023/09315
VALUE ADDED TAX – person purporting to act as Customs agent – whether liable for import VAT unpaid because of claims for postponed VAT accounting invalidly made by that person – sections 6(3)(b) and (d) and 21(6)(c) of the Taxation (Cross-border Trade) Act 2018 – yes – whether conclusion compliant with subject’s A1P1 rights – yes – appeal dismissed
Written submissions: 15 January, 18 February, 27 March and 1 April 2025
Before
TRIBUNAL JUDGE MARK BALDWINMR MICHAEL BELL
Between
ROSELINE LOGISTICS LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentDenis Edwards, of counsel instructed by Salvus Law Ltd for AppellantElisabeth Roxburgh, advocate, instructed by the Office of the Advocate General for RespondentsDECISION

Introduction

[1]The Respondents (“HMRC”) issued the Appellant (“Roseline”) with a post clearance demand note dated 13 March 2023 in respect of import VAT (the “Decision”). The Decision relates to 32 import declarations (the “Declarations”) which Roseline made in the period between 7 January 2022 and 11 May 2022 ostensibly for QP Trading Limited (“QPTL”). Roseline made the Declarations whilst acting (or purporting to act) as a Customs agent. Each of the Declarations utilised post VAT accounting (“PVA”), the effect of which is to enable a VAT-registered trader to account for import VAT in its VAT return rather than paying the VAT at the point of import. The import VAT due in relation to the Declarations totalled £1,126,249.64.[2]Following a request for a review of the Decision, which was performed under section 16 of the Finance Act 1994, a review conclusion letter dated 7 July 2023 was issued to Roseline upholding the Decision (the “Review Decision”). The Review Decision is the decision which is under appeal.[3]QPTL was not entitled to use PVA at the time that Roseline made the Declarations, and the issue that arises in this appeal is whether Roseline is jointly and severally liable for the VAT due from QPTL by virtue of section 6(3)(b) or 6(3)(d) of the Taxation (Cross-border Trade) Act 2018 (“TCTA”).[4]This issue sub-divides into two questions. First, is Roseline liable for this VAT based on these provisions construed on ordinary, domestic principles of statutory interpretation? Second, if it would be, would this infringe its rights under the European Convention on Human Rights (the “Convention”), so that the provisions should be interpreted differently to produce a “Convention-compliant” result?[5]The hearing of this appeal took place over two days at the beginning of December 2024. During the hearing it became apparent that the parties’ positions on the application of the Convention would need to be developed, and we received written submissions on this in January and February 2025. Finally, as explained below, a point of statutory interpretation occurred to us as we wrote our decision, and we received brief written submissions on this in March and April 2025.

The Law

[6]VAT is chargeable on the importation of goods into the United Kingdom; section 1(1)(c) Value Added Tax Act 1994 (“VATA”). Section 1(4) VATA provides that VAT on the importation of goods into the United Kingdom shall be charged and payable as if it were import duty.[7]Section 16 VATA provides as follows: “(1) The provision made by or under—(a) the Customs and Excise Acts 1979 (as defined in the Management Act), and(b) the other enactments for the time being having effect generally in relation to duties of Customs and excise charged by reference to the importation of goods into the United Kingdom, apply (so far as relevant) in relation to any VAT chargeable on the importation of goods into the United Kingdom as they apply in relation to any duty of Customs or excise. (2) The provision made by section 1(4) for VAT on the importation of goods to be charged and payable as if it were import duty is to be taken as applying, in relation to any VAT chargeable on the importation of the goods, the provision made by or under Part 1 of TCTA 2018.” (a) the Customs and Excise Acts 1979 (as defined in the Management Act), and (b) the other enactments for the time being having effect generally in relation to duties of Customs and excise charged by reference to the importation of goods into the United Kingdom,[8]Section 5 TCTA provides that chargeable goods which are presented to HMRC on import must be declared for a Customs procedure by the making of a Customs declaration.[9]Importantly for us, section 6 TCTA provides as follows:
“(1) If a Customs declaration is made in respect of any chargeable goods, the person in whose name the declaration is made is the person liable to import duty in respect of the goods. (2) If a liability to import duty is incurred as a result of section 5 in respect of any chargeable goods, any person who is in possession or control of the goods when they enter the United Kingdom is liable to import duty in respect of the goods. (3) In addition to any person liable as a result of subsection (1) or (2), each of the following persons is liable to import duty— (a) a person on whose behalf a Customs declaration is made, (b) a person liable as a result of provision made by section 21(6) (Customs agents), (c) a person liable as a result of provision made under paragraph 21 of Schedule 2 (special Customs procedures), and (d) a person otherwise involved in a breach of a relevant Customs obligation.

(b) the person (”

A”) acted (whether as a Customs agent or otherwise) on behalf of another person who breached a relevant Customs obligation and A knew, or ought reasonably to have known, of the breach by that other person, (c) the person participated in, or was otherwise involved in, a breach of a relevant Customs obligation and knew, or ought reasonably to have known, of the breach, or (d) the person possesses or controls the goods at a time when there has been a breach of a relevant Customs obligation and the person knew, or ought reasonably to have known, of the breach. (5) For the purposes of subsection (4)(a) a person (”P”) provides “false information in connection with a chargeable Customs declaration” if— (a) P provides information to another person to enable that other person to make a Customs declaration, (b) that other person makes the declaration, and (c) the information provided by P is false. (6) For the purposes of subsection (4) there is “a breach of a relevant Customs obligation” if— (a) there is a breach of a requirement imposed on any person that results in a liability to import duty, or (b) circumstances otherwise arise that result in a liability to import duty, and, in a case within paragraph (b) of this subsection, references to knowledge of the breach are to knowledge of those circumstances. (7) If two or more persons are liable to import duty in any case, those persons are jointly and severally liable to import duty in that case” (a) a person on whose behalf a Customs declaration is made, (b) a person liable as a result of provision made by section 21(6) (Customs agents), (c) a person liable as a result of provision made under paragraph 21 of Schedule 2 (special Customs procedures), and (d) a person otherwise involved in a breach of a relevant Customs obligation. (a) the person provides false information in connection with a chargeable Customs declaration and the person knew, or ought reasonably to have known, that the information was false, (b) the person (”A”) acted (whether as a Customs agent or otherwise) on behalf of another person who breached a relevant Customs obligation and A knew, or ought reasonably to have known, of the breach by that other person, (c) the person participated in, or was otherwise involved in, a breach of a relevant Customs obligation and knew, or ought reasonably to have known, of the breach, or (d) the person possesses or controls the goods at a time when there has been a breach of a relevant Customs obligation and the person knew, or ought reasonably to have known, of the breach. (a) P provides information to another person to enable that other person to make a Customs declaration, (b) that other person makes the declaration, and (c) the information provided by P is false. (a) there is a breach of a requirement imposed on any person that results in a liability to import duty, or (b) circumstances otherwise arise that result in a liability to import duty,[10]Section 21 TCTA deals with Customs agents and provides as follows:
“(1) A person (”the principal”) may appoint any other person (a “Customs agent”) to act on the principal’s behalf for the purposes of this Part, and— (a) the agent may make Customs declarations in the name of the principal (and in that case the agent acts as a “direct agent”), or (b) the agent may make Customs declarations in the agent’s own name (and in that case the agent acts as an “indirect agent”). (2) The appointment of a person as a Customs agent, and the withdrawal of an appointment of a person as a Customs agent, must be disclosed to HMRC in accordance with regulations made by HMRC Commissioners. (3) The effect of an appointment of a person as a Customs agent is that anything done under, or otherwise for the purposes of, this Part by, or in relation to, the agent is regarded as done under, or otherwise for the purposes of, this Part by, or in relation to, the principal (and not by the agent). (4) There is an exception to this rule if a Customs agent acts as an indirect agent (and see also section 37(8)(b)). (5) In that case, the indirect agent is liable to import duty in accordance with section 6(1) (and the principal is also liable to import duty in accordance with section 6(3)(a)). (6) If a Customs agent acts as a direct agent, the agent is also liable to import duty if— (a) the agent acts at time when the appointment has not been disclosed to HMRC as mentioned in subsection (2), (b) the agent acts at a time when the appointment of the person as a Customs agent has been withdrawn, (c) the agent otherwise purports to act on behalf of the principal when the agent has no authority to do so, or (d) a liability to import duty is incurred by reference to the importation of goods declared for a Customs procedure and the declaration was not made in accordance with regulations under paragraph 9 of Schedule 1 (simplified Customs declarations).” (a) the agent may make Customs declarations in the name of the principal (and in that case the agent acts as a “direct agent”), or (b) the agent may make Customs declarations in the agent’s own name (and in that case the agent acts as an “indirect agent”). (a) the agent acts at time when the appointment has not been disclosed to HMRC as mentioned in subsection (2), (b) the agent acts at a time when the appointment of the person as a Customs agent has been withdrawn, (c) the agent otherwise purports to act on behalf of the principal when the agent has no authority to do so, or (d) a liability to import duty is incurred by reference to the importation of goods declared for a Customs procedure and the declaration was not made in accordance with regulations under paragraph 9 of Schedule 1 (simplified Customs declarations).”
[11]Regulation 82 of the Customs (Import Duty) (EU Exit) Regulations 2018 provides that:
“(1) Where a person (“P”) appoints another person (“A”) to act on P's behalf as a Customs agent, A must disclose that agency in each temporary storage declaration and Customs declaration which is made by A as agent for P.”
[12]The Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019 (“the Regulations”) provide for a system of postponed VAT accounting (“PVA”) on the importation of goods. Regulation 3 of the Regulations provides as follows:
“(1) These Regulations apply to a registered person who is liable for import VAT on relevant goods (but this is subject to Part 2 of the Value Added Tax (Miscellaneous and Transitional Provisions, Amendment and Revocation) (EU Exit) Regulations 2020). (1A) These regulations do not apply to a person who is treated as having imported goods for the purposes of paragraph 4(2) of Schedule 9ZC4 to the Act. (2) A person to whom these Regulations apply (P) may have those relevant goods delivered or removed without payment of the VAT chargeable on the importation and may instead account for that VAT in accordance with these Regulations. (3) The effect of section 16(2) of the Act (application of Customs enactments) is modified to the extent that these Regulations make different provision for accounting for import VAT on relevant goods.”
[13]”Relevant goods” is defined in regulation 2 of the Regulations as meaning “goods imported into the United Kingdom by a registered person which are used or to be used for the purposes of any business carried on by the registered person, but does not include goods which are the subject of a declaration by a qualifying traveller within the meaning of regulation 39B of the Customs (Import Duty) (EU Exit) Regulations 2018”.[14]Regulation 4 provides:
“Subject to regulation 9, P may account for import VAT on relevant goods on the return P is required to make for the prescribed accounting period in which the liability to the import VAT on those goods is incurred if the conditions set out in regulation 5 are met.”
[15]Regulation 5 provides:
“(1) Where the relevant goods are declared for the free-circulation procedure for the purposes of Part 1 of TCTA 2018, P’s VAT registration number must be shown on that declaration; and (2) Where the relevant goods are declared for a special Customs procedure for the purposes of Part 1 of TCTA 2018, P must in relation to those goods comply with any conditions imposed by or under Part 1 of TCTA 2018 so far as relating to the special Customs procedure for which those goods were declared. (3) Where the relevant goods are declared for the free circulation procedure for the purposes of Union Customs legislation, P’s VAT registration number must be shown on that declaration; and (4) Where the relevant goods are declared for a special procedure for the purposes of Union Customs legislation P must in relation to those goods comply with any conditions imposed by or under the Union Customs legislation so far as relating to the special procedure for which those goods were declared.”
[16]In broad summary, therefore:(1) The Regulations apply to a VAT registered person who is liable for import VAT on goods imported into the United Kingdom for the purposes of any business carried on by it (see regulations 2 and 3(1) of the Regulations).(2) A person to whom the Regulations apply may follow the PVA procedure, which enables it to account for import VAT in its VAT return rather than making the payment at the point of import (see regulations 3(2), 4, 5 and 6 of the Regulations).(3) Where the PVA procedure is being followed, the VAT registration number of the person importing the goods and using the PVA procedure must be shown on the Customs declaration (regulation 5 of the Regulations).(4) A person may appoint a Customs agent to act on its behalf for the purposes of making Customs declarations. Where the agent makes declarations in the name of the principal, the agent does so as a ‘direct agent’. Where the agent makes declarations in their own name, the agent does so as an ‘indirect agent’. The appointment of a person as a Customs agent must be disclosed to the HMRC (see section 21(1) and (2) of TCTA 2018).(5) Where a Customs declaration is made in respect of chargeable goods, the person in whose name the declaration is made is liable for import duty in respect of the goods; section 6(1) TCTA.(6) So far as relevant for us, joint and several liability for unpaid import duty is imposed on another person in these three situations: (a) There is a breach of a relevant Customs obligation, and the person sought to be made liable acted on behalf of another person who breached the relevant Customs obligation, and the first person knew, or ought to have known, of the breach by that other person (see section 6(3)(d), 6(4)(b) and 6(6) TCTA 2018); or (b) There is a breach of a relevant Customs obligation, and the person sought to be made liable participated in, or was otherwise involved in, the breach and knew, or ought reasonably to have known, of the breach (see section 6(3)(d), 6(4)(c) and 6(6) TCTA 2018); or (c) The person sought to be made liable is a direct agent which purported to declare import duty on behalf of a principal in circumstances where the agent had no authority to do so (see sections 6(3)(b) and 21(6)(c) TCTA 2018).[17]So far as Convention rights are concerned, section 3 of the Human Rights Act 1998 (the “HRA”) provides as follows:
“(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. (2) This section— (a) applies to primary legislation and subordinate legislation whenever enacted; (b) does not affect the validity, continuing operation or enforcement of any incompatible primary legislation; and (c) does not affect the validity, continuing operation or enforcement of any incompatible subordinate legislation if (disregarding any possibility of revocation) primary legislation prevents removal of the incompatibility.”
[18]Section 1 HRA provides as follows:
“(1) In this Act “the Convention rights” means the rights and fundamental freedoms set out in— … (b) Articles 1 to 3 of the First Protocol,”
[19]Section 21 HRA provides defines “Convention” and “First Protocol” as follows:
“ “the Convention” means the Convention for the Protection of Human Rights and Fundamental Freedoms, agreed by the Council of Europe at Rome on 4th November 1950 as it has effect for the time being in relation to the United Kingdom; “the First Protocol” means the protocol to the Convention agreed at Paris on 20th March 1952;”
[20]Article 1 of the First Protocol (“A1P1”) to the Convention reads as follows:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

The Evidence

[21]We heard evidence from Mr Tony Aherne, a director of the Appellant, and Ms Donna Robinson, an officer of HMRC. Both provided witness statement and were cross-examined. We found both witnesses to be straightforward individuals and have no reservations about accepting their evidence. A hearing bundle was also before the Tribunal. In particular, the bundle contained various pieces of HMRC guidance addressing issues with which we were concerned, and we spent some time, including with the witnesses, examining the text of that guidance.[22]Copies of the Customs declarations on which the Declarations were made are contained in the hearing bundle. Box 14 in the declarations contains details of the person completing the form. Roseline’s details were included there. There is then a number in brackets after the Economic Operators Registration and Identification (or “EORI”) number. (A business needs an EORI number to import goods into the EU or the UK.) This number identifies the capacity in which the person completing the form is acting: [2] indicates that individual acts as a direct representative; [3] indicates that the individual acts as an indirect representative; [1] means that the importer is completing the form itself and is not using an agent at all. Roseline included a [2] in each of the Declarations.

Tony Aherne

[23]Mr Aherne is the sole director and majority shareholder of Roseline. He explained that, prior to COVID in 2020, Roseline was predominantly involved in the transport of equipment for exhibitions and live events across Europe. At this time, almost all the transport work it undertook did not involve any specific Customs declarations or payment of import duty as the movements were within the EU. Where any declarations did have to be made, Roseline instructed a Customs agent or broker to do so, but this was relatively rare.[24]Following the outbreak of COVID in March 2020, restrictions meant that almost all the events work in Europe ended overnight and Roseline had to look for other sources of income. To that end, and with the awareness that there would be changes coming when Brexit was implemented at the end of the year, Mr Aherne started to research the opportunities within the Customs broking/agency market.[25]Mr Aherne said that, at the time, it appeared that there was going to be a shortage of Customs brokers sufficiently prepared for the likely influx of work that would arise when the Brexit regulations came into force. There were also several grants made available by the government to help people get ready for the new post-Brexit import regime, which Roseline successfully applied for. These mainly covered training and software. Roseline was added to a list of Customs brokers featured on the HMRC website. Roseline participated in numerous training sessions and courses arranged by HMRC and other third-party training companies. Mr Aherne said that one of the issues that was reinforced in almost all the training was the difference between direct and indirect agents when it came to making import declarations, and the joint and several liability that would arise when acting as an indirect agent. There was almost no mention of the PVA process in the HMRC (or any other) training or guidance materials.[26]Mr Aherne said that, as 2021 approached, Roseline was as prepared as it could be based on the training it received, its own research and the formal guidance notes that were being circulated by HMRC. Nevertheless, he said that, in early 2021, the practical understanding of the new processes put in place across the whole of the industry was limited and Roseline was regularly approached by other agents, hauliers and freight forwarders asking how to operate in the new regime. Roseline also raised queries with HMRC directly and in many cases received contradictory information which did not accord with the rules as they understood them. Roseline was approached by the Institute of Import and Export as they were impressed by Roseline’s methods. They were uncertain about the post-Brexit world and Roseline helped them to understand how the new processes were working in practice.[27]Mr Aherne described the introduction of the new import rules in 2021 as a steep learning curve for both the industry and HMRC. Matters were also made more complex by the changing implementation dates, the limited notification of these dates and the differing protocols applying to trade involving Northern Ireland.[28]Mr Aherne explained that PVA was introduced in January 2021 at the same time as the delayed post-Brexit import provisions were introduced. He says that, as with much of the initial advice and training provided, there was an understandable sense that all parties (including HMRC) were feeling their way with the new schemes.[29]Mr Aherne spoke a lot about HMRC’s import systems. He explained that all import declarations in 2021 had to be made on HMRC’s legacy system, Customs Handling of Import and Export Freight (“CHIEF”), which was written and maintained by Fujitsu on behalf of HMRC. It had been intended that CHIEF would be replaced by a new system (CDS) in early-2019, but the transition was delayed by several years. He commented that, no doubt, the intention was that CHIEF would have been replaced by CDS before the new post-Brexit world, but this was delayed, and the additional information to be provided as part of the new Brexit requirements appeared to have just been ‘bolted-on’ in a less than satisfactory manner. The amendments to CHIEF did not capture all the necessary fields that Customs agents were required by law to complete; in particular, CHIEF had no functionality to permit entry of a VAT number.[30]Mr Aherne said that, following Brexit, hauliers undertaking European haulage work now had to make Customs entries. Whilst strictly not the responsibility of hauliers, goods owners looked to hauliers to do this. For the most part, hauliers were not equipped to undertake that work and sought to sub-contract it to others. Roseline had established very good relationships with several hauliers, who sub-contracted their Customs entries to it. A significant proportion of Roseline’s Customs work came from those hauliers, and that network developed over time through referrals. Roseline never had to advertise its services. Because it was on HMRC’s website as an authorised broker, it got lots of approaches from potential clients, but Roseline only took on those that were recommended.[31]Mr Aherne explained that sometimes Roseline received direct instructions from the importer to carry out import entries as a direct representative. However, it was common practice for the company to be instructed by an agent (usually the haulier) of an importer. In some cases, there may also be a sub-agents involved. So, in many transactions, Roseline would not have any direct contact with the importer.[32]Mr Aherne is aware that an importer must give their authority for the Customs agent to act as a direct (or indirect) representative in respect of the entry. However, where there are agents for the importer (or instructions from a party who indicates that they are acting on direct instructions from the importer), they are reliant on that party’s integrity in giving instructions on the importer’s behalf.[33]Roseline’s policy is not to act as an indirect agent because of the risk of joint and several liability; it always acts as a direct agent.[34]Turning to QPTL, Mr Aherne explained that Roseline had previous dealings with the transport/haulage company Craig Isaac Transport (“CIT”) and had undertaken Customs work on its behalf previously with no issues arising. CIT had been referred by and recommended to Roseline by one of its key long-standing clients. Mr Aherne said that he spoke to the client who introduced CIT but did not do any other specific checks on CIT.[35]CIT told Roseline they wanted it to deal with Customs entries for several of its clients, which turned out to include QPTL. The first requests from CIT to undertake declarations on behalf of QPTL came in early 2022. A typical instruction from CIT to Roseline would be an email like this one:
“Hi Eliza please see new details for clearing today Truck B841OHP Trailer T02 VAT by PVATransport cost £1800 Eurotunnel Calais - Folkestone ref 59217976 Thanks Craig”
[36]Mr Aherne’s analysis of this arrangement is that CIT were contracted by QPTL for the carriage of the loads and were instructed to arrange the Customs entries on QPTL’s behalf. CIT were acting as QPTL’s agent, which would include arranging the import declarations for them. Roseline was the Customs agent CIT instructed. As the example (above) shows, he says, in the individual load instructions CIT indicated that they had authority from QPTL to declare the VAT under the PVA procedure. Mr Aherne said that Roseline had no reason to suspect that CIT were not authorised by QPTL. For example, the CIT email referred to above (like all the others) was accompanied by the following supporting documents:(a) A commercial invoice detailing the trade terms (Incoterms FCA), cargo (loose copper), value (EUR241,551), seller (Fair Metals in Eindhoven, NK), the importer, (QPTL), and QPTL’s address and EORI number.(b) Export documents confirming similar details to the commercial invoice.(c) CMR waybill also containing similar details.[37]Mr Aherne said that CIT would only have such documents if it was legitimately involved in the movement of the goods on behalf of the goods owner (in this case QPTL). He said that it was entirely normal for Roseline to receive instructions from many hauliers in this way. Given that and the background to the instructions from CIT (its introduction by an established client of Roseline), Mr Aherne said that Roseline had no reason to doubt that CIT did hold, and were authorised to provide, the relevant authority for it to undertake the Customs entries (using PVA) as a direct agent on QPTL’s behalf.[38]In cross-examination Mr Aherne accepted that at no time did Roseline correspond or speak with anyone at QPTL; all their dealings had been through CIT. Roseline’s client was CIT, and it had relied on CIT. Mr Aherne said that it was not normal practice to “jump past” an immediate client and deal with the ultimate importer. In many cases Roseline would be told not to do that, and introducers would tell Roseline to come back to them with any queries. Mr Aherne said he thought this was caused by a mixture of hauliers not wanting their clients to be “bothered” and wanting to make sure that Customs agents did not contact their clients and try to sell alternative transport services.[39]Mr Aherne did not carry out a Companies House search on QPTL. Ms Roxburgh pointed out that, had he done so, he would have seen that it was subject to a strike off application and that it had not submitted any accounts. Mr Aherne accepted this.[40]Mr Aherne says that what Craig Isaac said to Officer Robinson in his email of 25 May 2023 (see [63] below) cannot be correct, because every request for entry that CIT emailed to Roseline contained the specific request, ‘VAT by PVA’. Ms Roxburgh put it to Mr Aherne that he did not know that CIT had authority from QPTL to give Roseline instructions; he just assumed that. Mr Aherne said it was a reasonable assumption to make given the material provided. Mr Aherne accepted that Roseline had been unable to produce a contract between CIT and QPTL.[41]Mr Aherne said that Roseline did not introduce CIT or Craig Isaac to the PVA procedure. It was CIT, unprompted by Roseline, who instructed Roseline that the entries were to use the PVA procedure.[42]Mr Aherne said that Roseline could see from the documents sent with each of the separate entry requests from CIT that the transactions appeared to be genuine. For example:(a) The sums stated in the commercial invoices appeared to be reasonable in respect of the type of cargo and weights. There was, for instance no indication that the sales were not at true value.(b) The importer, QPTL, was, or appeared to be, properly established within the UK. The delivery and trading address of QPTL was a unit on an industrial estate in Knowsley.(c) QPTL was a UK-registered limited company.(d) QPTL had a valid EORI number.(e) QPTL also appeared to have a valid VAT number.[43]Mr Aherne criticises what he understands to be HMRC’s position, that only a written and signed authority from the importer will be evidence of authority to act as a Customs agent and to use the PVA process. He says this was never explained during Roseline’s extensive training, and he was told by his solicitors that this is not a requirement of the primary legislation. He remains firmly of the view that Roseline has demonstrated that it had authority. Indeed, he says, there will be many cases where Roseline acts for an importer without a written and signed authority and this is the first time he has been told that Roseline could only be an agent if such written authority existed.[44]Mr Aherne said that, to benefit from PVA, the primary legislation states that it is necessary to provide the importer’s VAT number. However, CHIEF did not have any facility to allow entry of the VAT number – only the EORI number was to be added.[45]Prior to making a Customs declaration, Roseline would ensure that the EORI number was valid and that the name matched with the name of the importer they were acting for. There is an online facility that allows anyone to check the validity of a EORI number which Roseline used. The Roseline employee who was responsible for undertaking the checks for QPTL no longer works with the company, but she was fully trained in this process.[46]Mr Aherne said that another check was whether CHIEF rejected any declarations. He said that CHIEF regularly (up to 80% of the time) threw up errors in Customs entries. Mr Aherne said that he understood that only valid EORI numbers would be accepted by CHIEF. This understanding came from his own experience and that of other employees of Roseline and other freight forwarders. Where an incorrect EORI number was entered, he says that the entry would be rejected. It is impossible for Mr Aherne to say now that the employee checked QPTL’s EORI number, but that was part of Roseline’s routine process.[47]Mr Aherne explained that, because a VAT registration number comprised most of the digits in an EORI number, he believed that, if he entered an EORI number in CHIEF along with the code “G” (to claim PVA), the entry would be rejected if the importer was not VAT registered. He had understood that CHIEF would cross-refer the EORI number with the related VAT number and that, if there was no valid VAT registration, the entry would be rejected. He said there had been “endless” HMRC guidance, but nothing about checking VAT numbers. He said that Roseline had proceeded on the basis that an EORI number was all that was needed. He had not perceived the PVA system to be open to fraud as he thought the system would reject an invalid EORI number.[48]Mr Aherne said that the EORI number was never rejected on any of the QPTL Customs entries, and so Roseline understood that there were no issues with QPTL’s registration with HMRC as an importer, including for the purposes of PVA.[49]Ms Roxburgh expressed surprise, given that Mr Aherne accepted that CHIEF was antiquated and there was no way to input a VAT number, that he thought it would check the VAT number. Mr Aherne said that, as CHIEF threw up repeated errors, he (wrongly, he now accepts) assumed that CHIEF would not allow a claim to go ahead if “G” was entered as the payment method on the Customs declaration and an EORI number were entered but the EORI number was not linked to a valid VAT number.[50]In cross-examination Mr Aherne said that he was not aware of the need for an importer to have a VAT and EORI number to use PVA. He was aware that an importer needed to be VAT registered, but he thought their VAT number would be in their EORI number. However, he accepted that it is possible to have an EORI number without being VAT registered. He also accepted that CIT had not given Roseline a VAT registration number for QPTL and that he did not seek to check its VAT registration; he was focusing on the EORI. He accepted that, if he had sought to check whether QPTL had a VAT registration number, he would have discovered that it had been de-registered.[51]Mr Edwards took Mr Aherne to a “Technical Guidance Note” (undated) entitled “Import VAT: Postponed VAT Accounting”. It contains the following passage under the heading “How PVA will work”:
“All UK VAT registered Importers will be eligible to use PVA; no authorisation will be required. They will simply make the appropriate entry and provide their EORI and/or VAT registration number (VRN) on their Customs declaration. This process (subject to Customs clearance) will allow the goods to enter into free circulation without up-front payment of the import VAT.”
[52]Mr Edwards took Mr Aherne to the guidance on gov.uk (“Check when you can account for import VAT on your VAT Return from 1 January 2021”), which tells CHIEF users:
“On your [Customs] declaration you’ll need to enter: • Your EORI number starting with ‘GB’ which includes your VAT registration number into box 8 (Header Consignee), or, if applicable, your VAT registration number in box 44h (Registered Consignee) • ‘G’ as the method of payment in Box 47e”
He suggested this does not require a VAT number to be included (only “if applicable”) and CHIEF does not allow this to be done. • Your EORI number starting with ‘GB’ which includes your VAT registration number into box 8 (Header Consignee), or, if applicable, your VAT registration number in box 44h (Registered Consignee) • ‘G’ as the method of payment in Box 47e”[53]Ms Roxburgh took Mr Aherne to the gov.uk guidance “Due diligence when making Customs declarations” (published on 1 December 2017) and put it to him that the guidance directs users to check both EORI and VAT numbers, not one or the other.[54]Ms Roxburgh also took Mr Aherne to a letter he wrote to Officer Robinson on 9 May 2023. In it he wrote:
“Undoubtedly, with the benefit of hindsight, there are things that we could have done differently, in order to leave ourselves, and HMRC, less exposed. We have certainly learned from this and are now being much more careful to investigate the sources of business and the identity and bona fides of the importers for whom we undertake import entries.”
She suggested that this encapsulated the position. Mr Aherne replied that Roseline had not understood the limitations of CHIEF. These were rectified by CDS and Roseline now carries out more checks. But HMRC could have done more too. For example, they could have got CHIEF to check VAT numbers, highlight the risk of PVA fraud and limit the use of “G” codes for making PVA claims. He says that Roseline did all it could at the time and was not careless. Whilst he accepted that, had Roseline checked QPTL’s VAT registration, they would have seen it was not registered, he asserted that he believed CHIEF would check this.

Donna Robinson

[55]Officer Robinson is a compliance officer with HMRC. She took over looking into Roseline from Officer Hunjan. Ms Robinson was taken to emails between Craig Isaac and Officer Hunjan which Mr Edwards suggested showed a relationship between Craig Isaac and Roseline. On 10 January 2023 Craig Isaac wrote to Officer Hunjan commenting:
“Hi Narinder please see a copy of random month of a ferry invoice for me as discussed, the only truck of mine on there is BO62OTK the rest are sub contractors who do work for me and ship on my account, also as discussed Kate hasn’t got copies of the cmr,s as the work has all been payed and she forwarded them to Roseline shipping so they should of forwarded them to yourself, I am waiting for the detailed accounts of my accountant as he only came back of his annual holiday yesterday, as soon as I have them I will forward them on, thanks Craig.”
A “cmr” is a carriage of goods by road contract and Mr Edwards suggested that this email pointed towards there being a contract between CIT and Roseline. In a meeting on 24 November 2022, Officer Hunjan asked Craig Isaac about some copper movements he was interested in and Mr Isaac commented “that he had supplied all the paperwork, invoices, CMRs to Roseline”.[56]In her witness statement Officer Robinson had said that, for a Customs agent to have authority, there must be a written contract conferring authority on an agent. This position was repeated in the Review Letter. Mr Edwards observed that he was not aware of any legal or HMRC guidance requirement for authorisation to be in writing.[57]Officer Robinson told us that, when she was allocated Roseline to investigate, she noticed there were several import declarations where Roseline had declared PVA for importing companies which were not registered for VAT. She tried to find out whether there was any alternative evidence (e.g. that importers were members of a VAT group) which would remove the import VAT and whether Roseline had authorisation from the principal (importer) to declare PVA on their behalf.[58]On 16 December 2022 Officer Robinson received an email from Roseline, providing emails and jpeg attachments from CIT over a number of months. The email from Roseline stated that emails from CIT to them said Roseline should be processing the UK imports for QPTL using PVA. She noted the email instructions from Craig Isaac stated “VAT-PVA”. These were the only emails Roseline received from CIT that referred to PVA. We were taken to sample copies of these emails in the bundle, which are consistent with this position. Officer Robinson had not been shown any emails or other messages where QPTL (as opposed to CIT) authorised Roseline to claim PVA.[59]Ms Robinson said that QPTL had been de-registered on 20 October 2021 following a visit to its premises by a HMRC officer who was unable to establish that the business was trading. Officer Robinson did not know how long it would take for this to show up on HMRC’s system. CHIEF would not pick up de-registration and at that time an EORI number would not be cancelled if a VAT registration was cancelled; the system has now changed and, if a VAT registration is cancelled, EORI registration will be too.[60]On 12 January 2023 Officer Robinson sent an email to Roseline asking if they had any written procedures regarding the import declaration process, to check their understanding of the responsibilities of declaring PVA on behalf of their clients. She explained that she was querying why Roseline had used the EORI and not the VAT number in these import declarations. She asked whether they had considered the “Due Diligence when making Customs declarations” guidance available online. This guidance provides a link to verifying if new or potential customers and suppliers are VAT registered.[61]In a conversation on 18 February 2023 about QPTL, Ms Robinson said that Mr Aherne told her that Roseline only dealt with trusted freight forwarders or companies that had been recommended by trusted parties.[62]When asked what due diligence was done, he told her that, when using the CHIEF system, the EORI would bounce back if a non-VAT registered number had been used. Officer Robinson understood Mr Aherne to mean that an import declaration could not be completed on the HMRC CHIEF system if a non-VAT registered EORI was used for an importer.[63]On 22 May 2023 Ms Robinson wrote to Craig Isaac to check what role he played with the PVA imports for QPTL. She wrote “I have been advised that you gave authorisation on behalf of QP Trading Ltd to claim Postponed VAT Accounting (PVA) to Roseline Logistics Ltd”. On 25 May 2023 an email reply was received, as follows:
“I was asked verbally by the director of QP trading ltd to submit there Customs clearance to a agent for loads we carried as a haulage contractor, there was no contract agreement in place, and I have never told anyone I was given authority by QP trading LTD for Roseline logistics to postpone the vat by pva and don’t really understand what it means, we are just a haulage company who sent the paperwork for clearance to Roseline logistics.”
[64]On 25 May 2023 Officer Robinson sent Craig Isaac the correspondence from Roseline about their authorisation and invited him to comment. He replied within 5 minutes of Ms Robinson’s email being sent as follows:
“I was told thats how it was done I have no knowledge of the procedures, surely If I was doing it wrong Roseline should of contacted the client direct to double check as they were the agent submitting paperwork and should not of submitted it if they thought it was no correct, I am just a haulier not Customs agent !.”
[65]Ms Robinson was taken to the summary of the import declaration information put into CHIEF by Roseline. The summaries in the bundle were all in the same format and show details of the supplier, the importer (QPTL), the Customs agent (Roseline), the nature of the goods and (at box 44) an EORI number.[66]Officer Robinson explained that, for a VAT registered trader, an EORI number is simply their VAT registration number with “GB” in front and “000” added at the end. It is possible to have an EORI number without being VAT registered; one example would be a trader who imported goods but who was below the VAT registration threshold and chose not to register.[67]Officer Robinson explained that in 2022 (and for many years before that) HMRC had operated the CHIEF system, an electronic system into which importers inputted data for all imports. This system had been used before Brexit, including for imports from the EU (even though there was largely no import VAT). To input data an agent would still need an EORI number.[68]Officer Robinson said that in 2022 HMRC had been working on a replacement for CHIEF but this system was not ready for use. Officer Robinson agreed that there was nowhere on a CHIEF declaration where a VAT number could be inputted. An EORI number was needed. CHIEF would reject an EORI number that was wrong but could not pick up on irregularities between EORI and VAT numbers. CHIEF would only detect very basic errors in EORI numbers (such as not having 12 digits or not starting with “GB”); it would not carry out any more sophisticated checks. If an incorrect, but correctly formatted, EORI number was entered into CHIEF, the system would not pick this up.[69]Officer Olamide (who carried out the statutory review of Officer Robinson’s decision to issue a post clearance demand note) had noted CHIEF’s limitations when he wrote in his review letter (dated 7 July 2023):
“In addition, there were points made about the CHIEF system accepting invalid EORI numbers and not allowing for the submission of VAT Registration Numbers when the PVA scheme is selected. These are valid recommendations and possible future safeguards that might be implemented to assist with the submission of declarations. This does not supersede the need for due diligence and the fact that the mechanisms are and were available for checks to be done simply and reasonably as previously mentioned in this letter.”
[70]Officer Robinson agreed that VAT on movements of goods within the EU was much simpler before the end of the Brexit transitional period (at the end of 2020) and getting to grips with the new rules was a steep learning curve. However, HMRC published guidance on the new PVA system. We were taken to guidance (“Check when you can account for import VAT on your VAT return from 1 January 2021”) on gov.uk. The guidance explained that “if your business is registered for VAT in the UK, you’ll be able to account for import VAT on your VAT Return” for goods imported into Great Britain from anywhere outside the UK. The guidance stated that, to do this, the goods imported must be used for business purposes and “you[must] include your VAT registration number on your Customs declaration” If a trader used someone to import goods on their behalf, they should tell them how the trader wanted to deal with import VAT and “You should keep a written record of what is agreed.” The guidance for users of CHIEF said that they would need to enter their EORI number (“with ‘GB’ which includes your VAT registration number”) in box 6 (Header Consignee) or, if applicable, their VAT registration number in box 44h (Registered Consignee). Users of the Customs Declaration Service (CDS) were told to enter their VAT registration number in data element 3/40.[71]Officer Robinson was taken to HMRC’s guidance “Due diligence when making Customs declarations” (dated 1 December 2017). Roseline was (she said) a “Customs trader”. The guidance includes a section on “How to spot potential supply chain fraud”. She was asked which of the risk features identified were present in this case, but did not identify any. The guidance went on to say that it is important to have the right checks in place to make sure that counterparties are the person they claim to be and to tell readers to “Verify if new or potential customers are VAT registered” and to “Verify an EORI number”. In both cases readers were pointed to where they could verify these numbers. The document told readers that it was their responsibility to get enough information in writing to be sure about “the accuracy or completeness of the information and statements required to draw up the Customs declaration”.

Roseline’s submissions

[72]Mr Edwards says that HMRC are wrong to insist that a Customs agent must have “express authority” of a principal, in this case QPTL, for the purposes of section 21(6)(c). A Customs agent can have implied or ostensible authority to act for a principal, in which case it will not be “purporting to act on behalf of the principal” but will be acting in line with its implied or ostensible authority. The term “authority” in section 21(6)(c) must have the wider meaning including implied and ostensible authority because situations of express authority are apt to fall within section 21(6)(a) and section 21(2). Roseline had sufficient authority to act on behalf of QPTL for the purposes of section 21(6)(c). It had previously dealt with CIT and was entitled to rely on its authority to give instructions.[73]Mr Edwards says that Roseline complied with its due diligence obligations by obtaining and checking the EORI number on the CHIEF system. It fairly assumed that the CHIEF system would be fit for purpose and would verify all relevant details of QPTL, including that it had a valid VAT registration number. This is particularly the case given that the CHIEF system offered no possibility of inserting an importer’s VAT number, notwithstanding the provisions of regulation 5 of the Regulations. These failures are entirely down to HMRC, and they cannot reasonably be laid at Roseline’s door. The absence of any possibility of entering a VAT number on CHIEF reasonably led a person such as Roseline to proceed on the basis that CHIEF would enable VAT registration to be verified.[74]In the review decision letter HMRC acknowledge weaknesses in the CHIEF system, which has since been replaced. It was reasonable for Roseline to rely on the CHIEF system to pick up any irregularity concerning QPTL’s VAT registration. At the time, the arrangements for PVA were new and required some learning and adaptation on all sides. If the CHIEF system did not or could not pick up a VAT irregularity, it is unreasonable for HMRC to say that a Customs agent “ought reasonably to have known” of a Customs breach arising from de-registration of a (previously) VAT registered trader. And it is further unreasonable for this deeming to lead to joint and several liability for the lost VAT.[75]Turning to the Convention, Roseline submits that the imposition of joint and several liability on it as an innocent Customs agent, when it has complied with the EORI and CHIEF arrangements and not itself breached the Regulations, gives rise to a breach of its A1P1 rights and that the statutory provisions we are concerned with must be interpreted so that the interference with its Convention rights is no greater than is objectively established to be necessary to achieve the legitimate aim which the provisions pursue: see Pham v. Secretary of State for the Home Department [2015] 1 WLR 1591, per Lord Reed JSC at paragraph [119].[76]The question which follows from the relevant provisions interfering with Roseline’s A1P1 rights is whether that interference is justified. Here Mr Edwards says that HMRC must show(i) that section 6 is strictly necessary to achieve the aims it is said to pursue, and(ii) that the dramatic impact of that provision on Roseline here is proportionate, put another way, that Roseline’s A1P1 rights are outweighed by the interests which section 6 is asserted to pursue. He says that joint and several liability is not necessary to achieve the identified objectives of section 6 in a case such as this.[77]Mr Edwards stresses that Roseline will be “wiped out” if it is held liable. It properly and reasonably relied on the CHIEF system to verify QPTL’s EORI number. A trader’s EORI number and VAT registration number are substantially similar. Having properly used the CHIEF system, which HMRC maintained and required traders such as Roseline to use in cases such as this, HMRC’s case depends on requiring Roseline to do more than access and use the CHIEF system.[78]Mr Edwards starts by accepting the 4-fold approach (what he described as a “strict”) to justification seen in Bank Mellat (discussed below).[79]Mr Edwards notes that the Supreme Court has accepted that in some cases the approach to proportionality involves a less intense scrutiny of measures – and of means and ends – than entailed under the ‘strict’ approach to proportionality: see R (SC) v. Secretary of State for Work and Pensions [2022] AC 223, at [157]-[162]. In summary, he submits, the test in such cases is that a measure, to survive proportionality scrutiny, is not “manifestly without reasonable foundation”. However, this rationality test is the relevant test where the state is entitled to a ‘wide margin of appreciation’ and there is no authority or warrant for the ‘lighter’ review or scrutiny under the ‘manifestly without reasonable foundation’ test to apply in a case such as this, to justify a severe penalty scheme in tax law where its impact on an innocent taxpayer and trader is challenged.[80]Mr Edwards notes that in recent cases where the CJEU has approved national measures imposing joint and several liability on a trader for lost VAT (such as Case C-331/23 Dranken Van Eetvelde NV and, of course, Case C-439/04 Kittell v Belgium) there was a significant element of ‘fault’ attributable to the taxpayer and also no fault in any respect attributable to the state. In any event, he submits that the approach to proportionality called for in the present case is a stricter one than that which normally prevails in EU law.[81]Mr Edwards submits that the correct test for justification in this case, not least given the fundamental nature of Roseline’s rights which are in issue, is the ‘strict’ approach to proportionality under which a structured analysis of means and ends is called for. This “structured” approach can be found in Bank Mellat v HM Treasury, [2014] AC 700, where Lord Sumption observed (at [20]) that when looking at justification:
“the question depends on an exacting analysis of the factual case advanced in defence of the measure, in order to determine (i) whether its objective is sufficiently important to justify the limitation of a fundamental right; (ii) whether it is rationally connected to the objective; (iii) whether a less intrusive measure could have been used; and (iv) whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community. These four requirements are logically separate, but in practice they inevitably overlap because the same facts are likely to be relevant to more than one of them. Before us, the only issue about them concerned (iii), since it was suggested that a measure would be disproportionate if any more limited measure was capable of achieving the objective. For my part, I agree with the view expressed in this case by Maurice Kay LJ that this debate is sterile in the normal case where the effectiveness of the measure and the degree of interference are not absolute values but questions of degree, inversely related to each other.”
[82]Mr Edwards argues that the structured analysis required here entails much more scrutiny of the impact of the secondary liability provisions in TCTA than whether they simply strike “a fair balance” between Roseline’s rights and the aims pursued by the statute. Mr Edwards does not accept that, in providing for a liability such as that arising here, in contrast to an alternative approach to achieving the objectives (such as a penalty scheme), the state has a wide discretion with limited scope for human rights scrutiny. Rather, there is a need to show not only that the measures are ‘necessary’ to achieve the aims but also that the aims outweigh the impact of the measure on the Appellant, that is, its total destruction.[83]Looking at the 4 factors used to test whether an infringement of Convention rights is justified, Mr Edwards says:(1) Roseline accepts that the aims of the secondary liability provisions (fraud prevention) as identified by HMRC are legitimate and of some importance. Some interference with an innocent trader’s Convention rights can be justified in order to achieve these aims.(2) He accepts that there is a rational relationship between a penalty scheme and, to some extent, joint and several liability and the objective of fraud prevention. A penalty of some amount, at a sufficiently deterrent level, is required to ensure that care is taken to seek to identify risks of fraud in a supply chain. The question in this case is whether liability for the whole tax loss must be borne by an innocent appellant, where care was taken by it. In fact it took the only care which was required of it (that is, using the CHIEF system). It would be liable because it did not do everything which was recommended by HMRC and, moreover, where an EORI number and VAT number are substantially the same. Even if it can be accepted that this is justifiable as rational, the issue is whether it can satisfy the third and fourth limbs of the applicable test of proportionality.(3) Thirdly, is joint and several liability necessary in a case such as this, to achieve the identified objectives? There plainly are alternative means which could still have achieved these objectives. A penalty scheme could achieve the same objectives. In other domestic tax contexts, there is a gradation of penalties, and some discretion vested in HMRC to take account of the degree of taxpayer involvement or fault in the tax loss. Here, it is all or nothing.(4) Fourthly, the impact of liability on Roseline could not be more severe. It loses everything. Where it is clear that HMRC’s own systems (notably CHIEF) were not efficient or effective, and Roseline’s fault is not having taken no care at all (it correctly used the CHIEF system), but rather not doing what HMRC recommend, the severity of the impact of s.6 is out of all proportion to the aims it pursues.[84]For these reasons, Mr Edwards submits that there is an interference with Roseline’s A1P1 rights which is disproportionate and therefore a breach of its Convention rights. The solution, as mandated by section 3 HRA, is to construe section 6 TCTA so that it operates in a way which is no harsher than is necessary to achieve the legitimate aim which it pursues.

HMRC’s submissions

[85]HMRC say that the requirement of section 21(6)(c) is met because Roseline has not evidenced that it was authorised by QPTL to make the Declarations. Mr Aherne has provided evidence that CIT instructed Roseline to use PVA accounting when making the Declarations. However, there is no evidence that QPTL had instructed CIT to act on its behalf or to make the Declarations.[86]HMRC do not dispute that a principal (here, QPTL) can be bound by the actions of its agent even when those actions are not expressly authorised by it. Ms Roxburgh says that it is trite that a principal can be bound by the acts of its agents where those acts are within the agent’s actual, implied or ostensible authority. Two issues arise, however. First, whether the person in question is the principal’s agent. Secondly, if they are, what is the scope of the agent’s implied or ostensible authority? Roseline has been unable to provide any evidence that CIT was the authorised agent of QPTL. Nor has it been able to provide any evidence that QPTL represented to it that CIT was its agent or that CIT was entitled to give instructions on QPTL’s behalf. Mr Aherne simply stated that he had no reason to question that Craig Isaac/CIT was instructed by QPTL[87]Turning to section 6(3)(d), as amplified by section 6(4)(a), HMRC say that Roseline was the party that made the Declarations. It therefore declared that QPTL was eligible for PVA accounting when it was not. That constitutes a participation in the breach of a relevant Customs obligation. Roseline ought to have known of the breach of a relevant Customs obligation because it ought reasonably to have known that QPTL was not eligible to use PVA.[88]The phrase “ought to have known” is one which is widely used in legislation, and which has a well-established meaning. It will be found that a party “ought to have known” a state of affairs if that state of affairs would have been discovered on the making of reasonable enquiries (see for example Matrix-SCM Ltd v London Borough of Newham [2011] EWHC 2414 (Ch) at [13]).[89]As a Customs agent, Roseline is expected to undertake reasonable due diligence before submitting a declaration to HMRC. It is not sufficient for a custom agent to leave it to HMRC and their systems to identify false claims.[90]Roseline failed to undertake any due diligence checks on QPTL prior to making the Declarations. QPTL had been de-registered for VAT before the Declarations were made. This could have been identified by checking whether QPTL had a valid VAT number. This is a reasonable enquiry to make. There is a facility called “Check a UK VAT number” which allows this to be done quickly and easily online. The results of the search can be printed or saved to an electronic file. That facility is highlighted in HMRC’s published guidance “Due Diligence when making Customs declarations” published to assist Customs agents. Had Roseline undertaken reasonable enquiries, it would have been aware that QPTL did not qualify for PVA. Accordingly, this is a matter which the Appellant ought reasonably to have known.[91]Roseline did not discharge its obligation to make reasonable enquiries simply by submitting the Declarations through the CHIEF system. The CHIEF system is the system used by a trader to make a declaration to HMRC. HMRC have never suggested that use of the CHIEF system relieves a Customs agent of the requirement to undertake reasonable due diligence before making entries. There was no basis, reasonable or otherwise, for Roseline to assume that the use of this system would absolve it of the obligation to undertake reasonable enquiries before submitting the Declarations.[92]If Roseline was authorised by QPTL, section 6(3)(d) is amplified by section 6(4)(b) and, for similar reasons to those discussed above, HMRC say that Roseline ought to have known that QPTL was not eligible for PVA.[93]Turning to the Convention, HMRC say that A1P1 specifically provides that States are entitled to enforce such laws as they deem necessary to secure payment of taxes or other contributions or penalties. Rights conferred by A1P1 are not absolute. An interference will not constitute a breach of an individual’s rights under A1P1 if it is a lawful interference which pursues a legitimate aim and strikes a “fair balance” between the general interests of the community and an individual’s Convention rights (Sporrong and Lonnroth v Sweden (1983) 5 EHRR 35; James v United Kingdom (1986) 8 EHRR 123 at [51]).[94]In this case the legislation clearly performs a legitimate aim: that of preventing breaches of Customs legislation. Where the legislation pursues a legitimate aim, the question is whether it strikes a fair balance and it is for Parliament to assess the advantages and disadvantages of the legislative alternatives, having regard to the aim sought to be achieved (James v United Kingdom (1986) 8 EHRR 123 at [68]). In matters of discretionary judgement such as this, involving a balance between the competing interests of the need to protect an individual’s rights under A1P1 and of the general interest of the community in the implementation of social or economic policy, Parliament is to be afforded a wide margin of appreciation (AXA General Insurance Ltd and Others v Lord Advocate and others 2011 UKSC 46 at [32], [124], [126]). That is particularly so when dealing with matters of taxation (NKM v Hungary [2013] STC 1104 at [50]). As was explained by Andrews J in Zeeman v HMRC, [2020] EWHC 794 at [79]:
“Legislation will only be regarded as infringing A1P1 rights if it can be shown to be "manifestly without reasonable foundation ": James v UK (Application no 8793/79) (1986) 8 EHRR 123. That is the key test to be applied when considering each of the 4 elements of justification identified by Lord Sumption in the well-known passage of his judgment in Bank Mellat v HM Treasury [2014] AC 700 at [20].”
[95]Looking at those 4 elements of justification in Bank Mellat (see [81] above), HMRC submit that:(1) The general interest of the community in avoiding loss of tax through breach of Customs obligations is an important reason and justification for imposing joint and several liability.(2) The provision is rationally connected to the objective. A person who engages in activity which is in breach of Customs legislation aids the perpetrators of the fraud. Placing joint and several liability on those who participated in the breach (and who could have identified the breach had they made reasonable enquiries) will make it more difficult to carry out fraudulent transactions and so will be apt to prevent them.(3) As to whether a less intrusive measure could have been used, the liability is directly linked to the loss to the State. As liability is joint and several, it remains open to the person liable under the provision to seek to recover any payments which they are obliged to make from the person who breached the Customs obligation. There are steps which a Customs agent can take to protect itself.(4) Finally, a fair balance is struck. It is not disproportionate to place liability on Customs agents where the criteria in the statute are met. In particular, it is not disproportionate to require Customs agents to take reasonable steps to satisfy themselves that the information which they are submitting is true and accurate. The requirement is not onerous. In the case of a Customs agent making a declaration that a trader is entitled to PVA, reasonable enquiries include checking that the trader is VAT registered. This is not an onerous requirement. Steps have been taken to make checking the validity of a VAT registration number both quick and simple.

Findings of Fact

[96]The facts in this case (as opposed to how a person might reasonably respond to them) are largely not contentious and emerged from the material in the hearing bundle and the evidence of the two witnesses. Our findings of fact are as follows:(1) Roseline’s business before 2021 did not involve it making Customs declarations. The COVID pandemic effectively pulled the rug from under Roseline’s existing business, and so, having identified that there would be a need for Customs agents in the UK following the UK’s departure from the EU, it obtained grants to help it set itself up as a Customs agent and undertook appropriate training.(2) Roseline began to act as a Customs agent in 2021.(3) Although the law required the VAT registration number of a person using the PVA facility to be inputted into the relevant Customs declaration, this could not be done whilst the CHIEF system was being used.(4) Roseline restricted its customer base to clients introduced to it or recommended by existing clients. CIT was introduced to it by an existing client and referenced by Mr Aherne.(5) CIT instructed Roseline to use the PVA facility on the Declarations (i.e. all the Customs entries made for QPTL).(6) Because of the way CIT was introduced to it and because of the materials provided to Roseline by CIT, Roseline staff did not doubt the validity of the instructions CIT gave it.(7) Roseline had no direct contact with QPTL.(8) There is no evidence of any contract/authorisation between QPTL and Roseline, nor is there any evidence that QPTL authorised CIT to do anything at all on its behalf, in particular there is no evidence that it authorised or instructed CIT to appoint Roseline as its Customs agent or to give Roseline the instructions it did.(9) Despite this, Roseline completed the Declarations purportedly as QPTL’s direct agent and affected to claim PVA on QPTL’s behalf.(10) By the time Roseline started to act for QPTL, QPTL’s VAT registration had been cancelled (on 20 October 2021), as a result of an HMRC officer visiting its supposed business premises and finding no evidence of a business being carried on, and a notice of the Registrar of Companies’ intention to strike QPTL off the Register of Companies had been published (on 14 December 2021) in the London Gazette. Action to strike QPTL off the register was suspended on 8 January 2022, as an objection was made, and discontinued on 22 January 2022.(11) Roseline did not at any time check whether QPTL was VAT-registered or carry out a Companies House search on QPTL.(12) Whilst Officer Robinson could not be sure when QPTL’s deregistration would have found its way onto HMRC’s system (so that it could be checked using the online tool), we consider it most unlikely that this would not have happened by the end of 2021 and so find that, if Roseline had used HMRC’s facility to check VAT registration numbers in January 2022, it would have discovered that QPTL had been deregistered. If Roseline had carried out a Companies House search on QPTL in January 2022 it would have found the entries described above.(13) The CHIEF system regularly rejected Customs entries on the basis that they contained errors. Among these errors would be wrongly formatted EORI numbers. However, CHIEF only carried out very basic formatting checks on EORI numbers. It did not check their essential validity (i.e. whether they were a “real” EORI number linked to an authorised trader).(14) HMRC have never suggested that CHIEF would check VAT numbers where “G” is entered as a payment method on a Customs declaration (which is a claim to use PVA), nor (from the material we have seen) have they suggested that CHIEF conducted sophisticated checks of EORI numbers.(15) Where a trader was VAT registered, their EORI number (if they had one) would include their VAT registration number, but it was perfectly possible to have an EORI number without being VAT registered.(16) Despite knowing that CHIEF was an antiquated system with limitations and that a trader can have an EORI number without being VAT registered, Mr Aherne believed that CHIEF checked the essential validity of EORI numbers and, as they incorporated VAT numbers, it would identify whether a person claiming to use PVA was entitled to do so.(17) HMRC guidance (“Due Diligence when making Customs declarations” published on 1 December 2017) addressed to Customs traders stressed the importance of traders understanding their responsibilities and avoiding being caught up in fraud. This guidance stressed the importance of due diligence checks on counterparties and suggested verifying an EORI number and verifying whether customers or suppliers are VAT registered and told readers how they might do this. This guidance was cast in directional terms (“Verify …”) and did not suggest whether one test was sufficient.(18) HMRC’s published guidance did not address “head on” the tension between what the law required (a VAT number on the Customs declaration where PVA was used) and the limitations of CHIEF, but appeared to acknowledge this, albeit in a low-key and perhaps slightly muddled way, suggesting that entering an EORI number would be sufficient for CHIEF users. Although it suggested this practical approach, it nowhere suggested that an inability to input a VAT registration in CHIEF meant that PVA could be claimed by importers who were not VAT registered. So (the underlining below is ours): (a) The guidance entitled “Check when you can account for import VAT on your VAT Return from 1 January 2021 (Updated on 22 December 2020) set out who could use the PVA facility (although it did not use that term). It told users to “include your VAT registration number on your Customs declaration”, and, when addressing CHIEF users on the detail, it told them to include “your EORI number starting with ‘GB’ which includes your VAT registration number into box 8” and “if applicable, your VAT registration number in box 44h” (although the evidence is that this could not be done). As regards representatives, the instructions read “If you’ve been authorised to act on behalf of your client, you must use their EORI number or VAT registration number on the Customs declaration.” (b) Finally, the Technical Guidance Note said that “UK VAT registered importers” could opt to use PVA. They did not need authorisation and “They will simply make the appropriate entry and provide their EORI and/or VAT registration number (VRN) on their Customs declaration.” The detailed guidance indicated that CDS users “will be able to postpone accounting for the import VAT due by entering their VRN at header level in Data Element 3/40” whereas CHIEF users “will be able to postpone accounting for the import VAT due by inserting their EORI number (starting with GB) into Box 8 (Header Consignee) of the Customs declaration or, if applicable, their VRN in Box 44h (Registered Consignee)”

discussion

[97]We will address the three possible heads of liability under section 6 TCTA separately and in two stages. First, we will set the Convention to one side and apply what we might call an ordinary domestic reading of the legislation to the facts as we have found them. Then we will ask ourselves whether this conclusion needs to be reviewed in the light of the Convention.

Domestic principles of statutory interpretation

[98]Both HMRC and Roseline point us to a number of recent decisions of the Supreme Court which confirm that, in line with the modern approach to the construction of other statutes, fiscal legislation should be interpreted in a purposive way. For example, in Balhousie Holdings Ltd v. HMRC [2021] UKSC 11, Lord Briggs JSC summarized the approach, at [24] (citing Ribeiro PJ in the Hong Kong Court of Final Appeal in Collector of Stamp Revenue v. Arrowtown Assets Ltd [2003] HKCFA 46, [35]): “[t]he ultimate question is whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically”.[99]It is clear that, in interpreting a statutory provision, it is necessary to have regard to the purpose of the particular provision and, in so far as possible, to interpret its language in a way which gives effect to that purpose (UBS AG v HMRC [2016] UKSC 13 at [61] to [63]). In doing so, it is necessary to consider whether the relevant statutory provisions, construed purposively, were intended to apply to the transaction, viewed realistically. The requirement to view a transaction realistically is a requirement to view the transaction in light of the statutory provision being applied (UBS AG v HMRC [2016] UKSC 13 at [66] to [68]).[100]The correct approach to statutory interpretation was elaborated by Lord Hodge DPSC (with whom Lord Briggs, Lord Stephens and Lady Rose JJSC agreed) at in the Supreme Court in R (oao O) v Secretary of State for the Home Department, [2022] UKSC 3:
“[29] The courts in conducting statutory interpretation are “seeking the meaning of the words which Parliament used”: Black-Clawson International Ltd v Papierwerke Waldhof-Ascha›enburg AG [1975] AC 591, 613 per Lord Reid. More recently, Lord Nicholls of Birkenhead stated: “Statutory interpretation is an exercise which requires the court to identify the meaning borne by the words in question in the particular context” (R v Secretary of State for the Environment, Transport and the Regions, Ex p Spath Holme Ltd [2001] 2 AC 349, 396.) Words and passages in a statute derive their meaning from their context. A phrase or passage must be read in the context of the section as a whole and in the wider context of a relevant group of sections. Other provisions in a statute and the statute as a whole may provide the relevant context. They are the words which Parliament has chosen to enact as an expression of the purpose of the legislation and are therefore the primary source by which meaning is ascertained. There is an important constitutional reason for having regard primarily to the statutory context as Lord Nicholls explained in Spath Holme, p 397: “Citizens, with the assistance of their advisers, are intended to be able to understand parliamentary enactments, so that they can regulate their conduct accordingly. They should be able to rely upon what they read in an Act of Parliament.” [30] External aids to interpretation therefore must play a secondary role. … The context disclosed by such materials is relevant to assist the court to ascertain the meaning of the statute, whether or not there is ambiguity and uncertainty, and indeed may reveal ambiguity or uncertainty: Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), para 11.2. But none of these external aids displace the meanings conveyed by the words of a statute that, after consideration of that context, are clear and unambiguous and which do not produce absurdity. … [31] Statutory interpretation involves an objective assessment of the meaning which a reasonable legislature as a body would be seeking to convey in using the statutory words which are being considered. Lord Nicholls, again in Spath Holme [2001] 2 AC 349, 396, in an important passage stated: ‘The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the “intention of Parliament” is an objective concept, not subjective. The phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the minister or other persons who promoted the legislation. Nor is it the subjective intention of the draftsman, or of individual members or even of a majority of individual members of either House . . . Thus, when courts say that such-and-such a meaning “cannot be what Parliament intended”, they are saying only that the words under consideration cannot reasonably be taken as used by Parliament with that meaning.’ ” ‘The task of the court is often said to be to ascertain the intention of Parliament expressed in the language under consideration. This is correct and may be helpful, so long as it is remembered that the “intention of Parliament” is an objective concept, not subjective. The phrase is a shorthand reference to the intention which the court reasonably imputes to Parliament in respect of the language used. It is not the subjective intention of the minister or other persons who promoted the legislation. Nor is it the subjective intention of the draftsman, or of individual members or even of a majority of individual members of either House . . . Thus, when courts say that such-and-such a meaning “cannot be what Parliament intended”, they are saying only that the words under consideration cannot reasonably be taken as used by Parliament with that meaning.’ ”
[101]At the conclusion of the hearing and as we started to write our decision, we thought that, Convention points aside, the construction of the provisions in TCTA we are concerned with was straightforward. However, that confidence soon proved to be misplaced, and one question arose which we did not consider at all straightforward. That is the point (explored at [102]-[107] below) on which we sought further submissions from the parties.

Liability under section 6(3)(b) and section 21(6)(c)

(b) and section 21(6)(c)

[102]The potential application of section 21(6)(c) to Roseline raises a number of questions. The first is whether Roseline was authorised to claim PVA. The second is whether Roseline was a Customs agent at all. As we wrote this decision, we noticed that section 21(6) begins with the words “If a Customs agent acts as a direct agent …” and section 21(1) provides that “A person (“the principal”) may appoint any other person (a “Customs agent”) to act on the principal's behalf for the purposes of this Part …”[103]It was at this point that we encountered the unexpected point of statutory interpretation we referred to, which is this: If we were to conclude that, although Roseline purported to act as QPTL’s Customs agent, it had not actually been appointed as QPTL’s Customs agent (either by QPTL or by CIT on QPTL’s behalf), is Roseline a Customs agent for the purposes of section 21 at all and, if it is not, can it be liable under section 21(6) given the opening words (“If a Customs agent acts …”) of that subsection? We asked the parties for their submissions on this point.[104]HMRC submit that that section 21(6)(c) is intended to apply whenever a person purports to act as a direct agent when they are not authorised to do so, and it should be interpreted in a purposive way to have that effect. They say that this can be seen most clearly by looking at section 21(6)(b). A person whose appointment has been withdrawn is clearly no longer a Customs agent acting as a direct agent. If section 21(6) only applied to those who were currently validly instructed, section 21(6)(b) of TCTA would not fulfil any purpose. HMRC also submit that this approach is consistent with the way HMRC are told that a Customs agent has been appointed by an importer, which is on an import declaration. So, they say that sections 21(6)(b) and (c) should apply where a person has disclosed that they are acting as a direct agent on an import declaration. In those circumstances, it is readily understandable that the legislation would refer to the individual as a Customs agent acting as a direct agent: that is what they have held themselves out to be.[105]Roseline submits that section 21(6) is premised on a person being a ‘Customs agent’ and this is a threshold requirement for its application. So, if there is no valid appointment as a Customs agent, a person is not a Customs agent and section 21(6) does not apply. As far as HMRC’s point on section 21(6)(b) is concerned, they say that this provision envisages a valid appointment as a Customs agent which is later withdrawn and has nothing to say about the situation where there was never a valid appointment in the first place. Section 21(6)(c) is concerned with the situation where an agent is validly appointed but exceeds their authority. The key words are “purports to act on behalf of the principal when the agent has no authority to do so”. If there was never any valid appointment as an agent, there would be no “principal”, “agent” or any question of a lack of “authority”.[106]We are with Roseline on this point. Section 21 addresses the position of Customs agents. Putting subsection (6) to one side for a moment, it seems to us to be unrealistic to read any of the other provisions of section 21 as referring to people who appear to be (or act as) Customs agents but are not (because they have not been appointed as such). Subsection (1) tells us how a Customs agent is appointed and what such an agent can do (make Customs declarations in its own name or that of its principal). Subsection (2) requires an appointment (and withdrawal of appointment) to be notified to HMRC in accordance with regulations. Much simplified, subsection (3) provides that “the effect of an appointment of a person as a Customs agent” is that anything done by the agent is regarded as done by the principal. Subsections (4) and (5) provide an exception to this general rule, in the form of an indirect agent’s joint liability for duty and then we come to subsection (6). The purpose of subsection (6), as we derive it from its place and role within section 21, is to equate the liability position of a person who has been appointed as a Customs agent and who acts as a direct agent with that of an indirect agent in the four situations set out in that subsection.[107]Whilst we agree with HMRC that it seems odd that a person, who was not appointed as a Customs agent but acts as one, is in a better position (at least as regards liability under section 21(6)) than a person who was appointed as a Customs agent but who overreaches their authority, that result can be understood when subsection (6) is understood in the wider context of section 21, which is a section devoted to making provision for people who have been appointed by another person to act as their Customs agent. Our reading of “Customs agent” in section 21(6) is, therefore, no different from the definition of that term in subsection (1), and we consider that a person is only a “Customs agent” for another person where they have at some point been appointed as such by that second person.

Was Roseline QPTL’s Customs agent?

[108]That brings us to the question whether Roseline was appointed by QPTL as its Customs agent and, if it was, whether it was also authorised to claim PVA on its behalf.[109]The evidence here is quite sparse. The relevant material seems to us to be:(1) The emails from CIT instructing Roseline to use the PVA facility on the Declarations.(2) Craig Isaac’s statements to HMRC that he was asked verbally by a director of QPTL to “submit there Customs clearance to a agent for loads we carried as a haulage contractor”, but that he never told anyone that he was given authority by QPTL for Roseline to claim PVA and that he didn’t really understand what that meant as CIT was just a haulage company who sent the paperwork for clearance to Roseline. There is an obvious tension between Mr Isaac’s assertion that CIT did not understand Customs terminology and just passed paperwork on and the email instructions CIT generated and sent to Roseline about PVA. When asked about those instructions he told Officer Robinson that “I was told thats how it was done I have no knowledge of the procedures”. It is unclear whether Mr Isaacs is continuing to deny instructing Roseline to use PVA for QPTL or whether (as seems more likely) he is accepting that CIT did so but without understanding what using PVA meant.(3) Roseline had no direct contact with QPTL.(4) There is no evidence of any contract/authorisation between QPTL and Roseline, nor is there any evidence (beyond Mr Isaac’s email to HMRC) that QPTL authorised CIT to do anything at all on its behalf, in particular there is no evidence that it authorised or instructed CIT to appoint Roseline as its Customs agent or to give Roseline the instructions it did.(5) QPTL’s VAT registration was cancelled 20 October 2021 following a visit to its premises by a HMRC officer who was unable to establish that the business was trading.[110]Given that Roseline had no direct contact with QPTL, it can only have been appointed to act as QPTL’s Customs agent, if either CIT validly appointed/authorised Roseline on QPTL’s behalf or if CIT purported to appoint/authorise Roseline on behalf of QPTL when it did not have actual authority to do so but was acting as QPTL’s agent and had implied or ostensible authority to do so.[111]It is clear that CIT asked Roseline to act as Customs agent for QPTL and instructed it by email to claim PVA on QPTL’s behalf. Craig Isaac told HMRC that he was asked to use a Customs agent by QPTL but denies being authorised to instruct Roseline to claim PVA. Mr Isaac did not give evidence before us, and the unresolved tension between his two comments to HMRC about instructing Roseline to claim PVA and the emails that were sent makes it even harder for us to put much (if any) weight on anything he said to HMRC, including his statement to HMRC that he was told verbally by a director of QPTL to process its loads using a Customs agent. More tellingly, QPTL appears to have ceased trading in the Autumn of 2021, which was why its VAT registration was cancelled. QPTL did nothing to suggest or correct any misunderstanding on this point by HMRC and its registration remained cancelled. That suggests to us that QPTL was not in business and CIT was not acting as QPTL’s agent (or haulier) at all when it purported to deal with Roseline on QPTL’s behalf. Beyond Mr Isaac’s statement to HMRC, there is no evidence that CIT was acting as QPTL’s haulier or otherwise on its behalf, and it is not at all obvious to us why a company that was not trading would need a haulier.[112]If (as we find to be the case) CIT was not acting as QPTL’s agent at all, then CIT had no actual, implied or ostensible authority to bind QPTL and Roseline was never QPTL’s Customs agent for the purposes of section 21.

Was Roseline authorised to make the PVA claims?

[113]If, contrary to what we have just found, Roseline was validly appointed as QPTL’s Customs agent or if Roseline could be liable (as HMRC say is the case) if it acted as a Customs agent despite not having been appointed, the next question we would need to address would be whether Roseline was authorised to make the PVA claims.[114]The first question here would be whether a Customs agent has a general implied authority to make PVA claims. Mr Edwards submits that a Customs agent can have implied or ostensible authority to act for a principal, in which case it will not be purporting to act on behalf of the principal but will be acting in line with its implied or ostensible authority. He says that “authority” in section 21(6)(c) mut include implied and ostensible authority as cases of actual authority are apt to fall in section 21(6)(a) and section 21(2).[115]Ms Roxburgh does not disagree with Mr Edwards’ proposition that a principal can be bound by the acts of its agent, even when those actions are not expressly authorised. But, she says, we would still need to ask what the scope of an agent’s implied or ostensible authority is. Additionally, Ms Roxburgh submits that there must be limits to how far the idea of implied or ostensible authority can be taken. A Customs agent registered with HMRC might be said to have implied/ostensible authority to do anything a Customs agent might do, and that cannot be right as it would deprive section 21(6)(c) of any meaning, given that section 21(6)(a)-(b) cover an agent whose authority has not been disclosed to HMRC or an agent whose authority has been withdrawn.[116]We are with Ms Roxburgh on this question. Given that section 21(6)(a) addresses a Customs agent whose authority has not been disclosed to HMRC and section 21(6)(b) deals with an agent whose authority has been withdrawn, section 21(6)(c) must be addressing the position of an agent who has been and remains properly appointed (and disclosed to HMRC) but steps outside their authority. As Ms Roxburgh says, if “authority” here includes everything a Customs agent might ever expect to need to do (including the authority to make PVA claims) it adds little or nothing to (a) and (b). There may be some actions a Customs agent needs to take which are so minor, administrative and inconsequential that they could be seen as automatically authorised by appointment as a Customs agent. We were not addressed on this point. However, even if this is the case, making important claims with significant fiscal implications (such as a claim to be a direct agent in a particular case or to use PVA) must be steps which require clear authorisation beyond any implicit authorisation that comes from appointment as a Customs agent. If this were not so, it is hard to see what section 21(6)(c) could be addressing.[117]The next question would be whether, given that there is no evidence of QPTL giving Roseline direct instructions on this point and no suggestion from Roseline that QPTL did so, CIT had authority to instruct Roseline to make the PVA claims on QPTL’s behalf, so that Roseline could rely on the instructions it clearly received from CIT. There is no evidence that CIT had any actual authority to do this; indeed, Mr Isaac at least initially expressly denied to HMRC that it did. So, CIT would only be able to authorise Roseline to make the PVA claims in a way which bound QPTL if it had implied or ostensible authority to do so.[118]Mr Aherne’s unchallenged evidence of practice in the world of cross border goods transport is that goods owners look to hauliers to make Customs entries, and that it is common practice for Customs agents to be instructed by an agent (usually the haulier) of an importer and for Customs agents not to have any direct contact with the importer.[119]Although it may be common practice for Customs agents to deal with their principals through agents, we consider that it would be going too far to extrapolate from this that hauliers and other intermediaries automatically have an implied general authority to give instructions to Customs agents on individual important matters on behalf of their principal. As to ostensible authority, we have no contract or letter of instruction between QPTL and Roseline and no evidence of any other representation made by QPTL as to CIT’s authority. In the circumstances, we consider that it would be going too far to say that, even if CIT had (actual, implied or ostensible) authority to appoint Roseline, it also had implied or ostensible authority to give Roseline instructions on all Customs matters (including the PVA claims).

Our conclusions on liability under section 6(3)(b) and section 21(6)(c)

(b) and section 21(6)(c)

[120]We have concluded that Roseline is not liable under section 6(3)(b) and section 21(6)(c). This is because, for Roseline to be liable under this head, it must have been appointed as QPTL’s Customs agent and our conclusion on the facts is that QPTL did not appoint Roseline as its Customs agent, directly itself or indirectly through the agency of CIT.[121]Because the issue was canvassed extensively before us, we went on to consider whether, assuming that Roseline had been appointed as QPTL’s Customs agent or if Roseline could be liable if it acted as a Customs agent despite not having been appointed, when it made the PVA claims Roseline would have been purporting to act on behalf of QPTL when it had no authority to do so. Our answer to that question is that Roseline would not have been authorised to make the PVA claims in the Declarations and so would have been liable under this head if it had been appointed as QPTL’s Customs agent or if it could be liable if it acted as a Customs agent despite not having been appointed.

Liability under section 6(3)(d) read with section 6(4)(b)

(d) read with section 6(4)(b)

[122]Liability will arise under this head if the person sought to be made liable (”A”) acted (whether as a Customs agent or otherwise) on behalf of another person who breached a relevant Customs obligation and A knew, or ought reasonably to have known, of the breach by that other person.[123]Section 6(6)(b) provides that there is a breach of a Customs obligation if circumstances arise that result in a liability to import duty, and, in such a case, references to knowledge of the breach are to knowledge of those circumstances.[124]Although the language of section 6(3)(d) is more open textured than section 21, Ms Roxburgh did not suggest that liability under that provision can be incurred by someone who purports to act on behalf of another, but is not authorised to do so, and we have approached the issue of liability under this head on the basis that it is confined to those who actually act on behalf of another.[125]The reasoning behind our conclusion in relation to section 21(6)(c), that Roseline had not been appointed as QPTL’s Customs agent and was not authorised to make the PVA claims in the Declarations, leads to the conclusion that, while Roseline appeared to act on behalf of QPTL, it did not actually do so and therefore it cannot be liable under this head.

Liability under section 6(3)(d) read with section 6(4)(c)

(d) read with section 6(4)(c)

[126]Liability will arise here if Roseline “participated in, or was otherwise involved in, a breach of a relevant Customs obligation and knew, or ought reasonably to have known, of the breach”. Section 6(6) tells us what a breach of a Customs obligation refers to (circumstances arise that give rise to import duty/VAT) and that references to knowledge of the breach are to knowledge of those circumstances. This gives rise to three questions:(1) Was there a breach of a Customs obligation?(2) Did Roseline participate in the breach or was it “otherwise involved in” it?(3) Did Roseline know (or should it reasonably have known) of the circumstances that resulted in the liability to VAT?[127]The answer to the first question is clearly “Yes”. Goods were imported into the UK, import VAT should have been paid on them at the point of entry but this was not done because a claim for PVA was made on behalf of the declared importer (QPTL). That claim was invalid (as QPTL was not VAT registered and thus was not eligible to use the PVA facility) and so import VAT should have been paid at the point of entry, but this was not done.[128]On the second question, we were not referred to any authority on the meaning of “participate” or “involved” in this provision or more generally. The Oxford English Dictionary (“OED”) defines “participate” as “To take part; to have a part or share with a person, in (formerly also of) a thing; to share.” Similarly, “involved” is defined as “… to be occupied, engrossed, or embroiled in; to be concerned or associated with”.[129]By making the PVA claim on (or purportedly on) QPTL’s behalf, Roseline played a part (in fact, a very important part) in the breach of the Customs obligation. It was that claim which allowed the goods to enter the UK without import VAT being paid, when it should have been. Without the claim, the goods would have been unable to enter the UK without VAT being paid. By making that false claim (albeit not knowing it was false), Roseline participated in and was involved in the breach.[130]The OED definitions of “participate” and “involved” we have looked at do not require knowledge of the full picture, that is knowing the totality of what the participant is participating or involved in. It is clear from the words “or ought reasonably to have known” that liability is not confined to conscious wrongdoers (people who know that there is a breach of a relevant Customs obligation). Just as it is possible for innocent people to be caught up in the kinds of VAT fraud that bring the Kittel doctrine into play, so it is possible for entirely innocent people to participate in or be involved in a breach of a Customs obligation. HMRC have not suggested that Roseline knew the full picture, including that QPTL was not entitled to use the PVA facility, but that does not mean that it did not participate in, or was not involved in, the breach of the Customs obligation.[131]So, the answer to the second question is “yes”.[132]The final question is whether Roseline knew (or ought reasonably to have known) of the circumstances that resulted in the liability to VAT. We stress again that HMRC do not suggest that Roseline, or any of its staff, knew that QPTL was not entitled to claim PVA. The only question is whether Roseline ought reasonably to have known that.[133]Matrix-SCM Limited v London Borough of Newham, [2011] EWHC 2414 (Ch), was a case about whether a claim had been brought in time. The relevant domestic provision stipulated that proceedings should “be brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose”. The ECJ had held that the requirement to act “promptly” infringed the principles of legal certainty and effectiveness, and so the period of 3 months provided for in the national legislation should run from “the date on which the claimant knew or ought to have known of the infringement of the public procurement rules”.[134]The claim in question resulted from Matrix not being awarded a contract that Newham had put out to tender. Matrix claimed that Newham had not used the methodology for evaluating tenders outlined in its invitation to tender (“ITT”). Newham said that it had not done this but, even if it had, Matrix’s claim was time barred as it should have made its claim within three months from the time the ITT was made available, when its intended methodology would have been apparent. The ITT explained how tenders would be evaluated on price and there was a table attached which showed how 3 compering bids would be evaluated using this method. Matrix complained that the test Newham applied was a “curious and wrong” approach albeit that it was the same approach as that applied in relation to the 3 hypothetical bids set out in the table. The evidence of the responsible Matrix executive was that he had not considered it necessary to analyse the table in any great detail and assumed that it reflected his understanding of the narrative. He read the words in the ITT as clearly suggesting a different approach to that in fact set out in the table. The judge held that even a brief consideration of the table would have made plain Newham’s proposed approach and what Newham intended by the words in the ITT. If there was any doubt about what was intended, the table resolved that doubt. Accordingly, Matrix’s claim was time barred as it was brought more than 3 months after it should have known how Newham was approaching the tender process. During her judgment, the judge observed (at [13]), “[W]here it cannot be said that a claimant knew of facts that apparently clearly indicated an infringement, the question will become whether the claimant should have known of such facts. A claimant will have constructive knowledge if, upon reasonable enquiries, it should have discovered the alleged infringement.”[135]Although Matrix-SCM was not a case on the statutory language we are concerned with (It was addressing what was meant by “should have known” in an ECJ judgment), we do not discern any difference between asking whether a person “should have known” or “ought reasonably to have known” something, and we respectfully agree with and adopt the approach of the judge in Matrix-SCM.[136]A person in Roseline’s position will have constructive knowledge (should, or ought reasonably to, have known) of the relevant breach if it was in possession of information from which it could, if it had turned its mind to the question and avoided unfounded assumptions (the mistake the executive made in Matrix), have deduced that there was a breach or if, by making reasonable enquiries, it could have obtained the information needed to deduce that there was a breach.[137]We consider that Roseline ought reasonably to have known of the relevant breach for the following reasons:(1) The law and HMRC’s guidance have always been clear that PVA can only be claimed by a VAT-registered importer. HMRC has never suggested that this substantive requirement was waived or otherwise affected for as long as a VAT number could not be entered in CHIEF when PVA was claimed. To the extent Roseline thought this was the case, it made an untested assumption for which there was no sound basis.(2) Given that a VAT unregistered trader can have an EORI number, an assumption that an EORI number is sufficient to validate VAT registration is plainly wrong. Mr Aherne did not provide any convincing, rational explanation for why he assumed that QPTL having an EORI number was sufficient to confirm its VAT registration. Similarly, there was no basis for his (wrong) assumption that HMRC’s antiquated CHIEF system would check EORI numbers (beyond formatting) or VAT registration.(3) HMRC’s published guidance made the need to carry out due diligence on counterparties to avoid being caught up in fraud crystal clear, but Roseline made no attempt to contact QPTL or conduct any other due diligence on it or its entitlement to claim PVA. Roseline proceeded on the untested assumption that what CIT told it was correct. It was not entitled to do this and should have insisted that CIT gave it direct access to QPTL. Had it done that, it would have discovered QPTL’s lack of business operations and that it was not VAT registered.(4) Roseline made no effort to check whether QPTL was VAT-registered using HMRC’s online VAT registration checking facility or carry out a Companies House search on QPTL. Had it done so it would have seen that the Registrar of Companies had moved to strike QPTL off the register and that would have put Roseline on enquiry about QPTL. It would also have discovered that QPTL was not VAT registered. These were quick, easy and obvious steps to take, but Roseline failed to take any of them.[138]Mr Edwards referred us to the decision of the Supreme Court in HMRC v Tooth, [2021] UKSC 17, and in particular paragraphs [54]-[59]. This case was about whether an insufficiency of tax had been caused deliberately by Mr Tooth within the extended 20-year time limit. Mr Tooth had made a conscious decision to use the wrong box on his tax return in a situation where the deficiencies of the return form meant that he needed to put an incorrect number in at least one box. He did this and explained what he had done. As a result of the way he filled in the boxes, his return was not picked up by HMRC’s automated checks. The Supreme Court held that, in context, Mr Tooth’s return was not inaccurate and went on to say (at [58]):
“Even if we could have been persuaded, contrary to our conclusion above, that by some tunnel-vision approach to the interpretation of parts of Mr Tooth’s return, ignoring all context, it contained an inaccuracy, we would not have been satisfied that it was deliberate in the sense, explained above, that Mr Tooth or his advisors knew that the relevant statements were inaccurate and intended thereby to mislead the Revenue. Ms McCarthy submitted that all that was achieved by the extensive passages in the white spaces on Mr Tooth’s return, referred to above, was to explain why the statements in the relevant partnership boxes were deliberately inaccurate. That cannot be right. Reading the return as a whole, Mr Tooth and his advisors did their best, in the context of an intractable online form which did not appear to enable them to do it more directly, to explain the employment-related and scheme-derived basis of his ambitious claim to extinguish his 2007-8 tax liability by an admittedly contentious carry-back. It is unnecessary in this context to decide whether they had no alternative but to do it that way, a point briefly but inconclusively argued in this court, nor whether the requisite causative link between the alleged inaccuracy and the insufficiency of tax was established.”
[139]Mr Edwards takes from this that Roseline cannot be blamed for HMRC’s CHIEF system not allowing a taxpayer to input a VAT number or (in his submission) HMRC’s guidance not being clear and needing to be read carefully by a trader to work out what is relevant to him. We do not find the reference to Tooth to be helpful. Although HMRC’s guidance suggested a practical approach, it nowhere suggested that an inability to input a VAT registration in CHIEF meant that PVA could be claimed by importers who were not VAT registered (which would have been a perverse thing for HMRC to do as the P in PVA postpones VAT accounting into a trader’s VAT return and an unregistered person does not complete a VAT return). The Technical Guidance was clear that “UK VAT registered importers” could opt to use PVA. Mr Tooth was “boxed in” to completing his return inaccurately (at least looking at the requirements for individual boxes) because of the way HMRC designed the tax return form, but Roseline was not being forced to do anything at all. It could claim PVA for VAT registered traders without inputting a VAT registration number into CHIEF, but it was not being required or licensed to claim PVA for unregistered traders or abandon any attempt to check that the people on whose behalf it claimed PVA were entitled to use that facility.[140]For completeness we should add that we do not accept any suggestion that HMRC’s guidance needing to be read carefully somehow means that a person is not expected to understand what is required of them. If HMRC’s guidance had pointed a reader to the wrong answer, they might be heard to say that they could not be expected to understand the correct position and what was required of them (just as Mr Tooth could not complete his tax return in the way HMRC prescribed and correctly self-assess his tax liability), but (as we have repeatedly explained) the “wrong” answer/position would be a suggestion that PVA was open to persons other than VAT-registered traders, and HMRC never signposted that position.[141]We are, of course, not dealing with an inexperienced “lay” reader of HMRC’s guidance at all. Roseline was in business as a Customs agent and, by the time it made the Declarations, had been for over a year. A person in that position can reasonably be expected to appreciate the importance of carrying out due diligence on its clients and ensuring that its clients are entitled to make any claims it makes on their behalf. If a Customs agent does not take those steps will be fixed with the knowledge it would have obtained if it had done so.[142]So, the answer to our third question is also “yes”, and it follows from the answer to all three of our questions being “yes” that Roseline meets the conditions for liability under section 6(3)(d) read with 6(4)(d) TCTA.

Our conclusions based on domestic law

[143]Looking just at the relevant provisions of TCTA, Roseline is jointly and severally liable with QPTL for the import VAT which remained unpaid because of the PVA claims made in the Declarations. This is because, by making the Declarations, Roseline participated in, or was otherwise involved in, a breach of a relevant Customs obligation and it knew, or ought reasonably to have known, of that breach, thus meeting the conditions for liability under section 6(3)(d) TCTA read with 6(4)(d) TCTA.[144]Because Roseline was not appointed as a Customs agent by QPTL (or CIT on QPTL’s behalf), it has no liability under section 21(6)(c) TCTA nor, for similar reasons, is it liable under section 6(3)(d) read with section 6(4)(b),

Does the operation of domestic law infringe Roseline’s A1P1 rights?

[145]It is common ground that imposing joint and several liability on Roseline is an interference with its A1P1 rights.[146]Once that is accepted, the question becomes whether that interference can be justified. Both Mr Edwards and Ms Roxburgh frame their arguments around the 4 elements of justification identified by Lord Sumption in Bank Mellat. We respectfully agree with this approach to testing whether the accepted interference with Roseline’s A1P1 rights is justified. The issue between the parties is not how to test whether that interference is justified but rather what level of justification is required.

What level of justification for an interference with A1P1 rights is required?

[147]Mr Edwards sets a high bar for justification. He says that it is not enough for the provisions to strike “a fair balance” between Roseline’s rights and the aims pursued by the statute. In choosing between joint and several liability and other measures (such as a penalty regime) the state does not have a wide discretion with limited scope for human rights scrutiny. HMRC need to show that the measures are ‘necessary’ to achieve the legitimate aims of the statute and that those aims outweigh the existential impact of the measure on Roseline. Ms Roxburgh on the other hand submits that it is sufficient that the measure pursues a legitimate aim and strikes a “fair balance” between the general interests of the community and an individual’s Convention rights.[148]A1P1 is not a tax-focused provision. It starts by setting out the general principle that a person “is entitled to the peaceful enjoyment of his possessions”. However, this is not an absolute right. The first caveat to the general right is that a person may be deprived of his possessions in the public interest and subject to the conditions provided for by law and by the general principles of international law. The second caveat is that the general right does not “impair the right of a state to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties”.[149]The accepted need/right of states to control the use of property in a wide range of circumstances is the source of the significant degree of latitude we see afforded to states in departing from the general right in A1P1. So, we see the European Court of Human Rights (“ECHR”) observing (at [46]) in James v United Kingdom (Application no 8795/79), 8 EHRR 123, where the question was whether the operation of the enfranchisement provisions in the Leasehold Reform Act 1967 amounted to a breach of the Grosvenor Estate’s A1P1 rights:
“Because of their direct knowledge of their society and its needs, the national authorities are in principle better placed than the international judge to appreciate what is 'in the public interest'. Under the system of protection established by the Convention, it is thus for the national authorities to make the initial assessment both of the existence of a problem of public concern warranting measures of deprivation of property and of the remedial action to be taken. 45 Here, as in other fields to which the safeguards of the Convention extend, the national authorities accordingly enjoy a certain margin of appreciation. … The Court, finding it natural that the margin of appreciation available to the legislature in implementing social and economic policies should be a wide one, will respect the legislature's judgment as to what is 'in the public interest' unless that judgment be manifestly without reasonable foundation.”
[150]Similarly, in Sporrong and Lonnroth v Sweden, 5EHRR 35, a case about expropriation permits and prohibitions on construction, the ECHR commented (at [69]):
“[T]he Court must determine whether a fair balance was struck between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights. The search for this balance is inherent in the whole of the Convention and is also reflected in the structure of Article I. [The Court] finds it natural that. in an area as complex and difficult as that of the development of large cities. the Contracting States should enjoy a wide margin of appreciation in order to implement their town-planning policy. Nevertheless. the Court cannot fail to exercise Its power of review and must determine whether the requisite balance was maintained in a manner consonant with the applicants' right to 'the peaceful enjoyment of [their] possessions'. within the meaning of the first sentence of Article 1.”
[151]Despite acknowledging that wide margin of appreciation, the ECHR held (at [73]) that the permits, aggravated by the ban on construction and an inability to claim compensation, “upset the fair balance which should be struck between the protection of the right of property and the requirements of the general interest: [the applicants] bore an individual and excessive burden which could have been rendered legitimate only if they had had the possibility of seeking a reduction of the time-limits or of claiming compensation.”[152]Although not an issue in this case, it is worth noting that the fact that legislation is retrospective (or retroactive) will not of itself render it incompatible with A1P1. Retroactivity is an issue considered when addressing proportionality, but the ECHR has expressly recognised that retrospective taxation can be applied to remedy technical deficiencies in the law; NKM v Hungary (App no 66529/11), [2013] STC 1104, at [51].[153]Whilst retroactivity is not an issue for us, the ECHR’s position on retrospective legislation is indicative of the latitude the ECHR affords contracting states in the field of taxation. More broadly, in NKM, the ECHR observed (at [50]):
“In so far as the tax sphere is concerned, the court’s well-established position is that states may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test (see National & Provincial Building Society v UK [1997] STC 1466, 25 EHRR 127, paras 75 to 83; OAO Neftyanaya Kompaniya YUKOS v Russia [2011] STC 1988, 54 EHRR 599, para 559).”
[154]In a case involving an A1P1 challenge (that the relevant tax legislation amounted to a disproportionate interference with property rights protected by A1P1) to the “loan charge” legislation (which imposed income tax and National Insurance Contributions liabilities on certain loans or quasi-loans outstanding at the end of 5 April 2019), Zeeman v HMRC, [2020] EWHC 794 (Admin), Andrew J put the issue like this (at [73]):
“Any interference with the peaceful enjoyment of possessions must be both lawful and proportionate. There may be a degree of overlap between the factors that are relevant to take into consideration in assessing whether these two requirements are met, but the requirements themselves are separate and cumulative. Any such interference must strike a “fair balance” between the demands of the general interests of the community and the requirements of the protection of the individual’s fundamental rights. There must be a reasonable relationship of proportionality between the means employed and the aims pursued, and the person affected must not bear an individual and excessive burden.”
[155]She went on to explain (at [74]) that it is not sufficient to satisfy the requirement of lawfulness that the measure in question is contained in an Act of Parliament; the measure must be compatible with the rule of law. That means that it must have legal certainty (i.e. it must be clear and precise in its terms, and it must be sufficiently foreseeable) and it must not operate in an arbitrary manner. A law cannot be castigated as arbitrary if it is founded on necessity, reason or principle.[156]She concluded:
“[76] There is ample authority both in Strasbourg and domestically to the effect that a State, especially when framing and implementing policies in the area of taxation, enjoys a wide margin of appreciation: see e.g. Huitson v UK (Decision 5013/12 of 15 January 2015). Indeed, it follows from the wording of A1P1 itself that the State has a right to “enforce such laws as it deems necessary to control the use of property … to secure the payment of taxes or other contributions or penalties.”
In the field of tax, therefore, States may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test: see NKM v Hungary (above) at [50], Colazzo v Italy (Application No 36904/06) at [30]-[31], and Cacciato v Italy (Applications No 60633/16) at [23]-[24]. … [79] Legislation will only be regarded as infringing A1P1 rights if it can be shown to be “manifestly without reasonable foundation”: James v UK (Application no 8793/79) (1986) 8 EHRR 123. That is the key test to be applied when considering each of the 4 elements of justification identified by Lord Sumption in the well-known passage of his judgment in Bank Mellat v HM Treasury [2014] AC 700 at [20].”

The CJEU VAT jurisprudence

[157]Mr Edwards draws a distinction between what he sees as an approach based on proportionality alone, which he says pervades the CJEU analysis of some of the VAT joint and several (or equivalent) provisions, and the stricter approach he submits we should adopt.[158]In Axel Kittel v Belgium (Case C-439/04) the CJEU held that a person could be denied the right to recover input tax if he “knew or should have known that, by his purchase, he was taking part in a transaction connected with fraudulent evasion of VAT must, for the purposes of the Sixth Directive, be regarded as a participant in that fraud, irrespective of whether or not he profited by the resale of the goods.” The justification for this approach was that in such a situation the taxable person aids the perpetrators of the fraud and becomes their accomplice. Whether a person knew or should have known that, by his purchase, he was participating in a transaction connected with fraudulent evasion of VAT is to be ascertained by objective factors. The case was decided by reference to VAT (not Convention) jurisprudence.[159]Mr Edwards referred us to a recent CJEU decision, Dranken van Eetvelde NV v Belgische Staat (Case C/2025/693), dealing with a Belgian rule that made taxable persons jointly and severally liable with the primary person who owes the tax “if, at the time when they effected a transaction, they knew or should have known that non-payment of the tax with the intention of evading the tax was occurring or would occur in the chain of transactions.” The background here is that Article 205 of the Principal VAT Directive allows Member States to “provide that a person other than the person liable for payment of VAT is to be held jointly and severally liable for payment of VAT” in certain circumstances, and the question referred to the CJEU was whether the Belgian provision infringed Article 205 in conjunction with the principle of proportionality.[160]The CJEU held (at [22]) that, as Article 205 does not specify the persons that Member States may designate as joint and several debtors nor the situations in which such designation may be made, it is for the Member States to determine the conditions and arrangements under which joint and several liability will be incurred in compliance, in particular, with the principles of legal certainty and of proportionality.[161]As far as proportionality is concerned, the CJEU observed (at [23]) that “while it is legitimate for the measures adopted by the Member States to seek to preserve the rights of the public exchequer as effectively as possible, they must not go further than is necessary for that purpose” and (at [24]) that the use of joint and several liability to ensure the efficient collection of tax “must be justified by the factual and/or legal relationship between the two persons concerned in the light of the principles of legal certainty and of proportionality” (in other words, there must be a proportionate reason for making a person jointly and severally liable with the primary tax debtor).[162]On that basis, while the CJEU held that “strict” joint and several liability would infringe the principle of proportionality, a rule that imposed such liability on a person who knew or should have known that they were participating in a VAT fraud would not. This would be the case even though a person could be made jointly and severally liable for all the tax in question, without any adjustment based on the contribution of the various persons involved in the fraud. The conventional interpretation of joint and several liability (that it extends to the full amount owed) was held (at [34]) to be “consistent with the objective pursued by Article 205 of the VAT Directive, which … seeks to ensure for the public exchequer the efficient collection of VAT from the most appropriate person in the light of the specific situation.”[163]Although the CJEU expressed its decision in terms of proportionality, it referred to states’ legitimate aim of preserving the public exchequer before observing that they should not go further than is necessary for that purpose. If anything, the language of necessity shorn of any reference to a margin of appreciation might be thought to present a stricter test than that adopted by the ECHR in relation to A1P1.[164]Interestingly, “lawful and proportionate” (rather than “lawful and justifiable”) is how Andrews J summarised what is required to justify an A1P1 infringement (see [134] above). All told, we suspect the boundary between proportionality and justifiability is not a particularly hard and fast one and that the distance between the CJEU and the ECHR in this area is not as great as Mr Edwards suggests.

The relevance of adverse consequences

[165]Interestingly, one feature noted by Lord Sumption (when he referred to “the severity of the consequences”) and expanded on by Andrews J (at [78]), when she referred to ECHR caselaw discussing whether a tax fundamentally undermines the taxpayer’s financial situation, is the financial consequences of the measure for the taxpayer.[166]NKM concerned a tax charge on severance payments for public sector employees (introduced retrospectively and which gave an effective tax rate for the applicant of 52% at a time when the rate of general personal income tax was 16%) and financial impact was a relevant factor in gauging whether a fair balance has been struck. That legislation was declared incompatible with A1P1, but a challenge to the legislation after the tax rate was lowered to 25% was rejected as manifestly ill-founded: Csolle v Hungary (Application no 56683/13).[167]Although Andrews J highlighted this issue, when considering the loan charge legislation, she commented (at [92]) that, “even if Mr Venables is right and [certain identified features of the legislation (such as the narrowness of the exception for loans made on commercial terms)] could potentially result in hardship in an individual case, that does not mean the legislation itself is contrary to A1P1”. She went on (at [94]) to say:
“Moreover, as [HMRC’s] evidence demonstrates, HMRC were alive to the likely impact of the loan charges on individuals, and steps were taken to support them to pay the tax and reduce the risk of insolvency. HMRC have also made it clear in a letter from the Financial Secretary to the Treasury to MPs dated 18 July 2019 that they will not seek to tax the same income twice, and that they will not apply the loan charge to a tax year where an enquiry was closed on the basis of fully disclosed information. The evidence falls a long way short of establishing that the loan charges result in a disproportionate effect on all taxpayers to whom they apply.”
[168]This contrasts with what we might call the targeted and structural disproportionality of the tax regime considered in NKM., which meant that the applicant had to suffer a substantial deprivation of income in a period of considerable personal difficulty. On this, the ECHR commented (at [70]) that “For the court, it is quite plausible that the element that she was subjected to the impugned measure while unemployed, together with the unexpected and swift nature of the change of the tax regime which made any preparation virtually impossible for those concerned, exposed the applicant to substantial personal hardships.71. In the court’s view, the applicant, together with a group of dismissed civil servants (see para 6, above), was made to bear an excessive and disproportionate burden, while other civil servants with comparable statutory and other benefits were apparently not required to contribute to a comparable extent to the public burden, even if they were in the position of leadership that enabled them to define certain contractual benefits potentially disapproved by the public. Moreover, the court observes that the legislature did not afford the applicant a transitional period within which to adjust herself to the new scheme.72. Against this background, the court finds that the measure complained of entailed an excessive and individual burden on the applicant’s side. This is all the more evident when considering the fact that the measure targeted only a certain group of individuals, who were apparently singled out by the public administration in its capacity as employer. Assuming that the impugned measure served the interest of the state budget at a time of economic hardship, the court notes that the majority of citizens were not obliged to contribute, to a comparable extent, to the public burden.”[169]The conclusion we draw on this point is that a measure which has adverse economic consequences when applied to a particular subject in a particular situation will not, on that ground alone, be unjustifiable, whereas measures which have “a disproportionate effect on all [persons] to whom they apply” (which have an inbuilt structural economic disproportionality) will be harder to justify.

Our conclusion on the level of justification required

[170]Despite the very significant consequences of joint and several liability for Roseline, we do not accept Mr Edwards’ formulation of the level of justification required. We can find no warrant for his suggestions that it is not enough for the provisions to strike “a fair balance” between Roseline’s rights and the aims pursued by the statute, or that the state does not have a wide discretion or that HMRC need to show that the measures are ‘necessary’ to achieve the legitimate aims of the measure and that those aims outweigh the existential impact of the measure on Roseline. Quite the contrary, the authorities we have surveyed make it clear that states are afforded a wide margin of appreciation in derogating from a person’s A1P1 rights both generally and particularly in fiscal matters.[171]When considering Lord Sumption’s 4 elements of justification, therefore, we need to keep in mind this high level of deference (margin of appreciation) that the ECHR affords contracting states around taxation.

Is the interference with Roseline’s A1P1 rights justified?

[172]Looking at these 4 elements, both Mr Edwards and Ms Roxburgh are in broad agreement that the first two elements (that the legislation has a sufficiently important objective to justify the limitation of a fundamental right and whether the measure is rationally connected to the objective) are satisfied here, although they express the objective slightly (but potentially materially) differently. Ms Roxburgh describes the objective as avoiding loss of tax through breach of Customs obligations, whereas Mr Edwards refers to fraud prevention. That notwithstanding, the battle is really being fought on whether a less intrusive measure could have been used and whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community.[173]Turning to our analysis of justification, the first question is whether the objective of the provision is sufficiently important to justify the limitation of a fundamental right. The imposition of joint and several liability for import VAT seeks to avoid a loss of tax through breach of Customs obligations. There is no real dispute that avoiding tax loss is an important social objective, and we agree with that position.[174]The next question is whether the measure is rationally connected to the objective. We consider that it is in two ways. Firstly, by introducing the spectre of financial risk it encourages those involved in import VAT to take care to avoid being caught up in fraud or other breaches that lead to a loss of VAT. Although not exactly the same point, Mr Aherne’s own evidence is that Roseline will not act as an indirect agent because of the risk of joint and several liability, so this risk clearly leads to changed behaviours. Secondly, it seeks to secure the efficient collection of tax and reduce the risk of tax loss by expanding the range of people who might be called on to pay the tax beyond the importer. Whilst (as Mr Edwards says is the case here) not everyone made jointly liable for the tax will be able to pay it, expanding the scope of those potentially liable can only decrease the risk of the tax not being paid.[175]The next question is whether a less intrusive measure could have been used. We agree with Mr Edwards that, if bringing about behavioural change among Customs agents and others involved with import VAT were the only goal, a penalty regime might be sufficient. The level of penalty would need to be set high enough to act as a real deterrent. That level would clearly be a matter for parliament to decide and, unless manifestly unjustifiable, the penalty would be within the generous margin of appreciation afforded to states. Provided that there is (as is the case here) some level of fault on the part of the person sought to be made liable and a link between that fault and the tax loss, we would not consider that penalty equal to the tax lost to be manifestly unreasonable.[176]The point to keep in mind, however, is that we are not analysing a penalty regime. If HMRC had been able to collect the tax lost from the importer, Roseline would have no liability under this provision, even though the gravity of its failure would have been the same; it would still be the case that it should have known of the circumstances giving rise to the breach. The measure we are looking at simply seeks to ensure for the public exchequer the efficient collection of VAT from the most appropriate person/s in the light of the specific situation by widening the net of payers to include not only the importer (the person primarily liable for the tax) but also others who are at fault because they were involved in the breach that gave rise to the loss of tax and knew (or should have known) of the relevant circumstances. A penalty measure would not make good the loss to the state. A provision such as this (which seeks to recoup the loss to the exchequer but no more) is the most modest measure that could achieve that objective.[177]The final question is whether, having regard to these matters and to the severity of the consequences, a fair balance has been struck between the rights of the individual and the interests of the community. The first point to make here is that liability is only imposed on those who are at fault and whose fault is related to the breach, those who knew (or should have known) of the circumstances giving rise to the breach. That is a proportionate reason for making a person jointly and severally liable with the primary tax debtor.[178]Secondly, a Customs agent can protect itself (and thereby reduce or eliminate the risk of tax loss) by taking due diligence measures, such as those recommended by HMRC or basic common sense, so that it knows everything which it reasonably ought to know. Most obviously, when making a claim for PVA, which is only available to VAT registered importers, a Customs agent should take the simple step of making sure that the importer is VAT registered. None of this is difficult or arduous.[179]Thirdly, although liability is joint and several and not linked to the level of fault (doing that would limit the measure’s ability to protect against tax loss), it remains open to a person made liable under this provision to use its rights under domestic law to recover any payments which they are obliged to make from the person who breached the Customs obligation or to protect themselves in advance (for example by taking a VAT deposit).[180]Fourthly, whilst the consequences of liability are very serious for Roseline, that is a consequence of its modest financial means, the amount of tax lost and the apparent disappearance of the importer. For these reasons, the measure will have a significant (potentially existential) negative effect on Roseline, but this does not mean that the measure suffers from a targeted and structural disproportionality of the nature considered in NKM; it will not necessarily have such a disproportionate effect on all those to whom it applies.[181]For these reasons, we are satisfied that the interference with Roseline’s A1P1 rights is justified, and therefore it is not necessary to revisit our reading of the relevant legislation (section 6(3)(d) TCTA read with 6(4)(d) TCTA) or the way we have given effect to it to secure an outcome which is compatible with Roseline’s Convention rights.[182]For completeness, we should mention that both Mr Edwards and Ms Roxburgh had very different suggestions as to whether, and if so how, we should go about interpreting section 6(3)(d) and section 6(4)(d) TCTA to secure a Convention compliant outcome were that course of action to be necessary. Given our conclusion (that, read and applied in a conventional domestic way, the domestic legislation already does that) and meaning no disrespect to counsel or their labours, there is no need for us to prolong an already rather extensive decision by exploring those issues.

Disposition

[183]For the reasons set out above, we have concluded that:(1) Roseline participated in, or was otherwise involved in, a breach of a relevant Customs obligation and that it knew, or ought reasonably to have known, of the breach. This means that Roseline is jointly and severally liable under section 6(3)(d) TCTA read with 6(4)(d) TCTA for the import VAT which remained unpaid because of the PVA claims invalidly made in the Declarations; and that(2) this outcome is compatible with Roseline’s Convention rights.[184]This appeal is dismissed.

Right to apply for permission to appeal

[185]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: 15th APRIL 2025

Cited in 1 later judgment