Prestige Transport Solutions Limited v The Commissioners for HMRC [2025] UKFTT 463 (TC)

[2025] UKFTT 00463 (TC)Case No TC09500
FIRST-TIER TRIBUNAL
TAX CHAMBER
Venue Birmingham Tribunal CentreHearing Heard on: 17-18 June 2024Date Judgment date: 28 April 2025
Appeal reference: TC/2013/04362 TC/2013/04363
TC/2014/00160
TC/2014/01768
TC/2014/03685
EXCISE DUTY – whether appellant holding goods in warehouse – whether earlier holder established – whether behaviour leading to penalty deliberate and concealed – appeal upheld in part
Before
TRIBUNAL JUDGE ANNE FAIRPOTRIBUNAL MEMBER TERENCE BAYLISS
Between
PRESTIGE TRANSPORT SOLUTIONS LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentMr Bedenham KC, of counsel for AppellantMs Vicary, of counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs for RespondentsDECISION

Background

[1]The appellant company (PTS) is based in the West Midlands, with a business which encompasses transport, storage and distribution. This appeal relates to the storage aspect of the business.[2]PTS appeals against decisions issued by HMRC in respect of excise duty and a related penalty, as follows:(1) an excise duty assessment issued on 19 September 2012 as reduced by a review notified on 4 April 2013 to £56,875 (‘First Assessment’), appealed on 26 June 2013(2) an excise duty assessment in the amount of £747,331 issued on 10 June 2013 (‘Second Assessment’), also appealed on 26 June 2013(3) an excise duty assessment in the amount of £83,010 issued on 29 October 2013 (‘Third Assessment’) reviewed on 6 January 2014, appealed on 1 January 2014(4) an excise duty assessment in the amount of £232,355 issued on 4 November 2013 (‘Fourth Assessment’) reviewed on 23 January 2014, appealed on 3 July 2014(5) a penalty in the amount of £56,875 issued on 26 June 2013 (‘Penalty Assessment’) and reviewed on 6 March 2014, appealed on 31 March 2014[3]Although some of the appeals were made late, any dispute as to lateness had been resolved before this hearing.

Administrative matters

[4]The parties each made an application:(1) the appellant, to rely on an argument in their skeleton which was stated to have been foreshadowed in their grounds of appeal;(2) HMRC, to admit two further witness statements which were produced in response to the appellant’s application and proposed argument.[5]The panel considered the applications and agreed that both should be granted on the basis that sufficient notice had been given of the points in the appellant’s application and that HMRC should be able to reply thereto.

Relevant law

[6]Regulation 10(1) of the Excise Goods (Holding, Movement and Duty Point) Regulations 20103 (“2010 Regulations”) provides that: “The person liable to pay the duty when excise goods are released for consumption by virtue of regulation 6(1)(b) (holding of excise goods outside a duty suspension arrangement) is the person holding the excise goods at that time”.[7]s16(5) Finance Act 1994 provides that this Tribunal may “quash or vary any decision and … substitute [its] own decision for any decision quashed on appeal” in respect of excise duty assessments of this nature.

Case law as to ‘holding’

[8]In Case C-279/19 HMRC v WR (known as Perfect in the UK courts), the CJEU held that “holding” for the purposes of excise duty should be given its usual meaning:
“The concept of a person who 'holds' goods refers, in everyday language, to a person who is in physical possession of those goods. In that regard, the question whether the person concerned has a right to or any interest in the goods which that person holds is irrelevant.”
[9]In Davison and Robinson [2018] UKUT 437 (TCC)), the Upper Tribunal concluded (at [67]) that:
“…HMRC cannot make an assessment until it has the necessary information on which to establish when, how, where and by whose acts the excise duty point occurred. Therefore, in the absence of any relevant information in relation to any prior release for consumption, HMRC must assess the person it finds to be holding the goods in question, since that is the only excise duty point which HMRC is able to establish.”
[10]In Dawson’s (Wales) Ltd [2023] EWCA Civ 332, LJ in the Court of Appeal confirmed this, noting (at [3]) that:
“It is now common ground that [HMRC] are required, as a matter of law, to assess the first ‘holder’ of the excise goods…whose identity it can establish”
[11]and further that (at [94]) “[Where] a person in physical possession of excise goods upon which duty has not been paid seeks to contend that HMRC should have assessed a person earlier in the chain of supply who did not have physical possession of the goods, it is inevitable that a detailed consideration of the facts is necessary in order to determine whether that person was "holding" the goods.”.[12]The approach to be taken by the Tribunal has subsequently been outlined in Hartleb Transport Ltd ([2024] UKUT 34 (TCC)), in which the Upper Tribunal stated (at [81] onwards) that:
“The approach of the UT and Court of Appeal in Dawson demonstrates that the determination of "holding" is a question of law and fact. Although the initial focus, given the scheme and wording of the legislation together with the case law, is necessarily on the physical location of goods so giving weight to physical possession – that is not the end of the matter and a more detailed consideration of the facts is needed. Although Asplin LJ was careful to not express a view on the question of whether de facto and/or legal control is sufficient for the purpose of holding, as that issue was not before the court (see [72] of the Court of Appeal judgment), her decision shows that physical possession alone is not necessarily sufficient. As the UT commented in Dawson it is consistent with the legislation and case law to adopt an approach that establishes first who has physical possession of the goods but then considers whether the circumstances of that possession are such that it is inappropriate for that person to be considered to be "holding" the goods … We note in this regard Asplin LJ’s comment on the term “inappropriate” being inapposite following the decision in Davison and Robinson … We take this comment to be a reference to any use of discretion by HMRC in its determination of who should be assessed in circumstances where there are multiple holders/excise duty points and n)ot to the initial evaluation by HMRC of the facts to determine whether a person is or is not in fact a holder. This would be consistent with the decision in Davison and Robinson which confirms the need for HMRC to assess against the first excise duty point that it is able to establish.”

Initial point in issue: whether duty paid on the goods

[13]The first issue before the Tribunal was the question of whether or not the goods had been duty paid.[14]For PTS it was contended that there was a dispute as to whether the goods subject to assessment had been duty paid. Clearly, if PTS could show that the goods had been duty paid, the assessment would fall away.[15]PTS’ director (Mr Singh) stated that he had asked whether, and been advised that, all of the goods were duty paid. He had asked this about 2-3 weeks after making space available to the relevant customer. He had not obtained any supporting evidence that duty had been paid. Although enquiries had since been made, the appellant had not been able to obtain such evidence.[16]HMRC’s evidence was that they had been traced through the relevant supply chains when goods were seized. Where it could be established that duty had been paid, no assessment had been raised.[17]We had witness evidence from an HMRC officer (Officer Doyle) who had worked on the matter stating that the goods which were the subjects of the assessments had been traced to missing traders and that it could not be established that duty had been paid on such goods. Most of the records of this had been destroyed in line with policy as they were paper records.[18]For PTS it was contended that, as HMRC had established that duty had been paid on some of the goods seized and had not produced any evidence with regard to their inability to trace the supply chain in respect of the assessed goods, the Tribunal could conclude on the balance of probability that duty had been paid on the goods in dispute. Officer Doyle’s evidence was that he had only been able to trace one load seized back to a duty point. Those goods had been released and returned as a result. He could not recall exactly how much those goods were worth.[19]It was acknowledged by PTS that the burden of proof to show that duty has been paid lies with an appellant (s16(6) Finance Act 1994; s154(2)(a) CEMA 1979).[20]Neither party could produce documentary evidence. PTS did not ask for any evidence about what was being stored (see below). HMRC could not produce documentary evidence because it had been destroyed in line with policy.[21]Whilst it seems somewhat peculiar that records relating to a live appeal are destroyed (acknowledging that these appeals have been stayed for years behind Dawson’s (Wales) Ltd and Davison and Robinson Ltd) the contention that HMRC had not produced sufficient evidence of their efforts to trace the supply chain does not mean that the burden on the appellant falls away or is otherwise diminished. The fact that HMRC has established that duty has been paid on some other goods (apparently one seizure) which are not the subject of the appeal is nowhere near sufficient evidence to satisfy that burden of proof in respect of the goods which are the subject of these appeals.[22]We consider that the evidence of the officer is sufficient to establish that there was doubt as to whether duty was paid (such that a question arises as to whether or not duty was paid, for the purposes of s154(2)(a) CEMA 1979) and we find that PTS has not satisfied the burden of proof on them to show that duty was paid on the goods which were the subject of these assessments.

Summary of issues

[23]Having concluded that PTS has not met the burden of proof on them to show that duty was paid on the goods which are the subject of the assessments, there are two principal issues in dispute:(1) whether PTS was holding the goods for each of these assessments(2) if it was, whether PTS was the first identifiable holder of those goods[24]PTS had initially challenged the validity of the assessments, in particular as to whether they had been made in time. It was confirmed in the hearing that this point was no longer in dispute and so it is not addressed further in this decision.

Evidence & discussion

[25]We had witness statements and oral evidence from PTS’ sole director, Mr Singh, and two HMRC Officers, Mr Doyle and Mr Hewitt.

Storage - Whether PTS was ‘holding’ goods stored in the warehouse

[26]All four assessments relate to goods which had been stored on PTS premises at some point:(1) first assessment, some of the goods were seized from the warehouse and the rest from a cash & carry to which the goods had been transported from PTS’ warehouse on a vehicle owned and operated by PTS;(2) second, third and fourth assessments: goods were seized at third party locations, having been collected from PTS premises and delivered to that location[27]Considering the relevant case law and having established that PTS has not met the burden of proof on it to show that duty was paid not the relevant goods, the first question that arises is whether PTS could be regarded as holding the goods for duty purposes as a result of the goods being stored in their warehouse. It was agreed that goods had been stored on PTS’ premises, and the point is common to all four duty assessments.[28]PTS contended that it was not holding goods stored in the warehouse as any goods stored by third parties on its premises were at all times under the possession and control of IFM. The position was compared to that of a hotel room, where the hotel could not be said to have physical possession of guests’ belongings in the hotel room.[29]There were no contracts with customers for storage produced and, from Mr Singh’s evidence in the hearing, we conclude that there were no written contracts.[30]Mr Singh’s evidence in his witness statement was that PTS, at the relevant times, hired out aisles in the warehouse to third party customers for the storage of goods. The aisles were hired out on the basis of £1 per pallet per week. Customers had their own access to the space to load and unload goods and did not have to be let into the warehouse by Mr Singh, whose office was upstairs in the warehouse and which could be accessed without going through the warehouse. Mr Singh’s evidence was that customers in fact loaded and unloaded goods on the pavement outside the warehouse. There was no evidence to indicate that these arrangements amounted to more than permitting the customer to place goods into areas of the warehouse.[31]In contrast, in an interview with HMRC on 23 July 2012 (detailed below, in respect of the second assessment), Mr Singh stated that PTS was paid £100-£125 by Ian Fairclough per load to offload goods, store them and then reload them for onward delivery. The goods were stored for a day or two. Mr Singh’s evidence in that visit was also that PTS insured goods held in the warehouse. The arrangements described by Mr Singh in this visit were completely different, and describe a service of taking in, storing, and sending on goods. That is, physically handling and taking possession of the goods.[32]Mr Singh accepted that he had keys to the warehouse and could access it at any time as he chose. The warehouse did not have individual locked sections and he agreed that he could have accessed any goods stored by customers in the warehouse. Mr Singh stated that customers were all given keys to the warehouse; if a customer disappeared without returning the keys, the locks were changed although this was unusual. HMRC’s evidence confirmed that there were no separate closed sections to the warehouse, as it contained rows of racking and it was possible to see from one side of the warehouse to the other through the racking. At the seizure on 30 April 2012, goods stored in the warehouse were visible and not wrapped such as to obscure what they were.[33]As noted above, PTS used the area above the warehouse as office space. Whilst the offices had a separate access door, we find that PTS had capacity to monitor who was accessing the warehouse and also were able to enter the warehouse at any time and could, if they chose, physically handle any of the goods in the warehouse. Whilst PTS gave keys to those using the space to store goods, they also had access to that space themselves at all times. Mr Singh accepted that they could enter the premises at any time. There was no indication that anyone other than PTS had responsibility for the premises.[34]Mr Singh’s description of the arrangements in his witness statement was not directly challenged by HMRC in cross-examination. However, he was challenged on discrepancies between his statement and other comments in HMRC visit notes, and Officer Hewitt was not challenged as to the contents of the visit notes. Officer Hewitt had been present at both visits.[35]Mr Singh struggled to remember what had happened and what he had done at the time. He was asked whether he was just answering on the basis of whatever he thought would help PTS’ case at the time. Mr Singh’s response was that he wasn’t answering on that basis but that it was such a long time ago that he couldn’t remember.[36]In addition, we note that during an announced visit to PTS by HMRC in August 2013, “Dev Singh” had advised HMRC that he charged £75 for storing goods which were delivered and collected on the same day, and an additional £25 per day if goods were not collected on the same day. We note that this is consistent with a price of £100-125 for goods which were stored for a day or two.[37]On that basis, we consider that the contemporaneous documents (the visit notes) are more likely to be an accurate reflection of events and arrangements. However, even if the price charged was based on pallets stored rather than per load stored, we consider that that pricing methodology (based on blocks of items actually stored, rather than an area of space made available to store items as customers chose, would tend to support the view that PTS were providing a service of storing goods on behalf of customers, not exclusively renting an area of physical property to customers.[38]Accordingly, we do not consider that the analogy of a hotel room is apt; there was nothing in the evidence put to us to indicate that PTS was providing customers with a licence (or other property right) to enter and use any part of the warehouse for a period of time. We find that PTS were providing a service of storing goods.[39]Considering the evidence in the light of relevant case law and, in particular, the decision in Perfect and the decision of the Upper Tribunal in Hughes [2024] UKUT 00108, we find that PTS had physical possession of the relevant goods whilst the goods were on PTS premises. As established in Perfect it is irrelevant whether or not PTS had any right or interest to the goods; that is not sufficient for PTS to be precluded from holding the goods in question for the purposes of liability to duty.

Whether the goods (generally) were under the control of another person

[40]All four duty assessments relate to goods which were found to have been supplied to customers by Ian Fairclough Marketing Limited (IFM).[41]For PTS it was contended that IFM rented space in the warehouse and used the space to store goods there, arranging for delivery of the goods into the warehouse and, as such, it had de factor or legal control over the goods and so was the holder of the goods and should be assessed for the duty on the relevant goods.[42]HMRC submitted that PTS had not provided any evidence to support these contentions: HMRC contended that FM was an alcohol broker which did not have any physical contact with the goods sold.[43]Mr Singh’s witness statement evidence was that IFM had “hired over half of the aisles” in the warehouse and that the goods were at all times under the control and possession of IFM.[44]In his witness statements, Mr Singh also explained that the request had come from two men whom he had not met before who said they were from “A1 Traders”. He stated that PTS had agreed because the warehouse was unused and incurring fixed overhead costs.[45]Also in his witness statements, Mr Singh said that he had then later found out that the goods stored were owned by IFM, although no explanation was given as to how he later found out. In his second witness statement, Mr Singh stated that he did not have a business relationship with Mr Fairclough, and that he was not aware until some time later that IFM had any involvement with any goods stored in the PTS warehouse. There was no explanation as to what period of time was meant by “some time later”.[46]Mr Singh initially made similar comments in cross-examination but then stated that, when the men had visited to make enquiries, he had checked “A1 Traders” on Companies House and had not found any such trader. He said he had told the men that they had to provide correct details. When they returned, he stated that they then said they were from IFM, which he checked existed on Companies House and so he rented the space to them. He stated that all of this had happened before the first HMRC visit on 30 April 2012.[47]In cross-examination, Mr Singh could not recall why, at the HMRC visit on 30 April 2012, he had stated that the space was rented by A1 Traders. He could not recall why, at a subsequent HMRC visit on 21 May 2012 he had stated that he had had no communication from A1 Traders, although he suggested in cross-examination that both A1 and IFM were storing goods in the warehouse. He could not recall whether he knew at the date of the seizure who the customer was whose goods were being seized.[48]Mr Singh stated in cross-examination that he had first met Ian Fairclough “probably” two to three weeks after PTS started to rent space to IFM, when Mr Fairclough visited the warehouse.[49]However, as already noted above, HMRC’s evidence included the notes of an unannounced visit on 23 July 2012, after goods had been seized from Musgrave Distribution. At that visit, Mr Singh stated that PTS had provided services to Ian Fairclough from approximately October 2011 to April/May 2012. He said that he had not met Mr Fairclough personally and had only communicated with him by phone and fax. Payments would be made by drivers when they dropped off the goods. In the hearing, Mr Singh said that he could not recall why he had told the officer at the visit that he had not met Mr Fairclough. These points had been recorded in a notebook at the time of the visit and Officer Hewitt, who was present at the visit, was not challenged as to the contents of the notes.[50]Given the contradictions in Mr Singh’s evidence although also bearing in mind the passage of time since the events in question, we do not consider that PTS has met the burden of proof on it to show that IFM had sufficient control over the goods to be regarded as holding those goods in general terms.[51]We remind ourselves that “HMRC cannot make an assessment until it has the necessary information on which to establish when, how, where and by whose acts the excise duty point occurred. Therefore, in the absence of any relevant information in relation to any prior release for consumption, HMRC must assess the person who it finds to be holding the goods in question, since that is the only excise duty point which HMRC is able to establish”. (Davison & Robinson [2018] UKUT 437 (TCC) approved by Aplin LJ in Dawson’s (Wales) Ltd in the Court of Appeal at [83-84]).[52]Having concluded that PTS was holding goods which were stored in their warehouse, and that IFM did not have sufficient control over the relevant goods to displace PTS as the holder in general terms, the question for the Tribunal is then whether there is anything in respect of any of the specific assessments that could displace PTS’ liability to duty.

First Assessment

[53]This assessment was raised in respect of goods seized as a result of an assurance visit to PTS’ premises at NSA House in Smethwick on 30 April 2012. The goods seized were 23,418 litres of wine. 14,220 litres were seized at the premises; the balance of 9,198 litres (reduced by 972 litres on review) were seized at a cash and carry (Hyperama) as a result of a delivery note dated 27 April 2012 and issued by Ian Fairclough Marketing which had been found at NSA House during the assurance visit.[54]PTS contended that these goods belonged to IFM and were at all times under the possession and control of IFM. In his witness statement, Mr Singh stated that he had given the notice of seizure to Mr Fairclough on the day after the seizure. In the hearing, he stated that he had met Ian Fairclough once or twice, and that he had not met him again after the goods were seized. HMRC’s evidence was that Mr Singh had told them at the seizure that the goods were stored for A1 Traders. In the hearing Mr Singh agreed that he had thought that the goods were stored for A1 Traders.[55]Officer Hewitt interviewed Mr Singh on 21 May 2012. The notes of interview contain the following information:(1) Mr Singh had not been contacted by anyone about the seized goods.(2) He had been unable to contact A1 Traders as there was no response on the phone number that he had for them(3) He did not know what relationship IFM had to the goods(4) He had tried to contact IFM on the telephone number stated on the delivery note but had not been able to get a reply(5) He confirmed that PTS had transported the goods to Hyperama in accordance with the IFM delivery note and that the goods had been taken from the goods stored by A1 Traders[56]In the hearing, Mr Singh could not explain why he had given inconsistent answers but thought that he could recall giving Ian Fairclough the seizure document. He could not recall why he had not said this in the interview shortly after the seizure.[57]We note also that PTS’ lawyers sent a letter in August 2023 to Ian Fairclough which states that PTS “believe that the goods [seized from the warehouse in the first assessment] were supplied by A1 Traders”.[58]Mr Singh was unable to provide any details of A1 Traders: payments were in cash, the telephone number provided apparently did work, and he did not provide any names of the individuals who had asked about the same. He accepted that he did not have any information about them but that, as he was just making space available to them, he did not consider it necessary to have that information.[59]We conclude that Mr Singh’s evidence as to who PTS was dealing with around the time of the seizure of these goods was at best confused and does not identify any earlier holder of the goods.[60]As set out above, we have concluded that PTS had physical possession of the goods when they were in its warehouse and therefore was a holder of these goods. PTS also had physical possession and was a holder of the goods which it transported to Hyperama (as made clear in cases such as Perfect and Hartleb Transport [2024] UKUT 34 (TCC)).[61]Having established that PTS was a holder of the goods, the burden of proof is on them to show that there was another identifiable holder of the goods in question who should have been assessed in respect of this liability.[62]At the time of the seizure, and apparently as late as August 2023, Mr Singh appeared to believe that the goods were owned by individuals describing themselves as A1 Traders. These could not be identified by PTS at all; they had no valid contact information for them and did not know the names of the individuals.[63]In the hearing and his witness statements, Mr Singh suggested that A1 Traders were connected with Ian Fairclough. The evidence for this is inconsistent and, even if he had so believed that they were connected, we were provided with no evidence that IFM exercised sufficient control over the goods which were the subject of this assessment to displace PTS’ liability.[64]The only clear evidence that IFM had any involvement with the goods in question was a delivery note faxed in respect of the goods seized at Hyperama. None of this is sufficient to establish that IFM was a holder of the goods for the purposes of the legislation.[65]We are not satisfied that PTS has met the burden of proof on it to show that there was another identifiable holder of the goods in question in order to displace the liability which otherwise arises on PTS as the holder of the goods.[66]The appeal against the First Assessment is dismissed.

Second Assessment

[67]This assessment related to a seizure of 59,477.25l of wine from the premises of Musgraves Distribution in Belfast. The wine had been delivered to Musgraves between 19 May 2010 and 27 March 2012. HMRC contended that the goods had been collected from PTS’ premises and delivered to Musgraves by two hauliers, McBurnley Transport and Bradford Transport. The goods had been purchased by Musgraves from IFM; IFM had advised HMRC that they were a broker and did not physically hold the relevant goods at any time.[68]HMRC visited PTS on 23 July 2012 in connection with this seizure and interviewed Mr Singh who explained this time that:(1) He had had a temporary employee, Mr Khan, who dealt with IFM previously(2) PTS had stored alcohol for Ian Fairclough from October/November (2011 implied but not stated) to April/May (2012 implied but not stated)(3) Ian Fairclough contacted PTS by telephone, and Mr Singh had not met him personally(4) PTS did not have a telephone number for Ian Fairclough, although Mr Singh later said that they had a number but it did not work(5) Ian Fairclough had contacted PTS for the storage of goods in response to an advertisement(6) The terms agreed between PTS and Ian Fairclough were that IF would pay PTS £100-125 to load and reload goods; the storage of the goods was included in that price(7) The goods were only stored for a day or two at a time(8) Ian Fairclough would telephone the day before goods arrived, to instruct PTS to offload the goods and hold them for collection. He would fax PTS to confirm when the goods were to be collected.(9) PTS were paid in cash by the drivers who dropped off the goods(10) “Something like” 4-5 loads had been stored for Ian Fairclough(11) PTS had no paperwork for any of the loads stored(12) The goods were covered by PTS’ insurance[69]The explanations as to the arrangements are somewhat different to those given by Mr Singh in his evidence. As noted above, in cross-examination he could not recall why he had given these answers at the time of the visit because it was a long time ago.[70]Mr Singh was advised during this visit that the hauliers had stated that they had picked up all of the relevant loads from PTS’ premises and these amounted to more than 4-5. He said that the haulier was wrong.[71]We note that copy collection notes supplied to HMRC by PTS’ solicitors on 22 August 2013 are for 7 loads collected from PTS in relation to Ian Fairclough between 7 October 2011 and 28 November 2011, together with 2 further undated collection notes for collections from PTS for Ian Fairclough which were supplied with regard to the same request, one of which is in respect of goods which correlate to a delivery to Musgraves on 23 March 2012. In total, eight of the collection notes provided appear to correlate to deliveries to Musgraves included in the assessment (for three of those collection notes, the amounts appear to correlate to deliveries to Musgraves on slightly different dates to those on the collection notes).[72]HMRC’s evidence was that the amounts assessed were for goods which had been collected by the hauliers from PTS’ premises. Although the direct evidence was no longer available, Officer Doyle’s evidence was that he had received details of interviews with the hauliers from Officer Hyland, who had conducted the interviews. Officer Hyland had retired some ten years before the hearing and was not available to give evidence.[73]On 30 July 2012 HMRC visited one of the hauliers, Bradford Transport, which had been used to collect goods for Musgraves. They provided details of the pickups. The driver spoke to HMRC and stated that they had been instructed to call ‘Pete’ before collecting and on some occasions they were diverted from PTS’ warehouse to collect at other nearby locations. We note that the collection notes provided by PTS’ solicitors in August 2013 each stated that the contact collection was ‘Pete’ and included a mobile phone number. In practice, the driver stated that the number always went to voicemail and he had called Ian Fairclough to get instructions and was told where to collect the goods. On one occasion the driver had arrived at one of these locations and had found the load was on a trailer marked PTS 61 which he believed belonged to PTS. He had taken photographs of this load on the trailer before transferring it to his own trailer as two of the pallets were damaged.[74]The driver provided details of the other locations to which he was directed (a yard by Foundry Road Woodbourne Road and also a site at the Heath Street Industrial Estate in Birmingham). Officer Hewitt stated that he had checked the VOSA website for the registered operating basis of PTS and noted that there were two approved bases: the warehouse location and an address at Queens Head Road, which was a yard reached by Foundry Lane and Woodbourne Road. HMRC had visited this yard and been advised by a person present in the yard that they were employed by PTS. A PTS truck was parked on the slip road to the yard. Enquiries at the Heath Street Industrial Estate established that PTS were renting a unit at the site. When asked at that time about this, PTS had stated that they were sub-letting this location to another company, ‘Universe’.[75]Bradford Transport confirmed to HMRC that the goods collected on behalf of Musgraves in February and March 2012 had been collected from PTS’ warehouse. As noted above, at least some of the shipments were collected elsewhere, although the initial collection address given was stated to have been PTS’ warehouse. The other locations were found to have some connection to PTS. The other haulier used, McBurney Transport, had advised HMRC that the seized goods which they had delivered to Musgraves had all been collected from PTS’ warehouse during 2011. The evidence obtained from them was that 14 loads had been collected at PTS’ warehouse. A further collection had been made from premises in Barnsley which Mr Singh denied had any connection with PTS.[76]It was contended that PTS cannot be the holder for goods which were collected from other premises, as it could not have had physical possession of goods stored elsewhere. This was an additional ground of appeal raised shortly before the hearing; the original grounds of appeal (in 2013) accepted that the goods had been stored at PTS’ premises.[77]We note that the schedule of goods seized references 15 loads; the notes of a meeting between HMRC and PTS (Mr Singh) on 23 July 2012 refer to the goods seized at Musgraves as being made up of 21 loads. McBurnley Transport refer to 15 loads having been collected, one from premises not apparently belonging to PTS. Given that Bradford Transport also moved some of the loads, the amounts assessed would appear not to include all of the loads moved by McBurnley Transport.[78]The HMRC officer’s evidence was that, although many of the records no longer exist, each of the loads assessed had been traced back to premises used by PTS. Officer Doyle had signed off the assessment as the last part of the assessment process, although he had not specifically worked on that case. His witness statement had been produced from records held at the time and his memory of the case. We note that, as above, that collection notes produced by PTS’ solicitors matched at least five of the deliveries included in the assessment.[79]On the balance of probabilities, we conclude that HMRC traced the assessed loads to PTS’ premises. It is not helpful that records which related to a live appeal were destroyed but records produced by PTS’ solicitors corroborate a significant proportion of the deliveries assessed and we note that the HMRC officer’s evidence that the goods had been traced to PTS’ premises was not challenged.[80]Having concluded that the goods had been collected from PTS premises, it follows from our finding above that PTS had physical possession and therefore were holding the goods whilst they were in storage. There was nothing in Mr Singh’s evidence that enables us to conclude that the goods subject to this assessment should be regarded as having been sufficiently controlled by IFM for the liability for duty to be displaced to IFM: at best, the evidence shows only that Ian Fairclough may have directed drivers as to where to collect goods. That is not, in our view, sufficient to demonstrate the required level of control for IFM to be an identifiable holder of the goods. PTS provided no evidence of any other person who they considered could be identified as an earlier holder of the goods.[81]The appeal against the Second Assessment is therefore dismissed.

Third Assessment

[82]This assessment related to two loads of various types of Echo Falls wine which HMRC contended had been collected from the appellant’s premises and delivered to Musgraves Distribution in two loads around the end of March 2012. The assessment schedule indicates loads dated 2 April 2012, although it was unclear what the date on the schedule related to.[83]There was limited evidence with regard to this assessment. HMRC had notes of a visit carried out at PTS’ premises on 17 July 2013 at which they spoke to “Mr Aulakh”. The visit was carried out because they had traced the loads to PTS and could not identify an earlier holder of the goods.[84]In the hearing, Mr Singh confirmed that he was Mr Aulakh. The notes of the visit do not provide any particular assistance as, at that visit, Mr Singh stated to HMRC that he had never heard of Ian Fairclough and had no idea how PTS dealt with him. He had no records of the two loads which HMRC was enquiring about. HMRC were told that PTS’ other director was not present at the time of the visit and they were subsequently asked to discuss the matter with the company’s lawyers.[85]HMRC wrote to the company’s lawyers, asking for more details of the loads and advising that, if PTS were able to provide evidence of an earlier duty point (such as details of the vehicle or company which delivered the goods to their warehouse), then they might be able to move the duty point and assessment to that holder. The lawyers replied by providing the collection notes referred to above, rather than any delivery notes.[86]None of the collection notes provided related to the two loads which are the subject of the assessment, but there is nothing in the letter which amounts to any denial of involvement in the storage (and thus holding) of the goods in question. HMRC’s request for information was repeated but no response was received from PTS’ lawyers (although another letter, referring to a letter sent by HMRC with a different date, states that they have already provided the information requested.[87]There is nothing in the grounds of appeal in respect of this assessment which indicates that PTS disputed at the time of making the appeal (January 2014) that they had held the goods which were the subject of the assessment.[88]Officer Hewitt’s evidence was that he had checked the records available in respect of this assessment which showed that the investigating officer (who has since left HMRC) had located collection notes in respect of these two loads which showed that the goods had come from PTS’ premises. The loads had been supplied to Musgraves by IFM but were established by HMRC to have been delivered to PTS by Universe Drinks Ltd, which was a deregistered trader which had been dissolved at Companies House on 29 January 2013. An earlier supplier appeared to have been identified but this company had been dissolved in August 2010, before the transactions took place. None of these records were produced in evidence, but Officer Hewitt’s evidence as to the contents of the records which he saw was not specifically challenged.[89]On the balance of probabilities, we conclude that HMRC traced the assessed loads to PTS’ premises. It is again not helpful that records which related to a live appeal were destroyed but we note that the HMRC officers’ evidence that the goods had been traced to PTS’ premises was not challenged.[90]Having concluded that the goods had been traced to PTS premises, it follows from our finding above that PTS had physical possession and therefore were holding the goods whilst they were in storage.[91]In Davison & Robinson, the Upper Tribunal stated (at [80]) that it “is consistent with our analysis that the Directive requires an assessment to be made against the first established excise duty point”; in Dawson’s (Wales) Ltd in the Court of Appeal, Asplin LJ stated that HMRC “are required, as a matter of law, to assess the first "holder" of the excise goods, within the meaning the Excise Directive and the HMDP Regulations, whose identity it can establish”.[92]PTS provided no evidence of any other person who they considered could be identified as an earlier holder of the goods. However, as noted above, HMRC’s checks had located a potential earlier holder, Universe Drinks Ltd, which had been dissolved before HMRC visited PTS in respect of these loads.[93]Officer Hewitt’s evidence was that another HMRC officer (Officer Ward) had established that both loads had been delivered to PTS’ premises by Universe Drinks Limited. We note that the specific wording was that the goods had been delivered “by” Universe Drinks Limited, not “on behalf of”. We therefore conclude that Universe Drinks was in physical possession of the goods in the course of delivering them to PTS’ warehouse and was therefore an earlier holder of the goods given the principles established in case law as to who is a ‘holder’ for these purposes.[94]In the hearing HMRC contended that PTS had not been able to provide any evidence as to an earlier holder and had confirmed that they had kept no records to show that there might have been an earlier holder and that, accordingly, it was not inappropriate for them to bear the consequences of such a failure and so be subject to assessment.[95]As is clear from Dawson’s (Wales) Limited, HMRC are required to assess the first holder whose identity it can establish: there is nothing to suggest that that obligation is displaced because a subsequent holder maintains poor records or cannot identify the holder where HMRC have done so. It is not relevant that Universe Drinks Limited was dissolved - it was an earlier, identified, holder of the goods. The fact that it has since been dissolved may give HMRC a recovery problem, but it does not mean that the liability for the duty must fall to PTS.[96]As an earlier identified holder has been established, the appeal against the Third Assessment therefore succeeds.

Fourth Assessment

[97]This assessment related to alcohol seized from a retailer (FOV) and a wholesaler (MtV) in Belfast on 12 October 2012. HMRC contended that the goods in question had been collected from premises used by the appellant for storage and delivered to a third party storage site in Belfast (CF) by Montgomery Transport. The goods had been supplied to FOV and MtV by IFM.[98]Officer Doyle was present at the seizures in Belfast and had been involved with the investigation. His evidence was that the supply chain for the goods had been investigated. The goods had been purchased by IFM from various companies which had been deregistered as missing traders. The haulier, Montgomery Transport, had told HMRC that the goods had been collected from PTS or an address very close by to PTS’ warehouse. HMRC therefore contended that PTS was the earliest identifiable holder of the goods.[99]HMRC provided a list of the various loads seized which included, inter alia, the date of the relevant IFM invoice, the collection address for the load, and instructions given:(1) 30 September 2011 - collection address was PTS’ warehouse(2) 9 November 2011 - collection address was PTS’ warehouse, contact “Pete” and a mobile number(3) 25 October 2011 - collection address at Bilston, Birmingham(4) 30 September 2011 - collection address was another address in Bilston(5) 13 December 2011 - collection address was PTS’ warehouse(6) 1 May 2012 - collection address in Digbeth(7) 23 May 2012 - collection address in West Bromwich.[100]The collection addresses (apart from PTS’ warehouse) had been checked by HMRC in mid 2013 and the reports were produced in evidence which stated that:(1) the address in Digbeth was a public house which was considered not to have the necessary storage capacity for the load in question(2) the address in West Bromwich was a house in a residential area and not large enough to store the load.[101]No reports were provided in respect of the Bilston addresses.[102]Officer Doyle’s evidence was that these loads were dealt with in a similar way to those in the second assessment: the transport haulier had confirmed to him that the drivers had been directed to collect from PTS notwithstanding the collection address listed on the documents. Officer Doyle believed that the haulier had obtained the information from driver records.[103]The list of the loads produced by HMRC further notes that an HMRC officer had confirmed that the goods in the 23 May 2012 invoice had been stored at PTS’ warehouse by Universe Drinks Limited and not the specified collection address in West Bromwich.[104]Mr Singh’s evidence was that PTS had no connection with the addresses in Bilston, Digbeth or West Bromwich. For PTS it was contended that there was no underlying evidence to confirm the transaction chain; however, it was not put to Officer Doyle that the transaction chain which he described in evidence was not accurate.[105]The collection of 23 May 2012 was established by HMRC to consist of goods which had been stored at PTS’ premises by Universe Drinks. For the same reasons as set out in respect of the Third Assessment, we conclude that Universe Drinks was therefore an earlier identified holder of the goods in that load and, following Dawson’s (Wales) Limited, HMRC are required to assess Universe Drinks Limited and not PTS in respect of that load. The appeal against the Fourth Assessment therefore succeeds to the extent of the duty on that load alone (£38,769).[106]With regard to the other loads in the Fourth Assessment, we conclude on the balance of probabilities from Officer Doyle’s evidence that these were stored on PTS’ premises notwithstanding the addresses on the collection notices (and noting that the 23 May 2012 collection was also established by another HMRC officer to have been stored on PTS’ premises). As no earlier holder of the goods in these loads has been established by either HMRC or PTS, we find that PTS is the earliest identified holder of the goods in those loads and so find that the balance of the assessment is upheld (£193,586).[107]Having considered the evidence before us, on balance we conclude that the Fourth Assessment should be partially upheld.

Penalty assessment

[108]Paragraph 4(1) of Schedule 41 Finance Act 2008 provides that a penalty is payable by a person (P) where: “(a) after the excise duty point for any goods which are chargeable with the duty of excise, P acquires possession of the goods or is concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods, and (b) at the time when P acquires possession of the goods or is so concerned, a payment of duty on the goods is outstanding and has not been deferred."[109]PTS appealed both the imposition of the penalty and also the amount of the penalty. Under paragraph 19 of Schedule 41, when considering an appeal, the Tribunal may affirm HMRC’s decision regarding the penalty, cancel the penalty, or substitute for HMRC’s decision another decision that HMRC had power to make.[110]HMRC issued PTS with a penalty of 100% of the value of the First Assessment (£56,875).[111]The penalty was charged on the basis that the behaviour which led to the First Assessment was “deliberate and concealed”, for the following reasons:(1) PTS had previously had a substantial quantity of non-duty-paid alcohol seized and was therefore aware of the risks involved with such goods;(2) no due diligence had been undertaken on the customer, and no paperwork or proper contact details had been retained[112]HMRC considered that PTS had provided no assistance with the investigation and so gave no discount for any quality of disclosure. The penalty was calculated on the basis that the assessments had been prompted by HMRC’s actions. HMRC concluded that no special circumstances existed which would merit a special reduction in the penalty. PTS did not contend that any special circumstances existed.[113]For PTS it was submitted that there had been no deliberate behaviour involved in the First Assessment. This was principally on the basis that PTS did not know what was being stored on the premises and did not have control of the relevant goods. It was accepted that no records were kept, and payments were taken in cash for which no invoices were provided. However, it was contended that the obligation to keep records only applied where the trader handled excise goods and, as PTS contended that it was renting space and not handling goods, the behaviour of those involved could not be regarded as deliberate.[114]It was accepted that PTS had been subject to a penalty for failure to keep proper records in respect of alcohol stored on its premises in 2007, a few years before the events which led to these assessments and that it needed therefore, to be careful about what goods were stored in the warehouse.[115]Mr Singh’s evidence was that some checks were carried out on customers when they rented space in the warehouse. He referred specifically to checking Companies House to ensure that customer companies existed. He considered that PTS did not have any responsibility for the goods which customers stored in the space that they rented and so did not generally ask for any such paperwork from customers. Mr Singh agreed that the fees were paid entirely in cash and no invoices were provided because he considered that PTS did not have to raise an invoice. PTS had accepted the payment arrangements because it assisted with cashflow and the cash had been recorded in a cashbook.[116]Mr Singh’s stated that he had not kept any records in respect of the goods which were the subject of the First Assessment. He stated that he had asked Ian Fairclough whether the goods were duty paid about two or three weeks after they had started to store goods for IFM. As noted above, given the inconsistencies between Mr Singh’s witness statements and his evidence in the hearing and, noting the passage of time since the events in question took place, we do not consider this to be reliable.[117]As noted above, we have found that PTS was a holder of the relevant excise goods that were seized from its warehouse, not merely granting a licence over the space. It was also a holder of the goods which it delivered to Hyperama. As such, we agreed that PTS should have kept proper records and undertaken due diligence as to the customers (beyond a short check of Companies House records) and as to the goods being stored.[118]However, having considered the evidence before us, we conclude that the behaviour involved in the First Assessment was not deliberate. It was remarkably lax, particularly given that PTS should have been well aware of the risks of storing alcohol, but we do not consider that HMRC have met the burden of proof on them to demonstrate that the behaviour was deliberate. We find, however, that the behaviour was careless and as such a penalty is merited.[119]The maximum penalty for careless behaviour is 30% of the amount of the assessment.[120]With regard to mitigation, it argued that the penalty should have been reduced on the basis of disclosure provided by PTS. This contention was not particularised. From the evidence provided to us, this appears to have amount to answering questions put by HMRC during a visit, although some of those answers were subsequently contradicted in the hearing (noting, again, that the hearing was over a decade after the relevant events). As PTS kept no records, it clearly could not provide any particular disclosure or assistance to HMRC.[121]On balance, we do not consider that PTS provided any particular assistance meriting any mitigation in the penalty.[122]Noting that no submissions were made by either party with regard to HMRC’s assessment that there were no special circumstances meriting a special reduction, we therefore find that the penalty imposed on PTS should be reduced to 30% of the amount of the First Assessment (being £56,875 x 30% = £17,062.50).

Whether reasonable excuse

[123]Paragraph 20 of Schedule 41 Finance Act 2008 provides (as relevant) that:(1) Liability to a penalty under … paragraph … 1 … does not arise in relation to an act or failure which is not deliberate if P satisfies HMRC or (on an appeal notified to the Tribunal) that there is a reasonable excuse for the act or failure.(2) For the purposes of subparagraph (1) (a) an insufficiency of funds is not a reasonable excuse and is attributable to events outside P's control, (b) where P relies on any other person to do anything, that is not a reasonable excuse unless he took reasonable care to avoid the relevant act or failure …[124]The approach to considering whether a person has a reasonable excuse (as relevant in this context) was set out by the Upper Tribunal in Christine Perrin [2018] UKUT 56 (at [81]) as follows: “(1) First, establish what facts the taxpayer asserts give rise to a reasonable excuse (this may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer's own experience or relevant attributes, the situation of the taxpayer at any relevant time and any other relevant external facts). (2) Second, decide which of those facts are proven. (3) Third, decide whether, viewed objectively, those proven facts do indeed amount to an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, the Tribunal should take into account the experience and other relevant attributes of the taxpayer and the situation in which the taxpayer found himself at the relevant time or times. It might assist the Tribunal, in this context, to ask itself the question "was what the taxpayer did (or omitted to do or believed) objectively reasonable for this taxpayer in those circumstances?" may include the belief, acts or omissions of the taxpayer or any other person, the taxpayer's own experience or relevant attributes, the situation of the taxpayer at any an objectively reasonable excuse for the default and the time when that objectively reasonable excuse ceased. In doing so, the Tribunal should take into account the experience and other relevant attributes of the taxpayer and the situation in which the believed) objectively reasonable for this taxpayer in those circumstances?"

experience and other relevant attributes of the taxpayer and the situation in which the

[125]PTS contends that it took reasonable steps to ensure that the goods were duty paid and therefore had a reasonable excuse. As set out above, we are not satisfied that PTS took reasonable steps to ensure that the goods which were subject to the First Assessment were duty paid.[126]Mr Singh witness evidence as to the ‘reasonable steps’ was, as noted above, not consistent. His second witness statement states that he had no business relationship with Ian Fairclough, yet he contended in the hearing that he had asked Mr Fairclough about the duty paid status of the goods. His first witness statement records that PTS had been advised by IFM that all goods collected, stored and delivered by PTS were UK duty paid, but no detail as to how this had been communicated was given.[127]At best, it appears that all that may have been done was to ask whether goods were duty paid. No records were kept to indicate that any due diligence had been undertaken. There was no indication of any detail which might support the statement. It was suggested that customers such as IFM would not provide details of their suppliers, but we consider that it would have been objectively reasonable to undertake due diligence on the customer as well as the goods and to keep records of that due diligence. In practice, we consider that a taxpayer aware of the obligations on it with regard to excise goods and which had previously been the subject of a penalty for failure to keep appropriate records, would have done precisely that.[128]Accordingly, we do not consider that PTS has established that it had a reasonable excuse for the failure.[129]The appeal against the penalty is therefore partially upheld, and the amount of the penalty reduced to £17,062.50.

Conclusion

[130]In summary:(1) the appeal against the First Assessment is dismissed;(2) the appeal against the Second Assessment is dismissed;(3) the appeal against the Third Assessment is upheld;(4) the appeal against the Fourth Assessment is upheld in part, and the assessment is reduced to £193,586.00;(5) the appeal against the penalty is upheld in part, and the penalty is reduced to £17,062.50

Right to apply for permission to appeal

[131]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: 28th APRIL 2025