Karman Ali v The Commissioners for HMRC [2026] UKFTT 1086 (TC)

[2026] UKFTT 01086 (TC)

Case No TC 09961

FIRST-TIER TRIBUNAL

TAX CHAMBER

Venue Manchester

Hearing Heard on: 8 July 2026

Date Judgment date: 22 July 2026

Appeal reference: TC/2025/01960

Penalties – Customs civil evasion penalty - Excise civil evasion penalty – Whether sufficient evidence to establish dishonest conduct by Appellant - Yes – Appeal dismissed

Before

TRIBUNAL JUDGE JENNIFER DEAN

MEMBER KERRY PEPPERELL

Between

KARAMAN ALIAppellant

THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondent

Mr L. Ahmed of NWS Solicitors for Appellant

Mr A. Cameron, litigator of HM Revenue and Customs’ Solicitor’s Office for Respondents

DECISION

Introduction

[1]This appeal concerns the Appellant’s appeal against a Civil Evasion Penalty (“CEP”) of £27,024, issued by HMRC on 22 January 2025 and upheld on review on 28 March 2025. The penalty is made up of a customs CEP in the amount of £5,817.00 and an excise CEP in the amount of £21,207.00

[2]The parties agreed that the issue for the Tribunal to determine is whether the Appellant’s conduct on 14 August 2024, in entering the United Kingdom carrying 86,400 cigarettes, involved dishonesty so as to give rise to liability to a penalty.

Background

[3]The following was not in dispute.

[4]On 14 August 2024 the Appellant arrived at Manchester Airport from Jordan and was found to be carrying 86,400 cigarettes, which were not UK duty paid, and which exceeded the relevant travellers’ allowance of 200 cigarettes.

[5]The cigarettes were seized by Border Force, and the seizure was not challenged, such that the goods are treated as condemned and forfeited.

[6]On 22 January 2025 HMRC Officer Aynsley issued the penalty decision against which the Appellant now appeals.

[7]Following a statutory review, HMRC upheld the penalty decision. The Appellant appealed to the Tribunal on 2 May 2025.

Legislative provisions, burden of proof and authorities

[8]There was no dispute about the applicable legislation.

[9]The Travellers Allowance Order 1994 is limited to 200 cigarettes and only applies where goods are not imported for commercial purposes.

[10]Under section 8(1) Finance Act 1994, a penalty arises where a person engages in conduct for the purpose of evading excise duty and that conduct involves dishonesty.

[11]Under section 25(1) Finance Act 2003, a similar penalty applies for evasion of customs duty and import VAT where conduct involves dishonesty.

[12]The penalty is equal to the amount of duty evaded or sought to be evaded. The Tribunal has power to reduce the penalty under section 8(4) Finance Act 1994 and section 29 Finance Act 2003.

[13]Pursuant to section 16(6) Finance Act 1994 and section 33(7)(a) Finance Act 2003, the burden of proving dishonesty rests upon HMRC.

[14]The parties cited a number of authorities. We have not found it necessary to undertake an analysis of the authorities as the principles are well known and we have applied them in reaching our Decision. As the main issue in this appeal was whether the Appellant’s conduct was dishonest, we have set out below the main authorities relied upon by the parties which are relevant to that issue.

[15]The Appellant noted that dishonesty is a serious allegation. In Re H (Minors)

[1996] AC 563

, Lord Nicholls recognised that the more serious the allegation, the more cogent must be the evidence necessary to satisfy the balance of probabilities.

[16]The leading authority on the issue of dishonesty is Ivey v Genting Casinos (UK) Ltd

[2017] UKSC 67

in which the Supreme Court (at [62]) approved the objective test previously explained in Royal Brunei Airlines Sdn Bhd v Tan and Barlow Clowes International Ltd v Eurotrust International Ltd

[1995] 2 AC 378

. At paragraph 63, the Supreme Court held:

“There can be no logical or principled basis for the meaning of dishonesty to differ according to whether it arises in a civil action or a criminal prosecution.”

[17]At [74] the Supreme Court set out the correct approach to adopt:

“When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts.”

[18]Once the individual's actual state of mind has been established, the question of dishonesty is determined objectively by reference to the standards of ordinary decent people.

[19]R v Barton and Booth

[2020] EWCA Crim 575

confirms that Ivey represents the authoritative statement of the law.

[20]The Appellant also cited HMRC v Tooth

[2021] UKSC 17

in which the Supreme Court emphasised the distinction between deliberate conduct and mistake in support of its argument that the evidence in this case demonstrates that the Appellant acted under a mistaken understanding of the customs regime rather than dishonestly.

The Appellant’s case

[21]We will set out the parties’ respective cases in more detail below, however in summary the Appellant's case is that:(a) the cigarettes were lawfully purchased abroad;

(b) taxes and charges had been paid abroad;

(d) he did not appreciate the scale of the liability ultimately demanded;

(e) he acted under a genuine misunderstanding rather than with any dishonest intention.

[22]The Appellant submits that HMRC have failed to establish either of the two statutory ingredients required under section 8 Finance Act 1994 and section 25 Finance 2003.

[23]In the alternative, if the Tribunal concludes that liability is established, the Appellant invites the Tribunal to exercise its powers under section 8(4) Finance Act 1994 and section 29(1) Finance Act 2003 and reduce the penalties to nil.

Issues

[24]The parties agreed that the issues to be determined can be summarised as follows:(i) Whether the Appellant engaged in conduct for the purpose of evading duty;

(ii) Whether such conduct involved dishonesty;

(iii) Whether HMRC have discharged the burden of proof;

(iv) Alternatively, whether the penalty should be reduced.

Evidence

[25]We heard evidence from Border Force officer McLean and HMRC officer Aynsley on behalf of HMRC and from Mr Ali on behalf of the Appellant. Mr Ali was assisted by an interpreter throughout.

[26]We have not rehearsed the evidence in full but rather we set out below the salient parts of the evidence which assisted us in reaching our decision. However, we should note that although we have not referred to each and every submission made by the parties, we took into account both the submissions and evidence in full in reaching our Decision.

[27]In essence, the crux of this appeal was the dispute between the Appellant and Mrs McClean as to events at the time the Appellant was intercepted and the goods seized. The two accounts were starkly different and could not be reconciled.

[28]Mrs Mclean was responsible for intercepting the Appellant at T1 at Manchester Airport. Her evidence was that the Appellant was intercepted at passport control and escorted to the baggage claim area. She explained that she would have been accompanied by two colleagues as was standard procedure, however as she was the intercepting officer, the other officers would not make any notes of the interception or search. She did not know if statements had been requested from her colleagues and confirmed that the cameras at the airport are not under the control of Border Force and it would be for a line manager to request access to any footage.

[29]She waited a distance behind the Appellant as he collected his bags from the carousel, then escorted him to the declaration board. The board is located in the middle, immediately before a traveller enters the Green “Nothing to Declare” Channel (“the Green Channel”). Mrs McLean was adamant that the Appellant had understood the board, which was in English, and had understood the conversation she had had with him. He had looked at the board and gave no indication that he did not understand it.

[30]She clarified that when she took a traveller to the declaration board it was her practice to ask if the traveller had any of the items shown on the board, which specified and showed pictures of all prohibited and restricted goods.

[31]The Appellant made no declaration of being in possession of cigarettes at that point and walked into the Green Channel. Mrs McLean confirmed that the Appellant did not mention the cigarettes prior to the search area where Mrs McLean commenced her standard questioning.

[32]Mrs McLean disputed that the Appellant was not given a choice about which channel to proceed through and explained he could have chosen to enter either the red or green channel or he could have indicated that he had goods to declare. He did not declare the goods and chose not to enter the red channel. Mrs McLean explained that she did not shepherd the Appellant into the Green Channel and if he had declared goods whilst at the declaration board, she would have recorded it in her notebook.

[33]Mrs McLean disputed that the Appellant had proceeded through the red channel to the search area; she clarified that a traveller is unable to proceed through the red channel; it does not lead anywhere, it simply allows a traveller to present at a desk to declare goods. The search area is accessed through the green channel. The reason her notebook does not record that they went into the green channel is because it is the only way to the search area.

[34]Mrs McLean explained that she had made a “late entry” into her notebook on the same day as she recalled further information that the Appellant had given. The entry was made very soon after the Appellant had left the Airport and she stated that the purpose of the notebook is to record events but that it does not need to be chronological.

[35]Mrs McLean confirmed that the Appellant had stated he had paid tax in Jordan, which was recorded in her notebook, but explained that it was of no consequence as he had not made any attempt to declare the goods or pay UK tax and had passed the red channel.

[36]Mrs McLean did not accept that the Appellant had chosen to leave the seized goods as he had honestly not understood that the tax due would be so great or that he had made any such claim. She maintained that such a conversation did not take place, there was no such record in her notebook and at the point of the search area no duty payments can be taken. She also explained that the duty and/or penalty due is calculated by HMRC and not Border Force. A traveller in the Green Channel or who had passed through the Green Channel would not be told any amount of tax due as they had passed the point of payment and she did not give any figure or estimate to the Appellant of the amount of tax that was owed.

[37]The Appellant explained that he had travelled four times in the relevant year to visit his mother in Iraq who was ill. He had travelled with his son, and this was the first occasion he had brought cigarettes back into the UK.

[38]He stated he had not seen the signs throughout the airport which set out the restrictions and although he speaks some English, his ability to read English is not good. He was unsure about the limits on bringing goods into the UK and only had a general idea about it. His reading and writing were not good enough to make a quick check on his phone using google.

[39]The Appellant stated he had been approached by two officers at passport control and later a female officer joined them downstairs. The two officers collected his three large bags from the luggage carousel and put them on a trolley. He disputed Mrs McLean’s evidence that he had collected the bags himself. He explained that the cigarettes were mostly in the three large bags and one smaller bag contained a small number of cigarettes. At Jordan, he was told that the 2 smaller bags he had could go in the hold and he collected these from the luggage carousel as the officers had already collected the three large bags. He had purchased 2 extra suitcases from the market while abroad with the intention of purchasing cigarettes.

[40]He stated that when approached, he believed it was to do with the “normal process” to ask how the number of items he had and the amount of tax, although he was not sure that the officers were aware he had cigarettes.

[41]He agreed he had been shown the declaration board by Mrs McLean and that from the pictures he understood the officers wanted him to declare his goods. He stated it was at that point he told the officers he had cigarettes; he had not entered the Green Channel at that point. From the moment he was intercepted at passport control he did not have his own free will to take the usual procedure and declare the goods.

[42]He could not recall which channel he entered as he was guided by the officers; Mrs McLean’s evidence was not correct.

[43]He had imported a large number of cigarettes as he has a large relative/community here who gift to each other, for example during Eid and as he had received gifts, he believed it would be good to buy to gift to others.

[44]When he had paid tax in Jordan, he was told he did not have to pay tax elsewhere. He stated that if asked to pay tax in the UK he was happy to do so. As he understood it, the cigarettes cost around £1,300, and “additional costs faced in the UK would be tax, and that would 20%. I was more than happy to pay 20% for these cigarettes…. My intention was to bring them to the UK, pay the circa £300 fine to legally be able to own them in the UK.” This was a general understanding he had.

[45]The Appellant stated that after he told the officers about the cigarettes, he was told the amount of tax due and as he could not afford it, he chose to leave the cigarettes. He was given a document which recorded that the goods had been seized but stated that the amount of tax he was told had been given verbally. He was told the tax was about £45,000, explaining in his written evidence that:

“…it would be cheaper for me to have the cigarettes confiscated, than to pay £45,000; and so I chose that…”

[46]In response to Ms Pepperell’s question seeking clarification as to whether he was referring to the penalty which was £45,000 after mitigation and which was only notified to the Appellant after the seizure, he could not recall the exact figure and it may have been higher but it was in the region of £45,000. The point he made in his witness statement that “I didn’t know, and I still don’t how they come up with £45,000” came from the fact that he had purchased cheap cigarettes and wouldn’t make that amount of money if he sold them in the market.

[47]The Appellant had sent an email to Mrs McLean on 29 November 2024 which stated:

“…I just brought the Tobacco to keep it and give it to friends and family who ever wanted and give me the money back that I paid for tax in abroad and in UK.”

[48]The Appellant claimed in cross-examination that the email was written by someone else and dictated by him. He had not meant in the email that he expected payment for the goods.

[49]The Appellant disagreed that his account had been inconsistent in that he had told Mrs McLean he was not carrying goods for others, but subsequently stated they were gifts and had also stated that he would receive payment for them. He maintained the goods belonged to him and therefore he was not carrying goods for others and the reference to payment was a mistake by the person who wrote the email. He agreed he had never stated that the email had been written for him prior to the hearing.

[50]Miss Aynsley was responsible for issuing the penalty to the Appellant. She explained that she had premised her decision on the information contained in Mrs McLean’s notebook together with information provided by the Appellant in the email dated 29 November 2024.

[51]Miss Aynsely summarised the basis of her decision that the Appellant had acted dishonestly as follows:(i) The appellant had been taken to the declaration board and made no declaration;

(ii) The appellant subsequently declared he had cigarettes, that he did not know the allowances and had paid tax in Jordan;

(iii) The appellant was 432 times over the allowance;

(iv) He had paid tax on 10,000 cigarettes in Jordan but not on the remaining 76,000;

(v) In the email, the Appellant stated that he wanted to pay the tax due but there was no evidence to support that assertion in the notebook;

(vi) He had travelled four times in a 15 month period and she considered that he was an experienced traveller who would be aware of his allowances;

(vii) In his email, he claimed that the goods were for friends/family/anyone who would pay and therefore he intended to gain financially.

[52]In mitigating the quantum of the penalty, Miss Aynsely allowed a 20% reduction for cooperation and 20% deduction for disclosure which was based on the fact that the Appellant had responded in a timely manner to her queries and provided information. She did not feel that a full reduction was warranted as she believed the Appellant had not taken full responsibility for his actions, for instance he had not declared the goods when shown the declaration board and the amount of goods was significant. Furthermore, the Appellant’s claim that he wanted to pay tax but did not know his limits, when considered alongside his statement that he had paid tax in Jordan was confusing. He had not paid tax in Jordan on the full amount of cigarettes and Miss Aynsely concluded that he had not been fully honest in his account.

[53]Miss Aynsley explained that she had no reason to doubt the record contained in Mrs McClean’s notebook and as the Appellant’s assertion that he had wanted to pay the tax was not recorded, she did not accept it had happened. She confirmed that she had not interviewed the Appellant nor ascertained whether he required an interpreter, noting that he had never requested one.

[54]Miss Aynsely clarified that she had not considered the amount shown as paid in Dinars on a Customs Duty Collection Form from the Kurdistan Regional Government as she considered tax paid elsewhere had no bearing on the case which was concerned with UK tax. She maintained that this would not alter her decision nor affect the quantum of the penalty which she considered had been mitigated on a fair and reasonable basis. Miss Aynsely also confirmed that the reasons for the Appellant’s previous travel were not relevant; he may have travelled to visit his poorly mother, but it was the frequency of travel and awareness of restrictions having passed through passport control and the green/red channels with which she was concerned. Miss Aynsely confirmed that she believed the amount of the goods was excessive and she had concluded that it was not credible that such a large amount would be intended as gifts, repeating that the Appellant was 432 times over the allowance.

Discussion and Decision

[55]The penalties in this appeal have been issued under ss 8 and 13 Finance Act 1994 and s 25 Finance Act 2003. In essence these provide that a person who is engaged in dishonest conduct for the purpose of evading duty shall be liable to a penalty equal to the amount of duty evaded or sought to be evaded.

[56]It is not disputed that it is for HMRC to establish that a person, in this case the Appellant, engaged in dishonest conduct for the purpose of evading excise duty and that the test to be applied is that set out in the decision of the Supreme Court in Ivey v Genting Casinos (UK) Limited t/a Crockfords

[2017] UKSC 67

(at [74]).

[57]We must therefore consider whether HMRC have established whether it was more likely than not that the Appellant dishonestly engaged in any conduct for the purpose of evading duty. For the reasons set out below, we are so satisfied.

[58]We preferred the evidence of Mrs McLean. We found Mrs McLean’s evidence clear, cogent and persuasive and we accepted it in full. We were satisfied that Mrs McLean’s pocket notebook was a reliable and contemporaneous record of events and supported her recollection.

[59]In contrast, we found the Appellant’s evidence vague and unconvincing, and we rejected it. By way of example, the Appellant in his oral evidence referred to the “normal process” and “usual process” in claiming that he would have declared the goods had he not been intercepted. We found this inconsistent with the contemporaneous record in Mrs McLean’s notebook that he was unaware of the allowance:

“Mrs McLean: We have allowances for cigarettes… Mr Ali: I have cigarettes Mrs McLean: How many Mr Ali: 432 pack containing 200. I paid tax on them in Jordan Mrs McLean: How many do you think you can bring into the UK duty free? Mr Ali: I don’t know. I’ve paid tax on them.”

Mr Ali: I have cigarettes Mrs McLean: How many Mr Ali: 432 pack containing 200. I paid tax on them in Jordan Mrs McLean: How many do you think you can bring into the UK duty free? Mr Ali: I don’t know. I’ve paid tax on them.”

Mrs McLean: How many do you think you can bring into the UK duty free?

[60]We also found this inconsistent with the Appellant’s written evidence which indicated some awareness of duties and allowance:

“To my understanding, because the cigarettes cost me around £1,300 there, additional costs faced in the UK would be tax, and that would 20%. I was more than happy to pay 20% for these cigarettes.”

[61]We rejected the Appellant’s explanation that his understanding of a 20% levy was “general information I had in my head” as wholly unpersuasive. The Appellant’s evidence was that he had purchased two additional large suitcases while abroad for the sole purpose of transporting the cigarettes. We found it entirely lacked credibility that any person, at a cost to themselves not only for the goods but for additional luggage, would not check whether there were restrictions on the importation of goods.

[62]Furthermore, we found that, irrespective of the reasons for the Appellant’s travel, he had travelled frequently in the preceding 15-month period (four times) and regularly (once a year) before that and we found it inconceivable that the Appellant, who has lived in the UK since 2002, had not noticed or been aware of the signs throughout airports advising about restrictions. Even taking into account the Appellant’s claim that his understanding of written English is not good, on his own evidence the declaration board had pictures of all restricted/prohibited goods.

[63]We found further inconsistencies in the Appellant’s evidence in relation to the purpose of the goods. Whilst we were willing to accept that the Appellant had told Mrs McLean that he was not carrying goods for others as the goods belonged to him, we did however find that there was inconsistency as to whether the Appellant would receive payment for the goods. Even if we were to accept that the email to Mrs McLean was written on the Appellant’s behalf, we did not accept that a reasonable person would not have checked its content before sending it to ensure its accuracy, particularly in circumstances where the letter was to an official and related to a potentially substantial penalty. We also consider, and we accepted HMRC’s evidence in this regard, that the amount of goods was so significant as to indicate commercial use and we rejected the Appellant’s evidence that he intended to give 86,400 cigarettes as gifts.

[64]We rejected the Appellant’s evidence that he had declared the goods at the declaration board and that when he was told the amount of tax owing, he had chosen to leave the goods. We also rejected his evidence that he had been, effectively, forced or shepherded through the Green Channel against his will. We found Mrs McLean’s evidence on this issue clear and straightforward and we accepted that her standard practice carried out each day was to ask at the declaration board whether a traveller is carrying any of the goods shown on the sign and that, in this instance, the Appellant had not declared any goods until the seizure point and had chosen to go through the Green Channel. This was corroborated by Mrs McLean’s notebook. Moreover, we accepted Mrs McLean's evidence, which we found persuasive, that she did not provide the Appellant with any estimate of the tax or duty payable and that no such conversation took place. We accepted her evidence that the calculation of any liability was a matter for HMRC. We also accepted her evidence that, by the time the cigarettes were discovered, the goods had been seized and the opportunity to declare them and pay duty had passed. In those circumstances, there was no reason for Mrs McLean to calculate, discuss or communicate any figure for tax or duty to the Appellant.

[65]Having accepted the evidence of Mrs McLean, and applying the test in Ivey, we were satisfied that the Appellant knowingly engaged in conduct for the purpose of evading duty and that his conduct in so doing was dishonest. HMRC had therefore discharged the burden of proof and the penalty, which was imposed in accordance with the applicable legislation, was correctly issued.

[66]We considered the mitigation allowed by Miss Aynsley and whether the penalty should be reduced further. We concluded that the reductions of 20% for cooperation and 20% for disclosure, which were based on one email sent by the Appellant, which was timeous and which provided information, could be viewed as generous given the significant amount of goods imported. However, we concluded that in taking all of the circumstances into account, the decision of Miss Aynsley was both fair and reasonable and there was no basis upon which to interfere with the quantum of the penalty.

Conclusion

[67]Accordingly, the appeal is dismissed.

Right to apply for permission to appeal

[68]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: 22 July 2026