Ryan Houghton v The Commissioners for HMRC [2025] UKFTT 545 (TC)
Neutral Citation: [2025] UKFTT 00545 (TC) Case Number: TC09524
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 13 January 2025Date Judgment date: 16 May 2025
Taylor House, London
Appeal reference: TC/2022/13686
CIVIL EVASION PENALTY – seizure of tobacco – appellant liable to penalty – reduction of penalty for disclosure and co-operation – reduction increased – appeal allowed in part
Before
TRIBUNAL JUDGETRIBUNAL MEMBER miCHAEL BELL
Between
ryan houghtonAppellantTHE COMMISSIONERS FOR HISRespondentMAJESTY’S REVENUE AND CUSTOMSRespondentMr Houghton, in person (did not attend) for AppellantMs Truelove, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION
[50]The Appellant was not awarded mitigation for co-operation for the following reasons:• In his first email dated of 18 August 2022, the Appellant confirmed that he was in the UK between 29 July 2022 and 13 August 2022, but chose not to respond to HMRC’s letter until 18 August 2022.• The Appellant did not explain why he was responding late to the enquiry.[51]Officer Crozier further explained that as the Appellant did not answer all of the questions posed to him and had not provided a truthful account of the events, he did not believe that had fully co-operated with the enquiry and as such should not be awarded the full reductions for the element of co-operation. We agree that a 20% reduction for the element of co-operation is appropriate in respect of the penalty assessed for 27 August 2021 and for 8 October 2021. However, we consider that the appropriate reduction for the element of disclosure should be 25% in respect of the penalty assessed for 27 August 2021, and 30% in respect of the penalty assessed for 8 October 2021. Firstly, the first two points said to go against mitigation for disclosure in respect of the penalty assessed for 27 August 2021 and for 8 October 2021 are not, in our view, well founded (these two points being that the Appellant did not explain how the attempt was made; and the Appellant did not provide details of the quantities involved). It is clear on both occasions how the attempts were made. It is also clear on both occasions what the quantities involved were. Furthermore, we consider it relevant, when considering the issue of reduction for disclosure in respect of the penalty assessed for 8 October 2021, that the Appellant had chosen to enter the red lane, and disclosed that he had 10 cartons of cigarettes (2,000 cigarettes out of the 5,800 cigarettes ultimately seized). Although this was not the full extent of the tobacco that he was carrying, it would not be appropriate, in our view, to completely discount the fact that he did enter the red lane and did then disclose a not insignificant proportion of the cigarettes. Finally, in respect of any inability to pay or insufficiency of funds, pursuant to section 8(5) FA 1994 and section 29(2) and (3)(a) of FA 2003, inability to pay/insufficiency of funds shall not be taken into account when considering whether there should be a reduction in the penalty. Therefore, the Appellant having taken out a bank loan of 350,000 AED to pay debts after Covid which he states consumes half his wages, or any other insufficiency of funds, are not factors which we can take into account. Conclusion For the reasons set out above, we would allow the appeal but only to the extent provided above in relation to allowing a 25% (rather than 20%) reduction for the element of disclosure in respect of the penalty assessed for 27 August 2021, and allowing a 30% (rather than 20%) reduction for the element of disclosure in respect of the penalty assessed for 8 October 2021. HMRC should recalculate the total revised level of penalties and write to the Appellant accordingly. Right to apply for permission to appeal 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: 16th MAY 2025Appendix A Finance Act 1994, Sections 8(1), 8(4) and 8(5) Penalty for evasion of excise duty (1)Subject to the following provisions of this section, in any case where— (a). any person engages in any conduct for the purpose of evading any duty of excise, and (b). his conduct involves dishonesty (whether or not such as to give rise to any criminal liability), that person shall be liable to a penalty of an amount equal to the amount of duty evaded or, as the case may be, sought to be evaded. (…) (4)Where a person is liable to a penalty under this section(a )the Commissioners or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and (b). an appeal tribunal, on an appeal relating to a penalty reduced by the Commissioners under this subsection, may cancel the whole or any part of the reduction made by the Commissioners. (5). Neither of the following matters shall be a matter which the Commissioners or any appeal tribunal shall be entitled to take into account in exercising their powers under subsection (4) above, that is to say- (a). the insufficiency of the funds available to any person for paying any duty of excise or for paying the amount of the penalty; (b). the fact that there has, in the case in question or in that case taken with any other cases, been no or no significant loss of duty.[45]Finance Act 2003, Sections 25(1), 29(1)(a) and 31 25 Penalty for evasion. (1)In any case where— (a)a person engages in any conduct for the purpose of evading any relevant tax or duty, and (b)his conduct involves dishonesty (whether or not such as to give rise to any criminal liability), that person is liable to a penalty of an amount equal to the amount of the tax or duty evaded or, as the case may be, sought to be evaded. (…) 29 Reduction of penalty under section 25 or 26. (1)Where a person is liable to a penalty under section 25 or 26— (a)the Commissioners (whether originally or on review) or, on appeal, an appeal tribunal may reduce the penalty to such amount (including nil) as they think proper; and (b). the Commissioners on a review, or an appeal tribunal on an appeal, relating to a penalty reduced by the Commissioners under this subsection may cancel the whole or any part of the reduction previously made by the Commissioners. (…) 31 Time limits for demands for penalties (1). A demand notice may not be given— (a). in the case of a penalty under section 25, more than 20 years after the conduct giving rise to the liability to the penalty ceased, or (b). in the case of a penalty under section 26, more than 3 years after the conduct giving rise to the liability to the penalty ceased. (2). A demand notice may not be given more than 2 years after there has come to the knowledge of the Commissioners evidence of facts sufficient in the opinion of the Commissioners to justify the giving of the demand notice. (3). A demand notice— (a). may be given in respect of a penalty to which a person was liable under section 25 or 26 immediately before his death, but (b). in the case of a penalty to which the deceased was so liable under section 25, may not be given more than 3 years after his death. Customs and Excise Management Act 1979, Sections 78(3) and 139 78 Customs and excise control of persons entering or leaving the United Kingdom. (…) (3). Any person failing to declare any thing or to produce any baggage or thing as required by this section shall be liable on summary conviction to a penalty of three times the value of the thing not declared or of the baggage or thing not produced, as the case may be, or [level 3 on the standard scale], whichever is the greater. (…) 139 Provisions as to detention, seizure and condemnation of goods, etc (1). Any thing liable to forfeiture under the customs and excise Acts may be seized or detained by any officer or constable or any member of Her Majesty’s armed forces or coastguard. (2)Where any thing is seized or detained as liable to forfeiture under the customs and excise Acts by a person other than an officer, that person shall, subject to subsection (3). below, either— (a). deliver that thing to the nearest convenient office of customs and excise; or (b). if such delivery is not practicable, give to the Commissioners at the nearest convenient office of customs and excise notice in writing of the seizure or detention with full particulars of the thing seized or detained. (3)Where the person seizing or detaining any thing as liable to forfeiture under the customs and excise Acts is a constable and that thing is or may be required for use in connection with any proceedings to be brought otherwise than under those Acts it may, subject to subsection (4) below, be retained in the custody of the police until either those proceedings are completed or it is decided that no such proceedings shall be brought. (4)The following provisions apply in relation to things retained in the custody of the police by virtue of subsection (3) above, that is to say— (a)notice in writing of the seizure or detention and of the intention to retain the thing in question in the custody of the police, together with full particulars as to that thing, shall be given to the Commissioners at the nearest convenient office of customs and excise; (b). Any officer shall be permitted to examine that thing and take account thereof at any time while it remains in the custody of the police; (c). Nothing in [section 31 of the Police (Northern Ireland) Act 1998] shall apply in relation to that thing. (5)Subject to subsections (3) and (4) above and to Schedule 3 to this Act, anything seized or detained under the customs and excise Acts shall, pending the determination as to its forfeiture or disposal, be dealt with, and, if condemned or deemed to have been condemned or forfeited, shall be disposed of in such manner as the Commissioners may direct. (6)Schedule 3 to this Act shall have effect for the purpose of forfeitures, and of proceedings for the condemnation of anything as being forfeited, under the customs and excise Acts. (7)If any person, not being an officer, by whom anything is seized or detained or who has custody thereof after its seizure or detention, fails to comply with any requirement of this section or with any direction of the Commissioners given thereunder, he shall be liable on summary conviction to a penalty of [level 2 on the standard scale]. (8)Subsections (2) to (7) above shall apply in relation to any dutiable goods seized or detained by any person other than an officer notwithstanding that they were not so seized as liable to forfeiture under the customs and excise Acts. Travellers’ Allowance Order 1994 (as amended by SI 1995/3044, SI 2008/3058 and SI 2009/3172)
Introduction
[1]This Order may be cited as the Travellers Allowances Order 1994 and shall come into force on 1st April 1994.[2]– (1) Subject to the following provisions of this Order a person who has travelled from a third country shall on entering the United Kingdom be relieved from payment of value added tax and excise duty on goods of the descriptions and in the quantities shown in the Schedule to this Order obtained by him in a third country and contained in his personal luggage. (2). For the purposes of this article— (a)goods shall be treated as contained in a person’s personal luggage where they are carried with or accompanied by the person or, if intended to accompany him, were at the time of his departure for the United Kingdom consigned by him as personal luggage to the transport operator with whom he travelled; (b). A person shall not be treated as having travelled from a third country by reason only of his having arrived from its territorial waters or air space; (c). “Third country” - (i). Shares the definition that applies to that expression for the purposes of Council Directive 2007/74/EC (this is termed “outside country” below) (see both indents of Article 3(1) of the Directive) (value added tax and excise duty exemptions for travellers from outside the Member States of the European Union, etc); but (ii). It incorporates the definition that applies for the purposes of that Directive to “territory where the Community provisions on VAT or excise duty, or both do not apply” (this is termed “outside territory” below) (see both indents of Article 3(2) of that Directive); but (iii). Any outside territory where those “Community provisions on VAT” do apply (or where that Directive regards them as applying) is not a third country for value added tax purposes; and (iv). Any outside territory where those “Community provisions on … excise duty” do apply (or where that Directive regards them as applying) is not a third country for excise duty purposes (v). Where the person's journey involved transit through an outside country, or began in outside territory, this Order applies if that person is unable to establish to an officer of Revenue and Customs that the goods contained in that person's personal luggage were acquired subject to the general conditions governing taxation on the domestic market of a member State and do not qualify for any refunding of value added tax or excise duty[3]The reliefs afforded under this Order are subject to the condition that the goods in question, as indicated by their nature or quantity or otherwise, are not imported for a commercial purpose nor are used for such purpose; and if that condition is not complied with in relation to any goods, those goods shall, unless the non-compliance was sanctioned by the Commissioners, be liable to forfeiture. [That condition is complied with, for example, where an occasional importation consists exclusively of goods intended as presents, or of goods for the personal or family use of the person in question.[4]No relief shall be afforded under this Order to any person under the age of 17 in respect of tobacco products [, alcoholic beverages and alcohol]. (…) Schedule Tobacco Products: 200 cigarettes, or 100 cigarillos, or 50 cigars, or 250 grams of smoking tobacco. Notes: (k). Each respective amount represents 100% of the total relief afforded for tobacco products. (l). For any one person, the relief applies to any combination of tobacco products provided that the aggregate of the percentages used up from the relief the person is afforded for such products does not exceed 100%. (m). A cigarillo is a cigar of maximum weight 3 grams. (n). This relief corresponds to Articles 8(1) and 8(4) of that Directive.