Vasile Cerchez v The Commissioners for HMRC [2026] UKFTT 1006 (TC)

[2026] UKFTT 01006 (TC)Case No TC 09947
FIRST-TIER TRIBUNAL
TAX CHAMBER
Hearing Heard on: 21 February 2024 and 16 February 2026Date Judgment date: 03 July 2026
By remote video hearing
Appeal reference: TC/2019/00030
EXCISE DUTY – whether Appellant “holding” goods subject to excise duty at the first duty point in the UK – yes – excise duty appeal dismissed – whether Appellant’s conduct “deliberate” – no – whether special circumstances justifying reduction in penalty to nil – yes – penalty appeal allowed
Written submissions: 24 March 2026
Before
TRIBUNAL JUDGE MARK BALDWINMR JOHN WOODMAN
Between
VASILE CERCHEZAppellantTHE COMMSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentThe Appellant in person for in personRebecca Young, litigator of HM Revenue and Customs’ Solicitor’s Office for RespondentsDECISION

Introduction

[1]On 30 June 2016, UK Border Force officers stopped the Appellant (“Mr Cerchez”) at Dover Eastern Docks. He was transporting 30 pallets of beer, which were seized because the officers considered that duty was due and there was no evidence of payment or security.[2]On 16 July 2016, Border Force officers stopped Mr Cerchez a second time at Dover Eastern Docks. He was again transporting 30 pallets of beer, which were seized because the officers considered that duty was due and there was no evidence of payment or security.[3]HMRC consider that Mr Cerchez is liable for the unpaid duty on the two loads of beer and to wrongdoing penalties, calculated based on deliberate behaviour with a prompted disclosure, as follows:(1) in relation to the first seizure: an excise duty assessment under section 12A Finance Act 1994 (“FA 1994”) of £27,894 and a wrongdoing penalty of £10,739 under Schedule 41 Finance Act 2008 (“FA 2008”);(2) in relation to the second seizure: an excise duty assessment of £27,876, under section 12A FA 1994 and a wrongdoing penalty of £11,708 under Schedule 41 FA 2008.[4]Mr Cerchez appeals against the excise duty assessments and the penalties.

Procedural History

[5]On 14 August 2017, the assessments and the penalties were notified to Mr Cerchez at the address Border Force had for him. However, Mr Cerchez was no longer living at that address, and the assessments and penalties were not forwarded to him.[6]HMRC began recovery proceedings via the Romanian tax authorities.[7]HMRC also sent follow-up correspondence, chasing collection, to an address in the UK where Mr Cerchez used to live, and which was occupied by Romanians who knew Mr Cerchez. Mr Cerchez visited this address and was given the correspondence.[8]On 19 March 2018 Mr Cerchez wrote to HMRC, telling them he had not received the assessments or the penalties, and providing information about the transportation of the goods and his role and responsibilities. He provided an address in Maidstone for HMRC to use for correspondence, and his email address.[9]On 16 April 2018 a different HMRC officer (not the one who made the original assessments) sent a letter to the address in Maidstone, which explained HMRC’s view of the position. Mr Cerchez says he did not receive this letter.[10]On 14 December 2018, Rainer Hughes filed a Notice of Appeal at the Tribunal on behalf of Mr Cerchez, together with an application for permission to appeal out of time. The hearing to determine that application was initially delayed while the “hardship” issue was considered; when that was resolved in Mr Cerchez’s favour, the hearing was cancelled because of the pandemic. On 13 August 2020 the Tribunal decided the late appeal application in Mr Cerchez’s favour and issued a summary decision on 25 August 2020. On 16 September 2020 HMRC applied for a full decision; this was issued on 6 November 2020.[11]On 19 January 2021, Mr Cerchez’s appeal was stayed behind that of Mr Perfect, to which we will turn shortly.[12]While all this was going on, HMRC did not stop the debt recovery procedure they had initiated in Romania. On 3 June 2019, the Romanian authorities issued a garnishee order to Mr Cerchez’s bank. As a result, his account was “emptied” and the accumulated funds transferred to the Romanian authorities to be passed to HMRC. In addition, an order was put in place so that no payments could be made from Mr Cerchez’s bank account until the debt to HMRC had been settled.[13]Mr Cerchez says that the effect of HMRC‘s decision is that he is unable to get another job in Romania. As a result of the enforcement of the garnishee order, Mr Cerchez defaulted on his mortgage and he has lost his flat, on which he has been paying mortgage instalments over many years. He and his wife and child were evicted. He is separated from his family and has to work in the UK separated from his wife and child. He says he is living in his lorry.[14]On 15 March 2022, the Court of Appeal issued its judgment in Mr Perfect’s appeal, holding that “the fact that Mr Perfect had neither actual nor constructive knowledge of the smuggling of the beer he was carrying cannot exempt him from liability from excise duty”.[15]On 18 May 2022, Rainer Hughes (who had also been acting for Mr Perfect in his appeal) informed the Tribunal and HMRC that they were no longer acting.[16]On 25 May 2022, HMRC contacted Mr Cerchez by email, advising him that he was likely to lose the excise duty part of the appeal and inviting him to confirm that he was withdrawing that part of his appeal or otherwise to set out amended grounds.[17]On 26 May 2022, the Tribunal (Judge Redston) directed HMRC to confirm whether they were still contesting the penalties. On 27 May 2022, HMRC responded, saying:
“The liability for the Sch 41 wrongdoing penalties flows from the liability for the Excise duty as the person handling those goods at the duty point, in this case HMRC considers this person the Appellant.”
[18]At a case management hearing on 21 October 2022 (which was attended by Mr Cerchez, a professional interpreter and Ms Young for HMRC) Mr Cerchez said that he was appealing the duty assessment because:(1) HMRC had been wrong to decide that the excise duty was payable by him, and not by the owners of the goods and/or the vehicle or by others;(2) HMRC had not disclosed the documents relating to the ownership of the goods and the vehicle, which were relevant evidence in the proceedings; and(3) had not acted in accordance with the undertakings given to him by the Border Force officials at the time of the seizure.[19]Judge Redston recorded that Mr Cerchez’s grounds of appeal against the penalties remained unchanged, essentially that he had a reasonable excuse because he was unaware, and had no reason to be aware, that there had been any breach of the law and he had simply followed instructions.[20]The substantive hearing began on 21 February 2024. The hearing was adjourned to give Mr Cerchez an opportunity to produce documents which he said he had relevant to the question whether he was an employee of a person at whose direction he was bringing the beer to the UK.[21]Mr Cerchez produced copies of two contracts of employment, one with Pro Logistics & Services Ltd (“PLS”) dated 12 July 2016 and the other with Rubicon Shipping Ltd (“Rubicon”) dated 5 February 2016.[22]HMRC provided written submissions on the material Mr Cerchez had supplied on 5 April 2024. At the Tribunal’s request, HMRC also made submissions on the relevance of the Upper Tribunal (“UT”) decision in Hartleb and the First-tier Tribunal (“FTT”) decision in Kent Couriers (both discussed below), which were decided after the first hearing.[23]One of HMRC’s submissions was that the two contracts “follow the same format. You would expect a variation in the structure of the document as it has been drafted by 2 separate companies”. We decided that this amounted to a suggestion that the two documents were not genuine and this needed to be put to Mr Cerchez. For that reason, and more generally because of the need to be sure that Mr Cerchez could understand and participate fully in the proceedings, we determined that we should hold a video hearing rather than proceed to determine the appeal on what had already been said at the first hearing and written submissions. Unfortunately, it was not until February 2026 that this resumed hearing could take place.[24]Following the adjourned hearing we explained to HMRC that we were not persuaded that the penalties had been correctly calculated and considered that there might be special circumstances justifying reduction of the penalties to nil. We asked whether they had considered cancelling the penalties. They replied on 24 March observing that, while they recognised that the enforcement steps taken by the Romanian authorities may have led to hardship for Mr Cerchez and his family, it was not obvious that the penalties were the sole cause of Mr Cerchez’ predicament or that reducing them to nil at this point would help to alleviate the situation. Furthermore, HMRC say that the provisions in paragraph 14(2) Schedule 41, FA 2008 exclude ability to pay as a special circumstance, and so they considered that they had no reasonable basis to cancel the penalties. The Law Excise Duty Liability

The Law

[25]Directive 2008/118 EC (“the Directive”) lays down general arrangements for harmonising excise duty across the EU.[26]Article 7 of the Directive provides that:
“1. Excise duty shall become chargeable at the time, and in the Member State, of release for consumption. 2. For the purposes of this Directive, “release for consumption” shall mean any of the following: …; (b) the holding of excise goods outside a duty suspension arrangement where excise duty has not been levied pursuant to the applicable provisions of Community law and national legislation;”
[27]Article 8 of the Directive states:
“1. The person liable to pay the excise duty that has become chargeable shall be: … (b) in relation to the holding of excise goods as referred to in Article 7(2)(b): the person holding the excise goods and any other person involved in the holding of the excise goods; … 2. Where several persons are liable for payment of one excise duty debt, they shall be jointly and severally liable for such debt.”
[28]In Case C-325/99 G van de Water v Staatsecretaris van Financien [2001] ECR I-5163 (“van de Water”) the ECJ noted, at [41], in relation to the predecessor directive to the Directive, that national authorities must ensure that an excise duty tax debt is collected. Following van de Water the UT has held that it is the duty of national authorities to ensure that excise duty is levied and paid where goods in respect of which duty has not been paid are found to be circulating within the EU. Otherwise, there would be a distortion of the internal market if goods in respect of which duty has not been paid are circulating freely alongside goods where duty has been paid; HMRC v B&M Retail Ltd [2016] UKUT 429 (TCC) (“B&M”), at [115], Davison & Robinson Limited v HMRC, [2018] UKUT 437 (TCC) (“Davison & Robinson”), at [63].[29]The Finance (No 2) Act 1992 (“F(No2)A 1992”) provides the authority for regulations to implement the Directive in the UK. Those regulations are the Excise Duty (Holding, Movement and Duty Point) Regulations 2010 (“the Regulations”).[30]Regulation 13 of the Regulations provided:
“(1) Where excise goods already released for consumption in another member state are held for a commercial purpose in the United Kingdom in order to be delivered or used in the United Kingdom the excise duty point is the time when those goods are first so held. (2) Depending on the cases referred to in paragraph (1), the person liable to pay the duty is the person – (a) making delivery of the goods; (b) holding the goods intended for delivery; or (c) to whom the goods are delivered.” (a) making delivery of the goods; (b) holding the goods intended for delivery; or (c) to whom the goods are delivered.”
[31]The concept of “holding” goods appears at numerous points in the Directive and the Regulations but there is no further definition of ‘holding’ in the Directive, F(No 2)A 1992, or the Regulations.[32]Mr Perfect (to whom we have already made reference) was an experienced lorry driver. He collected a lorry from Calais which was loaded with 26 pallets of beer. He looked at the documentation which confirmed that the consignment consisted of beer and that the ultimate destination was a warehouse in Barking. On arrival at Dover Docks, he was stopped by Border Force officers who, on checking the documentation, found that excise duty due on the consignment of beer had not been paid. As the goods had been transported without appropriate documentation, the lorry and goods were seized. The seizure of the goods was not challenged and as result they were duly condemned as forfeit. HMRC then assessed Mr Perfect for excise duty due on the beer and penalties. He appealed arguing that he was an “innocent agent”. The Court of Appeal referred to the CJEU the following question:
“Is a person (“P”) who is in physical possession of excise goods at a point when those goods become chargeable to excise duty in Member State B liable for that excise duty pursuant to Article 33(3) of Directive 2008/118/EC (“the Directive”) in circumstances where that person (a) had no legal or beneficial interest in the excise goods; (b) was transporting the excise goods, for a fee, on behalf of others between Member State A and Member State B; and (c) knew that the goods he was in possession of were excise goods but did not know and did not have reason to suspect the goods had become chargeable to excise duty in the Member State B at or prior to the time that they became so chargeable? (2) Is the answer to question (1) different if P did not know that the goods he was in possession of were excise goods?”
[33]The CJEU held (in HMRC v WR (C-279/19) (“WR”)) that article 33(3) of the Directive: “must be interpreted as meaning that a person who transports, on behalf of others, excise goods to another Member State, and who is in physical possession of those goods at the moment when they have become chargeable to the corresponding excise duty, is liable for that excise duty, under that provision, even if that person has no right to or interest in those goods and is not aware that they are subject to excise duty or, if so aware, is not aware that they have become chargeable to the corresponding excise duty”.[34]The CJEU explained in its judgment:
“24 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. 25 Moreover, there is nothing in the wording of Article 33(3) of Directive 2008/118 to indicate that the status of person liable to pay the excise duty, as being ‘the person holding the goods intended for delivery’, depends on ascertaining whether that person is aware or should reasonably have been aware that the excise duty is chargeable under that provision.”
[35]The Court of Appeal (in HMRC v Martin Perfect, [2022] EWCA Civ 330) (“Perfect”)) held (at [22]) that, although the United Kingdom had withdrawn from the EU, the Court was bound by the CJEU’s judgment of 10 June 2021 to hold, as was anyway its inclination, that article 33 of the Directive and, hence, regulation 13 of the Regulations bore the meaning given by the CJEU (and set out at [21] above) and “In other words, a person need not be aware that excise duty is being evaded to be “holding” or “making … delivery of” goods for the purposes of regulation 13 of the … Regulations or article 33 of the … Directive”.[36]Agniezska Hartleb t/a Hartleb Transport v HMRC, [2024] UKUT 34 (TCC) (“Hartleb”), concerned an appellant who ran a transport business in Poland providing two lorries and a driver for transporting goods. One of the appellant’s drivers was stopped at Dover where Border Force discovered in his lorry three pallets of cigarettes for which there was no evidence that duty had ever been paid. The lorry and cigarettes were seized and, as the legality of the seizure was not challenged in condemnation proceedings in the Magistrates’ court, both the cigarettes and lorry were condemned as forfeit although the authorities agreed to restore the lorry to the appellant in return for a fee. The appellant appealed arguing (in the light of WR and Perfect) that the FTT (which had dismissed her appeal) erred in law in concluding that she was the person holding or making delivery of the goods for the purposes of regulation 13(2)(b) of the Regulations despite not having physical possession of them.[37]In reaching its decision in Hartleb, that the appellant was the person holding the excise goods, the UT was influenced by the decision of the Court of Appeal in Dawson’s (Wales) Ltd v HMRC, [2023] EWCA Civ 332 (“Dawson”).[38]Dawson itself was about a different point (identification of an earlier excise duty point in circumstances where an assessment was being challenged on the basis that there was an earlier excise duty point against which the assessment should have been made), but the UT in Hartleb nevertheless held that the factors used by the UT in Dawson ([2019] UKUT 296 (TCC)) to identify an earlier excise duty point were also a useful guide in determining who to regard as holder in circumstances where physical possession and de facto and/or legal control are separated.[39]The four factors identified by the UT in Dawson (at [149]) were, in summary:(1) who had physical possession at the time the alleged earlier excise duty point occurred,(2) who is the person alleged to have de facto or legal control over the goods who it is said should be assessed rather than the subsequent holder and how that person is said to have control and the basis on which it was being exercised,(3) the time at which the excise duty point arose, and(4) where the goods were being held at the relevant time.[40]In the Court of Appeal in Dawson Asplin LJ confirmed her agreement with the UT’s first factor (Who had physical possession at the time the alleged earlier excise duty point arose?), noting that this approach was supported by Perfect itself where physical possession of the excise goods was “the touchstone” [77 -78]. She also agreed with the UT’s third and fourth factors, seeing the time of release for consumption as crucial, based on the wording of the Directive, and recognising that the time at which the duty point arose and the location of the goods at that time were crucial to the smooth running of the duty regime [87 - 88]. She did not comment on the second factor, other than to note that it was not disputed by Dawson’s.[41]Returning to Hartleb itself, the UT held at [90] that, although physical possession was with the driver, it was “legally correct and consistent with the operation of the Excise Directive and so the HMDP Regulations to treat the Appellant and not her employee as holder. Put simply, the circumstances in which the Appellant had control outweigh the fact that physical possession of the excise goods was with her employee” Having discussed (at [91]-[94]) some passages in the Advocate General’s opinion in WR, they concluded (at [95]) that “It seems clear to us that the Advocate General would have expected an employer to have been liable had the driver in WR been an employee and the employer identifiable”. The position of an employee was contrasted with that of a self-employed driver in the Dutch government’s submissions in WR. They had commented (extracted in Hartleb at [94]):
“As the Netherlands Government pointed out, WR is to be regarded as self employed and thus as an entrepreneur who accepted to work without any written contract and to be paid in cash. Entrepreneurship involves entrepreneurial risk and that includes an entreprenuer being personally responsible for the persons with whom he or she does business and from whom he or she accepts commissions. Furthermore, an entrepreneur can protect himself or herself against such risks through insurance or by assigning those risks contractually to the clients”
[42]Earlier in its decision, the UT made the following comments:
“81. 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. 82. 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. 83. 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 (see [143] of the UT judgment). 84. We note in this regard Asplin LJ’s comment on the term “inappropriate” being inaposite following the decision in Davison and Robinson – see [28] of the Court of Appeal judgment. 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 not 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.”
[43]In Kent Couriers Ltd v HMRC, [2024] UKFTT 145 (TC) (“Kent Couriers”), the FTT was concerned with the question whether a haulage company was the holder of excise goods in circumstances where it had placed an order on behalf of a customer with a delivery network for the delivery of soft drinks and, unbeknown to it, the pallets contained alcohol instead.Here the appellant clearly did not have physical possession of the alcohol when the excise duty point arose. Following Hartleb, the FTT observed (at [29]):
“It follows [from Hartleb] that we are bound to hold that de facto and/or legal control of goods without physical possession of them can be sufficient to amount to “holding” the goods in an appropriate case. However, that does not mean that de facto and/or legal control of the goods will always be sufficient to amount to “holding” the goods. In each case, it is necessary to consider all of the relevant facts by reference to the four questions set out in Dawson’s UT.”
[44]At [30] the FTT went on to hold that only one person can be treated as “holding” goods at any particular point in time and therefore it needed to consider “whether, on the basis of applying the four questions set out in Dawson’s UT to the facts in this case, it was the Appellant or someone else … who should be treated as “holding” the goods at the excise duty point. A finding that one of those persons was “holding” the goods at the excise duty point necessarily precludes a finding that the other or others was or were doing so and therefore a comparative exercise is required in which the position of each potential candidate must be weighed up against the other or others.”[45]The FTT went on to consider whether the appellant in that case should be treated as “holding” the alcohol at the excise duty point and concluded on the facts that it should not be. Essentially, the FTT considered that the rights and powers the appellant had over the goods were valueless to it, because it was acting as agent for its customer (so it did not have legal control in any meaningful way), and it did not have de facto control of the goods at the excise duty point. At [31](7) the FTT commented: “[W]e think that that exercise [of applying the four factors identified in Dawson’s UT] permits of only one answer given:(a) the significance which the prior cases have attached to physical possession of goods in determining who is “holding” the goods at any time;(b) the highly circumscribed nature of the Appellant’s rights of legal control of the goods at the excise duty point; and(c) the fact that the Appellant had no de facto control of the goods at the excise duty point and that de facto control of the goods at the excise duty point was enjoyed by Palletways and that is that the Appellant was not “holding” the goods at the excise duty point. Instead, the “holder” of the goods at that point was either the lorry driver, who was the person in physical possession of the goods at that point, or Palletways, who was the person with de facto control of the goods at that point.” (a) the significance which the prior cases have attached to physical possession of goods in determining who is “holding” the goods at any time; (b) the highly circumscribed nature of the Appellant’s rights of legal control of the goods at the excise duty point; and (c) the fact that the Appellant had no de facto control of the goods at the excise duty point and that de facto control of the goods at the excise duty point was enjoyed by Palletways[46]In Davison & Robinson HMRC had accepted that, as a matter of law and not merely as a matter of their discretion, HMRC were obliged to assess against the earliest point in time at which they are able to establish, on the evidence before them, that excise goods have been held outside a duty suspension arrangement. The UT in that case went on to hold (at [63]) that:
“Clearly, 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.”
[47]The Court of Appeal in Dawson at [94] held that, in the circumstances of that case, the burden of proof was on Dawson’s (having been found in possession of the relevant goods) to show that there was an earlier duty point.[48]So, just as a person found in possession of relevant goods cannot avoid being assessed merely by asserting that there must have been an earlier (albeit currently unidentified) duty point, it must also be the case that a person found in possession of relevant goods cannot avoid being assessed as the holder just by asserting that there must be another person with a stronger claim to being the holder; the person found in possession must be able to identify such a person and establish that they should be treated as the holder, so that HMRC can assess them.[49]The conclusions we draw from these cases on the meaning of “holding” are as follows:(1) The starting point is physical possession.(2) However, physical possession on its own will not be sufficient if someone else’s de facto and/or legal control of goods outweighs the first person’s physical possession. In particular, physical possession by an ordinary employee (like a DHL driver) is likely to be outweighed by their employer’s rights/control.(3) As a corollary of (2), de facto and/or legal control of goods without physical possession of them can be sufficient to amount to “holding” goods in an appropriate case.(4) There can only be one “holder” at any one time, and so a comparative exercise is required in which the position of each potential candidate for the title of “holder” must be weighed up against the position of the other or others.(5) HMRC do not have any discretion when it comes to deciding who the “holder” of goods is. The “holder” of goods at any given time is the person identified by that comparative exercise.(6) If a person found in possession of goods wishes to assert that it was not the holder of the goods at the first duty point in the UK, the burden of proof is on that person to establish the identity of the other person who was the holder at the same or an earlier duty point so that HMRC can assess that person.

Seizure, Forfeiture and Assessment

[50]Section 139 CEMA permits seizure by HMRC of anything reasonably suspected to be liable to forfeiture. Paragraph 3 of Schedule 3 to CEMA provides that a challenge to a seizure must be made within a month. In default of such a challenge the goods are deemed by paragraph 5 of Schedule 3 to CEMA to have been duly condemned and forfeited.[51]Under section 12(1A) Finance Act 1994 (“FA94”) HMRC may assess excise duty on a person where it appears to them(a) that any person is a person from whom any amount has become due in respect of any excise duty, and(b) that they can ascertain that amount.[52]Although section 12 provides that HMRC “may” raise an excise duty assessment, the CJEU in WR (at [66]) made it clear that HMRC have no discretion here. They must assess the person they find holding the goods, if that is the only duty point which can be established. The CJEU commented that, although fairness and proportionality are cornerstones of both EU law and the common law, the underlying policy of the Directive (that the excise duty due should be collected) meant that there was strict liability. This was discussed further by the FTT (Judge Scott) in Paul Eveleigh v HMRC, [2023] UKFTT 256 (TC), which also held that an assessment could not be challenged on the basis that it was disproportionate (even where the goods had been forfeited and Mr Eveleigh’s vehicle had been seized) and that an assessment for excise duty where goods are forfeit is not a penalty.[53]The point just discussed is important, given Mr Cerchez’s circumstances, which we have already touched on and to which we will return. If Mr Cerchez is found to have been holding the goods at the first assessable duty point in the UK, HMRC must assess him; there is no discretion not to do so, however desperate the circumstances in which Mr Cerchez now finds himself.

Penalties

[54]Paragraph 4 of Schedule 41 to FA 2008 provides:
“A penalty is payable by a person (P) where— (a) after the excise duty point for any goods which are chargeable with a 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.” (a) after the excise duty point for any goods which are chargeable with a 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.”
[55]Under the heading “degrees of culpability”, paragraph 5(4) reads:
“P's acquiring possession of, or being concerned in dealing with, goods on which a payment of duty is outstanding and has not been deferred…is – 'deliberate and concealed' if it is done deliberately and P makes arrangements to conceal it, and 'deliberate but not concealed' if it is done deliberately but P does not make arrangements to conceal it.”
'deliberate and concealed' if it is done deliberately and P makes arrangements to conceal it, and 'deliberate but not concealed' if it is done deliberately but P does not make arrangements to conceal it.”[56]Paragraph 12 of Schedule 41 is headed “Reductions for disclosure” and sub-paragraph (1) provides that, in a case such as this, which relates to a “domestic matter”, the possible reductions are set out at sub-paragraph (13). Paragraph 12(3) then reads:
“Disclosure of a relevant act or failure (a) is ‘unprompted’ if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the relevant act or failure, and (b) otherwise, is prompted.” (a) is ‘unprompted’ if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the relevant act or failure, and (b) otherwise, is prompted.”
[57]Paragraph 13 of Schedule 41 then sets out the mitigation available for the “quality of the disclosure”, namely for “telling, helping and giving” in the context of different types of penalty.[58]The meaning of “deliberate” in Schedule 41 was considered by this Tribunal in Hare Wines Limited v HMRC, [2023] UKFTT 25 (TC), where the Tribunal concluded (at [131]) that the interpretation of “deliberate” should reflect the decision of the Supreme Court in HMRC v Tooth, [2021] UKSC 17, and accordingly “a person has acted “deliberately” if he intentionally acquires possession of goods knowing that the payment of duty is outstanding, and intentionally does not pay that duty.” The test for “deliberate” behaviour is a subjective one, which requires proof that Mr Cerchez knew that the goods were excise goods on which duty should have been (but had not been) paid.[59]In H Tideswell & Sons Limited v HMRC, [2024] UKFTT 54 (TC), it was common ground that the concept of knowledge/knowing in this context includes what is often referred to as “Nelsonian blindness” and that this is also subjective, in that it requires a deliberate, conscious decision not to investigate whether a situation an individual has good reason to believe in is in fact the case. However, not appreciating, and thus not investigating, a risk (however obvious that risk might appear to others) is not enough.[60]Paragraph 14 of Schedule 41 provides that:
“(1) If HMRC think it right because of special circumstances, they may reduce a penalty under any of paragraphs 1 to 4. (2) In sub-paragraph (1) “special circumstances” does not include— (a) ability to pay, or (b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another. (3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to— (a) staying a penalty, and (b) agreeing a compromise in relation to proceedings for a penalty.” (a) ability to pay, or (b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another. (a) staying a penalty, and (b) agreeing a compromise in relation to proceedings for a penalty.”
[61]Paragraph 17 of Schedule 41 provides:
“(1) P may appeal against a decision of HMRC that a penalty is payable by P. (2) P may appeal against a decision of HMRC as to the amount of a penalty payable by P.”
[62]Paragraph 19 of Schedule 41 provides: “(1) On an appeal under paragraph 17(1) the tribunal may affirm or cancel HMRC's decision. (2) On an appeal under paragraph 17(2) the tribunal may—(a) affirm HMRC's decision, or(b) substitute for HMRC's decision another decision that HMRC had power to make. (3) If the tribunalsubstitutes its decision for HMRC's, the tribunal may rely on paragraph 14— (a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or (b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 14 was flawed. (4) In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review. (5) In this paragraph, “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 18(1)).” (a) affirm HMRC's decision, or (b) substitute for HMRC's decision another decision that HMRC had power to make. (a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or (b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 14 was flawed. Evidence Officer Craig Murray (“Officer Murray”)

Evidence

[63]Officer Murray gave evidence. He works for HMRC in the Post Detection Audit team in Glasgow, He was not involved in the decisions relating to Mr Cerchez but, as the officers who were no longer work for HMRC, he reviewed the documentation held by HMRC to make his witness statement[64]The CMRs in both instances had the same seal number. All parties (consignor, consignee and haulier) identified on the CMRs are the same in both seizures, as is the description of the load.[65]An invalid 22-digit ARC number was used in both seizures and a search of the Excise Movement and Control System (EMCS), an HMRC digital platform used to record and track the movement of duty-suspended or duty-paid excise goods, could find no other ARC to cover the movements.[66]Other details on the paperwork included the name and address of:(1) Consignor: Belogistique BVBA, Pathoekeweg 9A, 8000 Brugge.(2) Consignee – Plutus Merseyside, 179 Great Howard St, Liverpool, L3 7DL.(3) Haulier – Sanore Logistics, Braggot Street, Dublin.[67]When interviewed by the Border Force at the time of the July seizure, Mr Cerchez said that:(1) he had been working for his current employer for two months, but he did not know who that employer was.(2) he had swapped trailers in France and noted the load was beer (as stated on the CMR). He also noted that the load was not sealed.(3) the delivery location was Liverpool or London. The Border Force pointed out that the CMR stated Liverpool.[68]An internet search for the consignor Belogistique BVBA was inconclusive. HMRC systems found no other seizures involving this business.[69]Plutus, named as the consignee, confirmed to HMRC that they had contacted Belogistiques to advise that Plutus had received a number of seizure notices. Plutus also stated that in each case they all had invalid ARC numbers and were destined for non-existent customers. In reply they were told that the company Belogistiques BVBA had ceased trading in March 2015 and the writer was not aware of any ARC/EAD documents being issued since then.[70]A copy of the seizure letter was sent to the haulier (Sanore Logistics). The communication was returned undelivered. An internet search revealed that this company was dissolved in February 2012. Its registered address was shown as a different address in Dublin from the one on the CMR.[71]The notebook of Border Force officer Bray from the June seizure mentions various vehicle registration documents relating to the vehicle Mr Cerchez was driving, including an insurance policy in the name of Feniks Logistics (“Feniks”). HMRC wrote to this company to make enquiries but received no reply.[72]A check of all the documents obtained at the time of the July seizure discovered a vehicle insurance document for the vehicle Mr Cerchez was driving identifying the policy holder as DZHI, although this policy expired on 11 May 2016. HMRC wrote to this company to make enquiries but received no reply. Internet checks on DZHI revealed the owner to be Eamon Anthony Coyle who is a driver, and discovered a haulier called Coyle Transport. Additional background checks on Eamon Anthony Coyle and Coyle Transport did not reveal links between the other parties and DHZI, and so no enquiry letter was sent.[73]Checks of HMRC departmental systems revealed no further information. There was no restoration request made for any goods or vehicles.

Mr Cerchez

[74]Mr Cerchez said that he had been a lorry driver for 26 years. He had been driving loads all over Europe, crossing borders regularly. He agreed with Ms. Young that he was an experienced driver. She asked whether he thought he should be aware of the risks of transporting alcohol. Mr Cerchez said that he does not regard carrying alcohol as being inherently any different from any other kind of goods. He treats all loads, alcohol, clothes or whatever, in exactly the same way. The two loads we are concerned with were, in his view, just like any other load. He did not deliberately bring excise goods to the UK on which duty had not been paid.[75]Mr Cerchez criticises HMRC, because they and the Border Force are aware of the UK excise duty rules. There is no way that drivers can check, when they bring loads into the UK, whether duty has been paid or not. There is no phone number to call or website. Mr Cerchez says that, if he had been able to check, the second incident, when he was on notice of the risk, would not have happened.[76]Mr Woodman asked Mr Cerchez about the people he was working for. The first person was an English citizen called Mr Corcadel whom Mr Cerchez thought was in his 30s. He said that he owned a company that had about 30 trucks and employees from different countries including the UK, Bulgaria and Romania. Mr Corcadel had lots of contacts and could iron out difficulties. Mr Cerchez met Mr Corcadel whilst working for an Italian company. He met him in Calais during his weekly break and offered him better terms. The company was based in Bulgaria –and he was paid in cash. Mr Cerchez confirmed that he worked for this employer for 5 months. Mr Cerchez did not give his details to HMRC as they never asked.[77]Mr Cerchez stopped working for Mr Corcadel after the first seizure. Ms. Young asked him who he was working for the time of the second seizure and he said that he was working for someone else. In the HMRC drivers questionnaire he said that he was paid weekly, but he was not paid after these two seizures when he stopped working for his then employer.[78]The second company was run by a man called Ben. Mr Cerchez said that “Ben” was a large person. He said that he had 10 trucks in his business.[79]In terms of how he got a particular job, Mr Cerchez explained that it was normal for him not to be contacted personally by anyone with a job. He would just swap his trailer and the delivery details for the new job would be on the CMR which would be left in the new trailer for him to pick up. He would drive where it told him to.[80]Ms Young asked him whether it struck him as odd that the two CMRs for the loads we are concerned with were the same. He said that no one had told him that the first CMR was wrong, so he did not give it any thought. He had been told that HMRC could not find the ARC code on the first load, but not that the paperwork was fundamentally invalid.[81]Mr Cerchez said that his obligations as a driver are to check the CMR, the license, the insurance and the registration certificate for the vehicle. His responsibility was for himself and the vehicle he was driving, but he did not regard himself as being responsible for the goods he was carrying. He checked that no migrants had boarded his lorry and ensured the vehicle was safe before travelling. That was all. Mr Cerchez says that this is what he learned in his drivers training in Romania. He did not assist in loading the goods or complete the CMR other than to fill in the vehicle registration number[82]Mr Cerchez says that if the load had been sealed, he would not have been able to check it. He said that he knew he should check the load for things like drugs and migrants and that is why the load needs to be unsealed.

The Parties’ Submissions

[83]Ms. Young says that the first identifiable duty point in the UK was when Mr Cerchez arrived in Dover with the beer and he was holder. He was in physical possession of it.[84]Ms Young says HMRC does not operate a strict liability policy, in the sense that they unquestioningly seek to impose liability on the person in physical possession of goods at the first duty point. They would always look to see if they can identify an employer or someone else an innocent agent might be acting for. Mr Cerchez is liable because he had physical control and cannot show that he was acting as someone’s employee and on their instructions. He was asked several times and did not provide this information. Here HMRC have not automatically made Mr Cerchez liable. They have followed up avenues of enquiry, both those originally provided and those on his more recent contracts. In reply, Mr Cerchez said that he could not understand the requests being made. Mr Cerchez said that he told HMRC that he had an employment contract, but no one asked him to provide a copy. He had paid a lawyer some £3,000 to help and gave him the documents. He stopped using the lawyer when he asked for another £6,000 as he simply could not afford representation anymore.[85]Officer Murray had questioned why Mr Cerchez transported a similar load only a fortnight after he had been stopped, to which Mr Cerchez replied that he needed to work and he found some work in the same area.[86]Mr Cerchez said a week before the first seizure he had bought a load to the UK. He had carried out the same checks on the lorry and pallets as he did on the loads that were seized and nothing had gone wrong, but now it has.[87]Looking at the two contracts Mr Cerchez provided, Ms Young submits that the contract with Rubicon is dated 5 February 2016 and signed by Kokarel Petrov. Ms Young noted that the contract has been produced belatedly and for a different employer to the one suggested in interview.[88]The contract with PLS is dated 12 July 2016 and confirms that continuous employment commenced from this date. When the goods were seized on 16 July 2016, Mr Cerchez told the Border Force officers that he had been employed for 2 months whereas the contract suggests he had been employed for just 4 days at the time of the seizure. HMRC recognise that Mr Cerchez may have started working for the company on a trial period before signing the contract. However, there is no explanation accompanying the documents, so no conclusion can be drawn other than that he was formally employed from 12 July 2016.[89]The PLS contract is signed by John Dimitri. Mr Cerchez told HMRC in the driver’s questionnaire that he worked for someone called Jimi. Ms Young accepts that this could be said to sound like Dimitri.[90]HMRC found in checking PLS and Rubicon that neither company claimed to have experience of moving excise goods.[91]Ms Young says that, given the importance of moving alcohol, she would expect that this would be listed if the employer offered the service. It is highly unlikely that a potential customer would be left to assume alcohol was dealt with as container transport or other project cargoes.[92]Section 5 of both contracts state that Mr Cerchez will be paid monthly. This conflicts with the evidence he provided on 19 March 2018 and reiterated via his interpreter at the case management hearing on 20 October 2022, when he confirmed that he was paid weekly. In reply, Mr Cerchez told us that he was paid every week or two as he did not have his bank cards to transfer money and so was paid in cash.[93]Ms Young finds it unusual that both contracts follow the same format. She says one would expect a variation in the structure or language of the documents if they had been drafted by two separate companies. We asked Mr Cerchez about this, and he said he could not tell what the contracts were saying as they were written in English, which he does not understand.[94]Ms Young observed that, when Mr Cerchez appealed, he was represented by Rainer Hughes. Several documents accompanied the appeal. There is no obvious reason as to why these papers were not provided earlier. Mr Cerchez said he had the contracts with him when he was stopped. Drivers need to carry these documents with them in France and other mainland European countries. If he had been asked for the contracts he could have handed them over.[95]As the information was not provided until after the first day of the hearing, HMRC have only made basic checks. HMRC did not try to contact Rubicon or PLS because their initial open-source checks suggested that the companies had no relevant expertise and were unlikely to employ Mr Cerchez to carry these loads. Also, it was well over 7 years since Mr Cerchez worked for these companies, so HMRC thought it would be unlikely they would have any record of employing him.[96]We asked Mr Cerchez whether he had made any enquiries of these companies since 2016. He said that he had and they had threatened him, saying that if he did anything they would kill his family in Romania.[97]On penalties, Ms Young says that Mr Cerchez’s conduct was deliberate because of a lack of due diligence, and this was reinforced by his lack of cooperation and his refusal to accept that what he had done was wrong.[98]Ms Young said that Mr Cerchez had been stopped on two separate occasions little more than a fortnight apart. He is an experienced lorry driver in control of the loads he is carrying. Whilst it is not necessary for loads to be sealed, the absence of a seal meant that he would have been able to inspect the loads to see what was inside. There was also a seal number on the CMR, which indicated that the trailer should have been sealed and Mr Cerchez should have checked that. As an experienced driver he is obliged to check to make sure that the load he is carrying is legitimate. Here he seemed not to know who his employer was or where he was taking the goods. The ARC number was not valid. As an experienced driver Mr Cerchez should have checked that and realised that the number was wrong. If he had a legitimate employer, he would have been able to discuss the difficulties he should have identified. There was no evidence of the goods being booked into an exercise warehouse.[99]Although deliberate, his actions were not concealed, and there has been some reduction for cooperation. There are no special circumstances under paragraph 14. There is no reasonable excuse for deliberate conduct within paragraph 20.[100]Mr Cerchez has criticised the behaviour of one of the Border Force officers when he was first stopped, but all of this is after the duty point and the events which determine his penalty.[101]Ms. Young addressed Mr Cerchez’s situation, which she readily accepted is a very difficult one and that it is difficult not to feel sorry for him. Mr Cerchez stressed that he had nothing as HMRC, through the Romanian authorities, have taken everything he had. His house had effectively been repossessed and his Romanian bank accounts emptied. He could not work in Romania as anything he earns there will be taken by Romanian authorities for HMRC. He was separated from his family, his mother is ill (one of the reasons for the long delay between the two hearings was that Mr Cerchez was in a remote area of Romania looking after his mother), and he is living in the UK in his lorry.[102]Ms Young does not know for sure why the duty and penalty were being collected in advance of a tribunal hearing and so vigorously. She told us that the penalty should not have been collected until after the tribunal hearing, and the excise duty should not have been either, given that Mr Cerchez’s hardship application had been accepted. Her suspicion is that the collection process started when Mr Cerchez did not appeal the assessments in time, and it has subsequently proved difficult to stop it. Discussion and conclusions The Excise Duty appeal

Discussion and conclusions

[103]We can deal with Mr Cerchez’s appeals against the exercise duty assessments relatively briefly.[104]The starting point is that Mr Cerchez was found at the first duty point in the UK in physical possession of excise goods on which duty had not been paid. He was the holder of those goods at that time and liable to pay the excise duty in accordance with the Regulations and the Directive.[105]Mr Cerchez says that he is a lorry driver who simply carried a load for someone else. He did not decide what he carried or where he carried it from or to. He was doing someone else’s bidding, carrying goods as their employee and at their direction. HMRC do not dispute this. There is no suggestion that Mr Cerchez was importing his own beer into the UK.[106]No one has suggested that Mr Cerchez knew that he was carrying beer on which duty had not been paid, but it does not matter that Mr Cerchez might have been an innocent agent.[107]Given all of this, it is inevitable that there must be someone else who had sufficient de facto and/or legal control of the goods to amount to “holding” them albeit without physical possession, or with physical possession through the agency of Mr Cerchez. However, this is not sufficient for Mr Cerchez to avoid liability. Because of the policy imperative, recognised throughout the cases, that excise duty is assessed and paid, Mr Cerchez can only avoid liability if such a person can be identified.[108]Mr Cerchez’s difficulty is that no such person has been identified. HMRC wrote to the companies identified by the insurance documents found in the vehicles, but received no reply from either company.[109]Mr Cerchez did not produce any documents identifying any employer, in relation to either the first or the second seizure, until after the first day of the substantive hearing of his appeals. Initially on the first seizure, Mr Cerchez suggested that he was employed by Feniks, whereas the contract he produced (which he says he carried with him) names Rubicon as his employer. On the second seizure, Mr Cerchez said that he did not know his employer’s identity, whereas the contract he produced (which he says he carried with him) names PSL as his employer. Rubicon and PSL do not advertise a business service that includes the cross-border shipment of excise goods. Mr Cerchez says he has contacted PSL and Rubicon, but he could not give HMRC or this tribunal any information about them which might help establish that they were his employer.[110]Given their apparent lack of business in this area, HMRC have not made any attempt to contact Rubicon and PSL. However, given Mr Cerchez’s account of how the people behind these two companies responded when he contacted them, we consider that it is most unlikely, had HMRC approached them, that they would have learned anything useful, if indeed anything at all. HMRC were not obliged to reach out to these entities, and we agree with Ms Young that doing so would have been a futile exercise.[111]The research HMRC carried out, even though the burden of proof is on Mr Cerchez rather than them, has not resulted in an entity being established as Mr Cerchez’s employer or otherwise as being the holder of the excise goods.[112]Mr Cerchez has not discharged the burden on him to identify another person who should be treated as the holder of the beer at the first duty point in the UK in preference to him, as the person in physical possession of those goods at that time. For that reason, his appeal against the excise duty assessments must fail.

The Penalty Appeal

[113]The penalty relating to the seizure on 30 June 2016 is based on 38.50% of the potential lost revenue (“PLR”) of £27,894. HMRC allowed reductions to reflect their perception of the level of cooperation given by Mr Cerchez. Maximum awards have been given for helping and giving. However, out of a possible 30%, HMRC say that only 20% could be allowed for telling. This was because Mr Cerchez failed to admit the wrongdoing or explain how it arose. HMRC maintain that the penalty of £10,739.19 is correct and proportionate.[114]The penalty relating to the seizure on 30 June 2016 is based on 42% of PLR of £27,876. HMRC allowed reductions to reflect their perception of the level of cooperation given by Mr Cerchez. Maximum awards have been given for helping and giving. However, HMRC say that, out of a possible 30%, only 10% could be allowed for telling. This was because of the earlier penalty and because Mr Cerchez failed to admit the wrongdoing or explain how it arose. HMRC maintain that the penalty of £11,707.92 is correct and proportionate.[115]Turning to the penalty appeal, the first question is whether Mr Cerchez’s appeal is against HMRC‘s decision to impose a penalty or against the amount of the penalty.[116]Looking at his notice of appeal, the impression that document gives it that this is an appeal simply against HMRC’s decision to impose a penalty. Having narrated the “innocent agent” defence to the excise duty assessments, the grounds of appeal simply add “Of course, if [Mr Cerchez] is successful in challenging this assessment it follows that any penalty will be cancelled and will become a nullity”. The grounds of appeal do not engage with the quantum of the penalty at all. At the time the appeal was lodged, Perfect had not been decided and Mr Cerchez’s appeal as regards the exercise duty was founded on his being an innocent agent. If that appeal was successful, then it might be thought that the penalty would fall away.[117]It would have been wrong to think that, however. Paragraph 4(1) of Schedule 41 is set out at [54] above. As the FTT pointed out in Kent Couriers (at [38]):
“It can be seen that liability for the penalty does not depend on whether P falls within any of the three categories of person set out in Article 33(3) of the Directive or Regulation 13(2) of the Regulations. Thus, curiously, it is not necessary for P to be liable to the excise duty in question in order to be liable to the wrongdoing penalty in respect of that duty. Instead, it is merely necessary for P to acquire possession of the goods or be concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods.”
[118]Mr Cerchez was clearly in possession of the beer and concerned in carrying it. Even if he had been held not to be the holder, he would have been liable to a penalty, unless his conduct was non-deliberate and he had a reasonable excuse for his acts. The penalty would not have fallen away just because Mr Cerchez’s excise duty appeal succeeded.[119]At the case management hearing Mr Cerchez summarised his penalty appeal as being on the basis that he had a reasonable excuse. HMRC say that he cannot plead reasonable excuse as his conduct was deliberate. As paragraph 20 of Schedule 41 provides that no penalty liability arises in relation to a non-deliberate act or failure if the person sought to be made liable satisfies HMRC (or the tribunal on appeal) that they had a reasonable excuse for their act or failure, the questions of reasonable excuse and whether Mr Cerchez’s behaviour was deliberate are relevant to the HMRC’s decision to impose penalties.[120]Both HMRC and Mr Cerchez have addressed issues relating to the penalties which go beyond HMRC’s decision to impose them. Given this and the facts that Mr Cerchez is an unrepresented appellant with a limited command of English and that his penalty appeal seems to have evolved (if his notice of appeal is read literally, he pleaded no valid ground of appeal against HMRC’s decision to impose penalties), we have approached the penalty appeal on the basis that it is an appeal both against HMRC‘s decision to impose penalties and against the quantum of the penalties.[121]This is important because, if Mr Cerchez’s appeal is only against HMRC’s decision to impose a penalty, all we can do is affirm or cancel HMRC's decision. If his appeal is against the quantum of a penalty, we can affirm HMRC's decision, or substitute for HMRC's decision another decision that HMRC had power to make.[122]In the next two paragraphs we set out the reasons given in the penalty explanation letters for imposing penalties on Mr Cerchez.[123]30 June penalty:
“I consider your behaviour in this matter to be deliberate because:- 1. The paperwork you provided was not valid for the load it was purporting to carry. The reference number noted had 22 digits whereas a valid reference number consists of 21 2. Sanore Logistics, the haulier noted on the paperwork, has not traded since 2012. Belogistiques, the consignor noted on the paperwork ceased trading in 2015, a further indication the paperwork is invalid 3. You have failed to respond to my enquiry or provide satisfactory evidence that the excise goods you were carrying at the time of detection were being transported under the correct duty status arrangements or identify anyone else who was involved and had a legitimate interest in the goods.”
[124]16 July penalty:
“1. The paperwork you provided was not valid for the load it was purporting to carry. The reference number noted had 22 digits whereas a valid reference number consists of 21 2. You stated you had been working for your employer for two months but you could not provide details of that employer. 3. You were unsure where you were to deliver the load, Liverpool or London. 4. This is the second seizure you have been involved in and I consider you should have been aware of your responsibilities when importing alcohol. 5. You have failed to respond to my enquiry or provide satisfactory evidence that the excise goods you were carrying at the time of detection were being transported under the correct duty status arrangements or identify anyone else was involved and had a legitimate interest in the goods.”
[125]Before us Ms Young said (see also [98] above) that Mr Cerchez had failed to exercise diligence in ensuring that the loads were being moved legitimately and that the transport documentation was in order. The circumstances in which he obtained the goods (swapping trailers) should have aroused suspicion, given the lack of instructions provided. Furthermore, as the consignment involved high-risk excise goods, noting the load was unsealed should have alerted Mr Cerchez that further checks were needed in respect of the load and his employer.[126]Ms Young did not put to Mr Cerchez either that he knew that he was carrying beer on which excise duty or that he made a deliberate, conscious decision not to investigate whether this was the case.[127]The allegations made against Mr Cerchez in the penalty explanation letters and by Ms Young involve him not realising (for example, because the paperwork in his possession was defective, which it is said he should have realised, or the load was unsealed, even though there is no requirement for a seal) that he needed to carry out more checks before he moved the goods to the UK. The allegations are that he did not appreciate the need to take certain steps, and as a result he did not take those steps. None of these allegations assert that Mr Cerchez knew that he was carrying excise goods on which duty should have been (but had not been) paid or that he made a deliberate, conscious decision not to investigate whether this was the case when he had good reason to believe that it was. Not appreciating, and thus not investigating, a risk (however obvious that risk might appear to others) is a failing on Mr Cerchez’s part, but it is not enough to justify a finding of deliberate behaviour.[128]In our judgment, HMRC have not discharged the burden on them to establish that Mr Cerchez’s behaviour was deliberate.[129]No penalty liability arises where non-deliberate behaviour is concerned if Mr Cerchez can satisfy HMRC (or the tribunal on an appeal) that there is a reasonable excuse for his act or failure; paragraph 20, Schedule 41 FA 2008. The test of whether there is a reasonable excuse is an objective one. We need to ask ourselves whether what Mr Cerchez did was a reasonable thing for him to do (assuming he was responsible and conscious of and intending to comply with his obligations regarding tax) given his experience and other relevant attributes.[130]HMRC’s criticism of Mr Cerchez is that he did not take the steps which a reasonable person in his position would have taken in the circumstances to follow up on the warning signs (in particular that the trailer was unsealed even though there was a seal number on the CMR). We consider that there is force in this criticism of Mr Cerchez. He was an experienced lorry driver. He should have realised that the load should have been sealed and picked up on the other warning signs and made enquiries to reassure himself that the loads he was being asked to transport were in order.[131]To the extent Mr Cerchez’s appeal is against HMRC’s decision to impose a penalty, it fails because he clearly met the conditions for liability to a penalty in paragraph 4 of Schedule 41 and (although we have found that his behaviour was not deliberate) he had no reasonable excuse for his default.[132]It follows from our finding at [128] that HMRC were wrong to impose penalties based on deliberate behaviour. That produces a new penalty range of 10%-30% as the disclosure was prompted.[133]We agree with HMRC’s approach to the penalty discounts except that we cannot see any justification for limiting the telling discount in relation to the second seizure because of the first seizure. This has nothing to do with the quality of Mr Cerchez’s telling in relation to the second seizure. A discount of 90% should be given in both cases, reducing the penalties to 12% of PLR.[134]The next question is whether there are any special circumstances (within paragraph 14, Schedule 41) which might entitle HMRC (or us on appeal) to reduce that penalty.[135]We can only come to a different conclusion to HMRC on the operation of paragraph 14 if we consider that their decision on that point was flawed when considered in the light of the principles applicable in judicial review proceedings. HMRC’s decision cannot be said to be “flawed” just because we disagree with their decision. We need to consider whether, in reaching their conclusion, HMRC have considered matters that they ought not to have considered or disregarded matters that they ought to have taken into account or if HMRC have reached a decision that no reasonable person could have reached upon consideration of the relevant matters.[136]In Bluu Solutions Ltd v HMRC, [2015] UKFTT 95 (TC), the FTT made a number of comments on a similarly worded provision in Schedule 56 to the Finance Act 2009, as follows:(1) A decision on whether there are special circumstances is separate from the penalty decision and HMRC can exercise their discretion under paragraph 14 to reduce a penalty at any point up to the conclusion of an appeal hearing.(2) Special circumstances do not have to be considered before the penalty is issued, but, if HMRC never consider the special circumstances provisions, that the decision would be “flawed.”(3) The tribunal has jurisdiction where HMRC have failed to consider paragraph 14 at all, so that they have made no decision about the application of paragraph 14.(4) A decision of HMRC in relation to special circumstances requires reasons: otherwise, the tribunal cannot know whether the decision was flawed. The reasons do not need to be lengthy, but they must enable the reader to understand why the matter was decided as it was and what conclusions were reached[137]In their original penalty explanations, HMRC said that “Based on the information we have, we do not consider there are any special circumstances which would lead us to further reduce the penalty”.[138]The letter of 16 April 2018 repeated HMRC’s conclusion that Mr Cerchez was the person holding the goods and concluded “A penalty was appropriate because you had been found to have handled excise goods on which duty had not been paid after the duty point had arisen.” The question of special circumstances was not addressed at that point.[139]At the case management hearing, by which time Mr Cerchez’s predicament had become clear, Judge Redston asked HMRC whether they continued to pursue the penalties and they replied “The liability for the Sch 41 wrongdoing penalties flows from the liability for the Excise duty as the person handling those goods at the duty point, in this case HMRC considers this person the Appellant.”. This is an automatic response which betrays no consideration of whether, by then, there were any special circumstances justifying the penalties being reduced (potentially to zero).[140]HMRC’s amended statement of case (dated 8 February 2024) addressed the penalties but made no mention of Mr Cerchez’s predicament. When prompted by us, HMRC said that they considered that they had no reasonable basis to cancel the penalties primarily because an ability to pay is excluded from consideration as a special circumstance.[141]We consider that, by failing to consider whether Mr Cerchez’s predicament (not just his ability to pay) inherently constitutes “special circumstances”, when responding to our and Judge Redston’s prompts, HMRC have made a “flawed” decision not to reduce the penalties, as they have power to do at any point up to the conclusion of an appeal hearing. In consequence we can rely on paragraph 14 if we consider that there are special circumstances which make it right to reduce the penalty.[142]There is no definition of “special circumstances” in the legislation, but various Tribunals have attempted to give a definition. They often start with what the Court of Appeal (in a different context) said in Clarks of Hove Ltd v Bakers Union [1978] 1 WLR 1207 at page 1215 H that:
“…to be special the event must be something out of the ordinary, something uncommon; …”
[143]In Warren v HMRC, [2012] UKFTT 57 (TC) (“Warren”), the Tribunal said of “special circumstances”:
“[53.] We were not referred to (and could not find) any authority on the meaning of "special circumstances". Plainly it must mean something different from, and wider than, reasonable excuse, for (i) if its meaning were confined within that of reasonable excuse, paragraph 9 would be otiose, and (ii) because paragraph 9 envisages a reduction in a penalty rather than absolution, it must be capable of encompassing circumstances in which there is some culpability for the default: where it is right that some part of the penalty should be borne by the taxpayer. [54.] The adjective "special” requires simply that the circumstances be peculiar or distinctive. But that does not necessarily mean that the circumstances which affect all or most taxpayers could not be special: an ultra vires assertion by HMRC that for a period penalties would be halved might well be special circumstances; but generally special circumstances will be those confined to particular taxpayers or possibly classes of taxpayers. They must encompass the situation in which it would be significantly unfair to the taxpayer to bear the whole penalty.”
[144]Having cited this passage from Warren, in Welland v HMRC, [2017] UKFTT 870 (TC), the Tribunal (Judge Mosedale) observed (at [125]):
“What was said in Warren seems right, if very general. I will consider whether any of the grounds put forward by the appellant could amount to special circumstances. In summary, it seems to me that the alleged special circumstances must be an unusual event or situation which does not amount to a reasonable excuse but which renders the penalty in whole or part significantly unfair and contrary to what Parliament must have intended when enacting the provisions.”
[145]In Warren Judge Mosedale was considering the position of a non-resident individual who sold 3 properties in one tax year. He failed to make an NRCGT return within 30 days after completion and suffered 3 penalties for these failings. Judge Mosedale asked (at [136]) “Does the fact Mr Welland sold three properties in one tax year amount to special circumstances?” She thought that it did as “A taxpayer selling a single valuable property who failed to make the return would be penalised once; Mr Welland, selling three not so valuable properties, was penalised three times.” As a result, even though Mr Welland had clearly committed 3 defaults, she reduced the penalties so that only the penalty on the first sale was payable.[146]Finally, whatever the special circumstances, “[their] existence alone is not sufficient to warrant a penalty reduction on the grounds of special circumstances. The [circumstance] must in some way be relevant to the facts of the case”, as the FTT put it in Appellant v HMRC, [2018] UKFTT 0103 (TC), at [58].[147]The fact that we have found that Mr Cerchez’s behaviour was not deliberate is not a special circumstance, nor (as paragraph 14 itself makes clear) is an inability to pay. Equally the fact that Mr Cerchez does not have a reasonable excuse for his behaviour does not prevent him being able to pray paragraph 14 in aid.[148]As Mr Cerchez explained his position to us and previously to Judge Redston (and Ms Young did not challenge this), because of the Romanian authorities’ enforcement actions on HMRC’s behalf, he has lost his home, all his savings and his ability to work in Romania and is separated from his family. He is living in his lorry in the UK. In our judgment, this goes beyond a mere inability to pay and could amount to special circumstances which make it right to reduce the penalties.[149]Whilst non-payment of excise duty is a very serious matter and the penalty regime is a proportionate regime designed to penalise delinquent (including negligent) tax behaviours and deter the delinquent and others from similar behaviour, we cannot imagine that Parliament would ever have intended someone in Mr Cerchez’s position to end up in the predicament he has.[150]As Ms Young rightly points out, we do not know to what extent reducing the penalties to zero would alleviate Mr Cerchez’s plight. The quantum of the excise duty liabilities alone may make matters very difficult for Mr Cerchez, even without any penalties, and some of the consequences of the enforcement steps already taken (his homelessness most obviously) may be difficult or impossible to reverse.[151]However, none of this means that the plight of Mr Cerchez and his family does not constitute special (probably unique) circumstances which go beyond an inability to pay, which are more than sufficiently connected to the penalties and the matters surrounding them (they are triggered by a premature and seemingly remorseless enforcement of the duty and penalty assessments) and which justify a reduction in the penalties to zero. In our judgment, this very extreme and unusual set of facts does amount to special circumstances justifying a reduction of the penalties to zero.[152]As permitted by paragraph 19 of Schedule 41 FA 2008, we substitute for HMRC’s decisions on the penalties our decision that the amount of both penalties is zero, which is a decision HMRC had power to make.

Disposition

[153]For the reasons set out above, Mr Cerchez’s appeals against the excise duty assessments are dismissed but his appeals against the penalty assessments are allowed and both penalties are reduced to zero.

Right to apply for permission to appeal

[154]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: 03 July 2026