LFS Enterprises Limited v The Commissioners for HMRC [2026] UKFTT 930 (TC)

[2026] UKFTT 00930 (TC)Case No TC 09926
FIRST-TIER TRIBUNAL
TAX CHAMBER
Appeal reference: TC/2024/05891
Venue Royal Courts of Justice
Chichester Street
Venue BelfastHearing Heard on: 12 May 2026Date Judgment date: 19 June 2026
REGISTERED DEALER IN CONTROLLED OILS (RDCO) - Imposition of additional requirements on licence - Some already mandated by force-of-law provisions of Excise Notice 192 - Some record-keeping requirements not reasonable or proportionate - Further review ordered - To that extent only, appeal allowed in part.
Before
TRIBUNAL JUDGE CHRISTOPHER MCNALLTRIBUNAL MEMBER PATRICIA GORDON
Between
LFS ENTERPRISES LIMITEDAppellantTHE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMSRespondentRonan Lavery KC and Niamh Horscroft BL, instructed by McNamee McDonnell Solicitors, Newry for Appellant.Stuart Redpath, an HMRC Litigator of HMRC Legal Group (with written submissions from Sarah Patton, an HMRC Litigator), instructed by General Counsel and the Solicitor to HMRC for Respondent.DECISION
[1]For the detailed reasons which follow, this appeal is allowed in part.[2]The Appellant is a limited company which, since August 2020, has been approved by HMRC under the Registered Dealers in Controlled Oils (RDCO) scheme to sell controlled oils (principally, kerosene and Marked Gas Oil (MGO) = 'red diesel') from sites at three different locations in Northern Ireland.[3]The sites are at Ormeau Road (Belfast); Saintfield Road (Lisburn); and Annaghgad Road (south of Crossmaglen, and very near to the border with the Republic of Ireland).[4]At the relevant periods, the Appellant sold red diesel and kerosene at all three sites. Annaghgad Road sold only those. Saintfield Road also sold diesel and Adblue. Ormeau Road also sold diesel.[5]This is its appeal, made by way of a Notice of Appeal filed on 22 October 2024, against HMRC's decision in August 2024 ('the Decision'), upheld at departmental review in October 2024, to add additional conditions to the Appellant's RDCO approval.

The Additional Conditions

[6]Those conditions, applicable to all the Appellant's operations, and hence applicable equally to its trading at all three sites, were: (1) To record and keep, for each site, details for all supplies of rebated fuel (and not just sales over 100 litres), namely: (a) "Full name and full postal address of customers (b) Make, model and vehicle registration number of customer vehicle or eligible vehicle (c) Volume of rebated fuel purchased (d) Date/time of each rebated fuel sale (e) Customer's stated use (f) Details of due diligence checks to establish eligibility (g) VAT number, if registered (h) Method of sale drum/running tank (i) Copy of daily sales records which must include monetary values/litres sold per transaction (j) Details of opening and closing stock (in litres) of rebated fuels for each week (k) Copies of all fuel purchase invoices (l) Current selling price." (2). To provide those details to HMRC on a weekly basis ('the Information Requirement'); (3). To report 'any suspicious transactions, or requests to direct fill a road vehicle, to the HMRC fraud hotline ('the Suspicion Requirement');[7]The Additional Conditions were to have come into effect in August 2024.

The Appeal

[8]In summary, the appeal is advanced on the following series of grounds:(1) The Decision is 'entirely unreasonable, disproportionate and unjustifiable';(2) Insofar as the Decision was based on a lack of business records, business records were kept but, without any fault on the part of the appellant, could not be retrieved;(3) The business's operational practice had been explained to HMRC officers on several occasions and had been approved by them;(4) 'Full records' were provided to HMRC on 5 March 2024;(5) Adequate checks are made on persons buying rebated fuel;(6) No fuel is being provided to customers from the Republic of Ireland; or, if it is, it is a lawful supply;(7) Farmers operating cross-border farms are, after Brexit, under the Trade and Co-operation Agreement, allowed to fuel on either side of the border;(8) The imposition of restrictions applicable to bulk sales (ie, sales over 100 litres) on all sales is entirely disproportionate, (i) because there is no demonstrated loss of Revenue; and (ii) because the Appellant is being singled out, especially given that HMRC allows the existence of unmanned sites selling controlled oils;(9) The imposition of blanket conditions across all three sites, failing to take account of their different conditions, is disproportionate and unlawful.[9]These largely repeat the submissions made, on behalf of the Appellant, by his solicitors in an email dated 19 August 2024.[10]The Appellant seeks an order that the Decision should cease to have effect.

The law

[11]HMRC can, 'at any time for reasonable cause', vary the terms of an RDCO approval: CEMA 1979 section 100G(5).[12]The Decision is an 'ancillary matter'. Therefore, the Appellant must show us, on the basis of evidence, that the decision to impose the Additional Requirements 'could not reasonably have been arrived at': see FA 1994 section 16(4). The Appellant must show that 'the grounds on which any such appeal is brought have been established': FA 1994 section 16(6). The relevant standard is the usual civil standard, namely the balance of probabilities.[13]RDCO is a UK-wide scheme. All RDCO-scheme participants, across the whole of the United Kingdom, "when buying, selling, loading, unloading, delivering, moving or holding controlled oil ... must comply with any conditions or restrictions that the Commissioners may prescribe": Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002 (SI 2002/3057) ('the 2002 Regulations') Reg 8(2)[14]Regulation 9 of the 2002 Regulations provides:
"Returns and information 9. —(1) Registered dealers in controlled oil must make returns concerning their dealing in, buying and selling of controlled oil, at such time, in such form and manner, and containing such particulars as the Commissioners prescribe. (2) When such information as the Commissioners, for this purpose, prescribe comes to his attention, a registered dealer in controlled oil must, without delay, notify them of that information in such form and manner as they prescribe."
[15]HMRC also rely on the Revenue Traders (Accounts and Records) Regulations 1992 (SI 1992/3150) Regulation 6:
"Items and records (including an excise duty account) to be kept and preserved A revenue trader shall keep and preserve such records as the Commissioners may specify for any case or cases, in a notice published by them and not withdrawn by a further notice."
[16]The relevant notice is Excise Notice 192 ("Registered Dealers in Controlled Oil") ('Notice 192').[17]Excise Notice 192 is a public-facing, publicly-available, document. It is periodically updated. Updates are thereby immediately available and visible to all RDCOs on the Internet. Over and above notification by way of publication on the Internet, HMRC publishes a so-called 'Newsletter', circulated to RDCO traders, which informs them of changes. Some of the Paragraphs of Notice 192 expressly have the force of law.[18]Paragraph 5.2 of Excise Notice 192 ("RDCO obligations when supplying controlled oil") has the force of law.[19]Until 7 November 2024 (ie, at the time of the Decision), it said:
"As an RDCO, you must take every reasonable precaution to make sure that your supplies of controlled oil ... are only to persons who will use that oil as permitted by the law. [...]."
[20]After 7 November 2024, such persons were stated (for the first time) to include:
"a person who will use that oil in an excepted machine in the UK, as permitted by the law, as a condition of allowing the rebate."
[21]Notice 192 Paragraph 5.3 ("Your responsibility to supply controlled oil only for legitimate purposes") does not have the force of law. It is "for guidance only and are (where applicable) HMRC's current view of the law as at the date of publication ... These sections of the notice do not replace or amend the law".[22]From 12 February 2024, Paragraph 5.3 said:
"You must take all reasonable precautions to supply controlled oils only for legitimate uses [...] and not to supply [...] marked controlled oils for use in, or supply to, other jurisdictions where their use is not allowed."
[23]That latter point was entirely new. It had not appeared in any previous version of Notice 192. The circumstances which led to its inclusion in February 2024 are not known to us (eg, whether it represented HMRC's view as to a change in the law, or whether it was something which had always been HMRC's view, but which HMRC had not previously articulated). That change was extant from 12 February 2024. The February 2024 revision was notified to RDCOs in general (at the very latest) in Newsletter 7 in March 2024, and was specifically notified to the trader on 26 March 2024.[24]Newsletter 7 said:
"Supplying rebated fuel for use outside the UK Rebated fuel contains a mix of markers that are only used in the UK. Using it outside the UK is illegal unless it is already in the running tank of an excepted machine when it exits the UK. You must not sell rebated fuel to a customer who intends to use it for a non-permitted purpose in the UK. If you do, you may face penalties and other sanctions"
[25]The Table in Paragraph 5.16 of Notice 192 does not have the force of law.[26]It says that if the nature of the supply, as in this case, is "Forecourt or distributor yard or other supplies made through pump or similar dispenser exceeding 100 litres", then the "standard checks" are: "Make sure the customer does not put the oil directly into a road vehicle. Vehicle Registration Number For record-keeping requirements, read the following force of law paragraph".[27]The latter part of Paragraph 5.16 of Notice 192 has the force of law. It says:
"For forecourt or distributor yard supplies made by pump or similar dispenser in excess of 100 litres ... you must record the customer's name, name of person entering the details (if different), contact details, transaction date, vehicle registration number, usage of the oil and date the last usage was checked [...]"
[28]We acknowledge that the operation of the RDCO regime in Northern Ireland is challenging because Northern Ireland has a land border with a non-UK country, the Republic of Ireland. This means that people are able to cross the UK/ROI border, without any UK-government imposed formalities, checks or inspection, to buy fuel which they can then take back across the border to the Republic of Ireland.[29]In relation to this trader, its Annaghgad Road site is particularly likely to be affected by ROI consumption. Annaghgad Road is extremely close to the UK/ROI border, which is an open border. That site sells only Marked Gas Oil (red diesel) and kerosene. Red diesel can be dispensed either into a running tank and/or into a drum or other container. We were told, and accept, that sales of red diesel at Annaghgad Road are (or were) mainly to farmers from the Republic who arrived to fill not only their running tanks but also drums to fill. Kerosene is widely used for domestic heating in rural areas of the Republic. Kerosene is not dispensed into the running tanks of vehicles but into drums, typically 20-25 litres in size.[30]We are told by HMRC that UK rebated fuels - whether kerosene or MGO - supplied in the UK, cannot be used in the ROI unless they are already in the fuel supply of a vehicle or machine when it crosses the border. That obviously has a particular impact both on sales from Annaghgad Road and its sales of kerosene, which is never put into the running tank of a vehicle, and any sales of red diesel other than into the running tank of a vehicle (eg, into drums).[31]Although HMRC suggest that this restriction has always existed (and, hence, that supplies of this kind have always been unlawful) we are not told the source of this alleged restriction except the reference in HMRC's closing note that the statutory framework under the Hydrocarbon Oil Duties Act 1979 is exhaustive, and that the duty rebate "only applies where fuel is used for specified lawful purposes within the UK", and that cross-border use "has never fallen within the scope of the rebate".[32]Hence, HMRC's position is that, at all times since the enactment of the HODA 1979 (ie, for the past 47 or so years), such sales and supplies have always been unlawful. We asked whether the UK's membership of the European Union and/or the departure of Great Britain (but not Northern Ireland) from the Single Market and Customs Union had any impact on this analysis, and we were told no.[33]The Appellant, through its director Mr Farrell, limits itself to the Delphic comment, in Mr Farrell's witness statement that it is "supposedly illegal to sell to customers using the oil in the south".[34]However, absent express challenge on the point in the Grounds (save, perhaps, for the apparent point about the Trade and Cooperation Agreement between the UK and the EU) we simply have to do the best that we can and proceed on the basis that HMRC's description of the present legal situation is accurate; meaning that the sale in the UK of rebated fuels for use in the Republic, other than in the running-tanks of a vehicle, is prima facie illegal (regardless of the tax and duty situation).[35]There is no evidence before us that supply for cross-border/non UK-use was actually identified as unlawful (or even problematic) until the revised wording of Notice 192 in February 2024, referred to in RDCO Newsletter 7.[36]Although Notice 7 is slightly confusing, because, despite the heading, it does not deal only with supply for use outside the UK, but also supply in the UK for non-permitted purposes in the UK, it is sufficiently clear as to HMRC's position on supply for use outside the UK.[37]That information was communicated well before the Decision which is under appeal; and the Appellant therefore knew of the position, whether or not it had known previously.

Record-keeping

[38]A notable feature of this appeal is that the Appellant has hardly disclosed any of its business records, whether from the period ante-dating the Decision, or from after it. In the bundle, which is the agreed file of documents for us to consider, there is hardly any evidence at all to show its trading practices, then or now. Mr Farrell's written evidence (in his witness statement) or oral evidence as to the business' records and what the business's practices are carry diminished weight in circumstances where the records showing how the business actually operates in terms of its sales have not been provided to us.[39]We acknowledge that some documents (such as purchase invoices) were provided to HMRC in March 2024, because those are the basis of the tables drawn up by Officer Napier, which - as a form of explanatory document - are in the bundle. But, as we discuss below, these are not sufficient to give HMRC, or us, proper transparency into the operation of this business,[40]RDCO approval is not a right. It confers a privilege on the authorised person to buy and sell rebated fuels. HMRC is thereby entitled to supervise whether that privilege is being used properly.[41]We are satisfied that HMRC had good reason for its concern as to the Appellant's record-keeping, and hence HMRC's ability to monitor the Appellant's compliance with the RDCO regime. We are satisfied that this company was not keeping adequate records to allow those things to be done.[42]We accept Officer Napier's evidence that he had a discussion with Mr Farrell on 2 March 2024. Mr Farrell told HMRC that the appellant kept computerised records which were 'backed up on the cloud', including stock records kept on Excel, On 3 May 2024, HMRC asked Mr Farrell for the trader's stock records from April 2020 to April 2024. On 7 May 2024 Mr Farrell told Officer Napier that those records had not in fact been backed up on the cloud, and were no longer available.[43]We accept Officer Napier's evidence that he was told by a staff member during a visit at Ormeau Road that the staff member would allow the sale of rebated fuel so long as the customer had a drum. HMRC were told, and we so find, that customers "come with their drum" and the employee "authorises the sale", and would not "complete checks".[44]We also accept that the employee told HMRC that he did not know whether the pumps could dispense more than 100 litres. That is a surprising thing to have said given that the then conditions on the trader's RDCO licence which engaged at 100 litres.[45]There was no evidence from the employee as to what had happened or which had been said during that encounter. Mr Farrell was not there, so he was not in a position personally to say what had been said.[46]We are satisfied that Mr Farrell told Officer Napier that the principal customers at Annaghgad Road were coming from the Republic of Ireland to purchase rebated fuel (MGO and kerosene). In his letter of 19 August 2024, Officer Napier told Mr Farrell that such sales were to cease immediately.

Stock records

[47]The stock records which HMRC required were those set out in the template to its Decision letter; namely, total stock of kerosene and MGO at the start and end of each weekly period.[48]It is correct that there is no express statutory requirement to keep stock records, specifically. But there is a requirement to keep records; and Mr Farrell seems to have recognised that stock records were relevant insofar as he told HMRC in March 2024 that they were kept on Excel, and the suggestion (wrong, it turned out) that they were backed up on the cloud. As such, in March 2024, Mr Farrell did not seem to object, per se, to stock records being provided to HMRC.[49]However, since then, and regardless of Mr Farrell's apparent willingness in March 2024 to provide stock records, the dispute has evolved into one as to whether stock records are in fact a type of record which have to be kept by an RDCO trader at all.[50]We do not consider that HMRC's position that 'records' means 'primary' records (and, therefore, by some species of inference, includes stock records) is helpful.[51]It seems to us that the better analysis is that, read purposively, in the usual way, and in the context of the RDCO scheme, the statutory requirement to keep records means such records as permit HMRC to discharge its statutory obligations of ensuring that the correct amount of tax or duty is paid on rebated fuels and/or that rebated fuels are only sold for permitted uses.[52]In our view, and even if this is read as subject to an additional reasonableness test, those records do include stock records. This is because whilst sales and purchase invoices can (perhaps) be reconciled each with the other, there is no alternative reliable way of assessing whether (for example) the trader's purchase invoices and till receipts are reliable, in the sense that they actually match its stock. This is particularly the case where stock - as here - is held at a number of different sites and/or - again, as here - is moved between sites.[53]We accept Officer Napier's position that his calculations, on the basis of supplier records, was that he could not work out the stock position and/or verify it. Nor can we. He had concerns, which we accept as valid and well-founded, that his calculation of the stock and consideration of the trader's VAT returns and its HO5 returns could not readily be reconciled with Mr Farrell's assertion in March 2024 that he would sell about 300,000 litres of kerosene a month.[54]We agree with the position when it comes to examination of the small scattering of HO5 returns which are in evidence before us. By way of example, the sales of kerosene recorded:(1) In March 2022, 77,770 litres to 1028 domestic customers plus 300 litres other supplies;(2) In April 2022, 69,000 litres to 898 customers ("domestic supplies below de minimis") plus 800 litres other supplies;(3) In December 2022, 81,090 litres to 1120 domestic customers;(4) In January 2023, 123,140 litres to 1586 domestic customers.[55]Those are all paper returns. We have been shown only small sample of online returns. We do not know why either party has been unable to produce an uninterrupted run of returns.[56]In September 2023 (an online return) the total sales of rebated fuels overall (ie, both MGO and kerosene) were only about 190,000 litres.[57]Hence, there is an obvious - and unexplained - discrepancy between what Mr Farrell said, and what the available records show; at least, in relation to kerosene sales. The business - at least, on the face of its HO5 records - was not selling 300,000 litres of kerosene a month. Although this is not the case which he advanced before us, we have considered whether Mr Farrell just made a mistake, but weight has to be given to what he said because he was the person who was running the business.[58]We find that Mr Farrell did tell Officer Napier in March 2024 that "records" were "backed up to the Cloud". At the same time, he also said that stock records were kept in Excel. However, he did not tell Officer Napier that his laptop had broken a few months earlier, and that since then he had been keeping stock records with pen and paper. In any event, we have not been shown any such paper stock records.[59]We also find that Mr Farrell told HMRC in March 2024 that he was checking his stock daily. We do not know much about how those stock records were kept: there is reference to an 'electronic dip', but we do not know how that worked. In response to a question from us, Mr Farrell told us that the dip did not communicate (for example) with an App. The impression is that readings had to be manually taken. We have not been shown anything written down.[60]Since it was not put to Mr Farrell in the course of his cross-examination that he was not being truthful about having ever kept stock records, whether on laptop and/or on paper and/or the fate of them, we proceed on the basis that he did keep such records, as he described to Officer Napier in March 2024: on an Excel spreadsheet, updated once or twice weekly, on a second-hand laptop which (as he told HMRC on 7 May 2024) had failed (although Mr Farrell says in his witness statement that the failure had been "a few months" before March 2024) and which could not be repaired (at least, by the persons he took it to), meaning that the data was, to all practical intents and purposes, irretrievable; and which is now definitely lost for good since he has since 'disposed' of the laptop, so that no efforts can now be made, even at this very late stage, to see whether the data can be retrieved.[61]However, even taken as accurate and truthful, this does not ultimately assist the Appellant, because the obligation of the business was to take such steps as were reasonable to keep its records in a fashion which was not vulnerable to such loss and/or to take reasonable and demonstrable efforts to retrieve the information if lost or damaged. Although Mr Farrell did not seem to have realised - at least, before March 2024 - that the stock records might end up being of such interest to HMRC, this should not have come as a surprise to him. They are (for good reason) records of a conventional kind in most businesses; and good business practice would be to make sure that they were not only kept, but kept in a way which safeguarded them from loss - such as being backed up.[62]Keeping them on a second-hand laptop - and not (as it now appears) backed up on the cloud or an external hard drive or (even) printed off from time to time - did not meet that test. Had any of those things been done, then the failure of the laptop would not have meant loss of the records. But, even if that were wrong, the sole effort made to retrieve the documents seems to us casual or perfunctory (and there is no supporting evidence from the computer shop); and then the machine was (at some unknown time) thrown away, putting any records completely beyond recovery. Moreover, and as already noted, if there were paper stock records, none have been disclosed in these proceedings, and there are none in the evidence before us.

'The booklet'

[63]Although Mr Farrell said that some notes of sales and customer details were kept in 'a booklet', we were not shown any such booklet, and so we were not shown any evidence at all about the details being taken. We work and make findings on the basis of available evidence; and are entitled to draw inferences from the absence of evidence, especially where that evidence is of the kind which can be expected to be available. We are not satisfied that there was ever any such 'booklet'. But, even if there was, we cannot make findings as to the adequacy of any information recorded in it unless we have actually seen it.[64]Taking all the above into account, it is clear to us that there is a systemic problem in relation to this trader's record-keeping, and this all can be laid squarely at the door of Mr Farrell. He is the governing mind of the enterprise, across all its sites. He is ultimately responsible for the integrity of the trader's activity, whether or not he is personally present, across all its sites. He is responsible for the conduct - the acts or omissions - of the firm's employees; and he is responsible for their training when shortcomings have been identified, as they have been here.[65]We accept that Officer Napier said that record-keeping was not a prominent feature in his decision-making; but this did not amount to a concession that record-keeping was not a part at all in his decision-making. That is not surprising. No such concession could reasonably be made when the RDCO scheme rests in large measure on the ability of HMRC to monitor its implementation and the activity of those authorised under it. It was reasonable for Officer Napier to have taken this account, both as a free-standing factor, and as a part of his overall approach. For the reasons already explained, we do give weight to the record-keeping element; and we do not consider it to have been inherently unreasonable to require that stock records be kept in a form which could later be produced to HMRC.[66]Moreover, and apart from Mr Farrell's bare assertion, there is no credible evidence that the trader - once shortcomings had been brought to its attention - has done anything at all to modify its trading activity or even to train its employees. That is surprising, to say the least, especially against the backdrop of an existing appeal to this Tribunal, and what the trader says are the potentially existential consequences if its appeal is dismissed. The trader is not doing enough to ensure that it can show that its sales are compliant.

Sales to customers from the Republic of Ireland

[67]Mr Farrell said in March 2024 that he had been selling red diesel from Annaghgad Road to farmers who 'would bring a few drums to top up their tanks'.[68]As to kerosene, the thrust of Mr Farrell's oral evidence was that he was doing what he realistically could - taking payment in sterling and not Euros; and asking purchasers who were driving vehicles with ROI plates what they were going to do with the kerosene. But he also stressed that he had to work with the fact, on the ground, that many of his customers were not really very receptive to being asked questions as to their identity or their business in buying kerosene in bulk and/or were not enthusiastic about giving information; and, if questioned, were apt to take their business elsewhere - probably to some retailer where they faced less questioning.[69]We assessed this evidence as truthful. But, even if local trading conditions in this part of the United Kingdom are as Mr Farrell described - and we think that they probably are - those do not operate to relieve or exempt this company from the requirements applicable to all RDCO traders, wherever they are in the UK, which include (as we have already set out) the prohibition on selling rebated fuels in any quantity in drums for cross-border/non-UK use.[70]There is some force in Mr Lavery KC's argument that the Additional Conditions, insofar as predicated on cross-border sales, were retroactive. But HMRC's case is that the changes announced in February 2024 were not substantive but were only clarificatory. Hence, if such sales have always been illegal, then that point falls away. Retroactivity then just means that these restrictions, although they existed, were not highlighted before February or March 2024.[71]A more difficult point - which, perhaps fortunately, we do not need to resolve - is how HMRC's position is reconcilable with the well-known and long-standing existence of sellers of rebated fuel in otherwise remote areas of Northern Ireland, happening to be near the border with the Republic, whose very presence seems directed specifically to those coming across the border from the south to buy rebated fuel.[72]As already remarked, we did ask the parties whether anything in this case was said to depend on the UK-EU agreement on the UK's departure from the European Union, and Northern Ireland's continuing presence, despite that departure, in the Customs Union and Single Market. We were told that those features were not relevant; and no party took the opportunity in their closing submissions to address us on the point. Ultimately, we were not invited to find that HMRC's conclusion that certain sales for cross-border use were prima facie illegal.[73]It seems to us that the focus on cross-border sales and whether or not this trader actually knew, or was supposed to have known, before February or March 2024 that these sales from Annaghgad Road (if not sales into a running tank) were prima facie illegal, ignores the record-keeping deficiencies.[74]It is a paradox that the Additional Conditions, insofar as they are imposed on the trading at Annaghgad Road, are unlikely to end up mattering very much (if at all) in the case where, as HMRC say, sales of rebated fuels other than in the running tank of a vehicle for cross-border use are prima facie unlawful. That would mean that any sale of kerosene or MGO other than into a running tank at Annaghgad Road to customers from the Republic is unlawful (on the inference - which seems very likely - that those customers are going to go back to the Republic and use the fuel there). That applies where the sale is over or above a 100 litre threshold.[75]It seems to us that this restriction, in and of itself, will, in effect, end (and, at least from August 2024, should have ended) all sales of kerosene and MGO into drums or other containers at Annaghgad Road, regardless of the quantity of those sales and whether or not they are over 100 litres.[76]That is to say, it is not - contrary to Mr Farrell's evidence and submissions - actually the Additional Conditions which pose an existential threat to the financial viability of Annaghgad Road. It is the fact that cross-border non-running-tank sales of rebated fuel, in any quantity, are now treated as illegal by HMRC, regardless of how they were treated before February 2024.[77]It seems to us that sales of red diesel into the running tank of an eligible vehicle for use in the Republic would still be lawful, so the Appellant's argument in correspondence about farmers 'decanting red diesel' from their running tanks when crossing the border is simply misconceived. But, although sales of red diesel into the running tank of an ROI vehicle would still be legal, the rebate would not apply and there would be tax and duty to be paid on that sale by this business in the UK. That is one of the things HMRC are entitled to know about; and one of the reasons why records need to be kept.[78]We do not accept that there was any change in the company's business practices after the Decision, or after it was advised that its record-keeping was inadequate and/or that it should stop selling to customers from the Republic. There is simply no evidence of any change. Mr Farrell said that his staff had been trained, but his say-so is not enough. It is no more than a bare assertion. There was no supporting evidence of the kind one would expect to see had retraining really been done and/or, if done, done with genuine purpose, such as (for example) a written policy or some other training records. There was nothing in writing at all that training had even been undertaken, let alone as to what its content was. "Telling the employees" - even if this was done - was not sufficient.

Competitive disadvantage / 'singling out'

[79]A point was made that other traders sell kerosene from unmanned stations, including near the border. That is correct, which is why Notice 192 makes express provision for sales from unmanned stations.[80]But this appeal is not about those other traders or about the conditions imposed on them. This appeal is about this trader, and its trading practices; whether those are compliant with the RDCO scheme; and, if not, what - if anything - should be done about it.

Alleged breach of the Trade and Cooperation Agreement

[81]We were not provided with any evidence that any purchases were being made by persons who had "cross-border farms" (ie, farms with elements on both sides of the border). A farmer who farms land in the Republic, and who crosses the border to fuel with red diesel, is not a cross-border farmer.[82]We were not taken to any provisions of the TCA. Therefore (and save for our remarks that we have taken as read that HMRC's position that no cross-border/non-UK sales of rebated fuels, including red diesel, other than in a running tank are legal, and at no time since the enactment of the Hydrocarbon Oils Act 1979 have been) this is not a factor to which we need to have any further regard in the context of resolving this appeal.

Alleged breach of Article 41 EU Charter of Fundamental Rights

[83]In the closing submissions filed on his behalf, the Appellant contends that 'the failure to allow Mr Farrell the opportunity to respond to several criticisms made of his business before the imposition of Additional Cnditions' is a breach of his right, said to arise under Article 41 of the EU Charter of Fundamental Rights (still in force in Northern Ireland, but not placed before us) "which specifically allow for the right of every person to be heard, before any individual measure which would affect them adversely is taken".[84]This is not in the Grounds of Appeal, and there is no application to amend the Grounds.[85]But it is in any event misconceived, and we dismiss the argument:(1) Our understanding is that the Additional Conditions have been stayed pending this appeal - ie, they have not been implemented;(2) At the Appellant's request, the Decision was subject to a departmental review which answered to the requirements of Article 41; and/or(3) There has now been an appeal, including the hearing and testing of evidence, which answered to the requirements of Article 41.[86]Moreover, and insofar as it is said that the Additional Conditions are 'likely to make the business unviable', that potential consequence flows - at least in relation to that part of the business which is Annaghgad Road - from HMRC's approach (or, at least, its approach from February 2024) to cross-border sales of rebated fuel. Otherwise, there is no evidence (except Mr Farrell's say-so) as to the effect or likely effect on this business.[87]For the sake of completeness, we note that we were invited to consider some remarks of Laws LJ in R (Sinclair Collis) Ltd [2012] QB 394, but those related to a Convention challenge; and no such challenge is made in the (otherwise extensive) Grounds of Appeal in this case.[88]There is therefore no need to consider the intensity of review which one would expect in an Convention challenge. But, and even if this were a case of intensity review, it is the case that a proportionality review may itself be limited in context to examining whether the exercise of a power involved some manifest error or a clear excess of the bounds of discretion. We have not been asked to identify any manifest error here (nor, for the avoidance of doubt, have we identified any such error); nor any clear excess of the bounds of discretion; and nor have we identified any such excess.[89]As far as it goes, this is a case in which the question of what requirements to impose on an RDCO approval is a technical field. As such, as in any assessment of proportionality in a technical field, we must allow a proper margin of discretion to the decision-maker.

Different conditions across different sites

[90]We accept that there are different conditions across different sites: Annaghgad Road in a rural area near the border is obviously very different to Ormeau Road in Belfast.[91]However, for the reasons already set out, we are satisfied that a situation existed in relation to the Appellant's operational practices overall which merited, and which continues to merit, the imposition of record-keeping requirements on all sales, at all sites, and not simply those over 100 litres.[92]There are two main reasons:(1) There was and still is a systemic problem with this trader's operations and compliance in general, across all its sites, which needs remediation by way of record-keeping requirements;(2) There is no evidence to support the proposition that restricting any record-keeping requirements to a 100 litre threshold is going to remedy these defects.

Previous alleged representations

[93]We do not consider that it is any answer to say that HMRC had previously represented to the trader that its trading was unobjectionable. This is not the picture which unequivocally emerges from the evidence. But, and in any event, no officer of HMRC has any authority to disapply the force of law requirements in Notice 192; nor is anything put forward to support an argument that HMRC had made representations that sales to customers from the Republic of Ireland otherwise than in accordance with the law generated a genuinely arguable and legitimate expectation that HMRC would disapply the law as to supplies for cross-border use.

Factors to which we have little or no regard

[94]We have no regard to the background of alleged fuel contamination which, it seems, might have played some part in HMRC taking an interest in this company in the first place. There is a warning letter in February 2023 concerning the alleged presence of laundered kerosene and contaminated fuel at Ormeau Road and Saintfield Road. However, in March 2023, Mr Farrell gave an explanation - which HMRC seem at the time to have accepted - that there was a compartment leak from one of the tanks.[95]There is reference to contaminated fuel, pumps and tanks uplifted from Saintfield Road; that is said to have been "under appeal". Whatever actually happened, we know no more about it.[96]Although these seizures were mentioned in Officer Napier's witness statement, this was done only in a passing way, and without detail. If it was indeed evidence which was material to the overall dispute, then the witness statement was the proper place to have dealt with it. Although more detail about this emerged in examination-in-chief, this was objected to by Mr Lavery KC; not least because no such allegations had been put to Mr Farrell in his cross-examination. That objection was a sound one. Moreover, and in any event, we were told by Mr Lavery KC - for what it was worth - that Mr Farrell's account of this, had he been asked, would have been different. Again, for what it is worth, we expect it would have been what he told HMRC in March 2024, as recorded in its visit report.[97]An allegation was also made that the company had been penalised; but there was no supporting evidence in the bundle. The warning letter in February 2023 expressly decided that there was to be no financial penalty. In any event, the relevance is not apparent.[98]A further irrelevant factor is that some HO5 returns needed to be re-submitted in March 2024 because the returns had failed to populate the correct box; but HMRC did not seem to challenge the figures.

Conclusions as to the Record-Keeping Requirement

[99]Some of the things on HMRC's list already have to be provided under the force of law provisions of Excise Notice 192 Paragraph 5.16, including the so-called 'Standard Checks'.[100]It is not argued that the force of law paragraphs in Notice 192, as it has stood from time-to-time, do not have the force of law.[101]However, the record-keeping requirements do seek to disapply the applicable ordinary 100-litre threshold for record-keeping.[102]Other conditions either seek to convert HMRC non force-of-law guidance into formal conditions (thereby engaging corresponding penalties or other sanctions for breach) and/or refer to categories of records or information which are not mentioned in Excise Notice 192.[103]We consider it appropriate to consider each requirement, on an item-by-item basis.[104]We also note that the list of requirements in the Decision letter does not precisely match the list of requirements in the templates annexed to the Decision letter.

Full name and full postal address of customers

[105]The template annexed to the Decision letter for "pump sales" requires "full name and address of the customer including postcode".[106]Notice 192 Paragraph 5.16 provides that "the customer's name, name of person entering the details (if different), and contact details" should be taken. By "name" we take this to mean forename and surname.[107]We do not understand the relevance of (for example) middle names (which would be part of many people's "full name").[108]"Contact details" have to be taken, but we do not understand the relevance of "full postal address" rather than just postal address, or house name and number and postcode and/or some other unique contact details such as a mobile phone number or an email address.

Make, model and vehicle registration number of customer vehicle or eligible vehicle

[109]This is too wide. The Decision letter is in any event inconsistent with the template annexed to the Decision letter, which only requires "vehicle registration number".[110]That is consistent with Notice 192 Paragraph 5.16, which requires only the taking of the registration number and we do not see it reasonable to require this business to record make and model. The purpose is unclear. Moreover, equipped only with the registration number, HMRC (as indeed anyone) can look up the make and model on an online vehicle identity checker, of the sort which exist (free of charge) both in relation to UK and ROI registered vehicles.

Volume of rebated fuel purchased

[111]This is reasonable and proportionate. It is, or should be, an ordinary part of any sale to any customer. In March 2024, the Appellant told HMRC that it had an EPOS system 'to keep track of sales'.

Date/time of each rebated fuel sale

[112]This is reasonable and proportionate, for the same reason set out above in relation to the volume of rebated fuel.

Customers stated use

[113]Paragraph 5.16 provides for "usage of the oil". The purpose is to establish whether someone is a business or domestic user: see Paragraph 5.16 ("Standard checks to be made on your customers").[114]The customer's stated use (even if at a high level of business or domestic) is therefore a reasonable requirement, even if(i) customers might not want to say what their intended use is (and are entitled not to say);(ii) if customers refuse to say, the trader has no way of making the customer tell them;(iii) customers might lie anyway (especially if their intended use is in some way improper or unlawful. We do not know anything about the law applying in the Republic of Ireland concerning the use of rebated fuel purchased in the UK).

Details of due diligence checks to establish eligibility

[115]Although this is on the template to the Decision letter, it is as an alternative to "Stated use of the rebated fuel".[116]If it is - as the Decision letter seems to suggest (but the template does not) a separate, discrete, requirement, then, to our eyes, 'details of due diligence checks to establish eligibility' is either unclear and/or does not obviously add anything to the information otherwise collected. It is therefore an unreasonable requirement.

VAT number, if registered

[117]Although this is in the template to the Decision letter, this requirement is unreasonable. It is actually two requirements:(i) asking if a customer is registered for VAT; and(ii) if they are, obtaining their number. This is unduly interrogative.[118]Moreover, we do not understand the relevance of a customer's VAT number; and this is not a VAT case.

Method of sale: drum/running tank

[119]This appears in the template to the Decision letter as "Method used to collect the rebated fuel and quantity (No of drums, bowsers, containers, etc)".[120]Given the situation which HMRC has identified in relation to this trader's activity, and the restriction on any cross-border sales of MGO other than in the running tank of a vehicle, this is reasonable and proportionate.

Copy of daily sales records which must include monetary values/litres sold per transaction

[121]This is reasonable and proportionate.

Details of opening and closing stock (in litres) of rebated fuels for each week

[122]For the reasons already set out, this is reasonable and proportionate.

Copies of all fuel purchase invoices

[123]This is reasonable and proportionate

Current selling price

[124]This is reasonable and proportionate.

Payment method (Euro cash, sterling cash, card cheque etc)

[125]This is in the template to the Decision letter, but not actually referred to in the Decision letter.[126]If pursued, this does not seem to us a reasonable requirement, in the sense that it does not appreciably add to the information already reasonably required.

Conclusion on the Record-keeping requirement

[127]Given that the Decision is an ancillary matter, then our powers are confined by FA 1994 section 16(4) "to a power, where the tribunal are satisfied that the Commissioners or other person making that decision could not reasonably have arrived at it, to do one or more of the following, that is to say—(a) to direct that the decision, so far as it remains in force, is to cease to have effect from such time as the tribunal may direct;(b) to require the Commissioners to conduct, in accordance with the directions of the tribunal, a review or further review as appropriate of the original decision; and(c) in the case of a decision which has already been acted on or taken effect and cannot be remedied by a review or further review as appropriate, to declare the decision to have been unreasonable and to give directions to the Commissioners as to the steps to be taken for securing that repetitions of the unreasonableness do not occur when comparable circumstances arise in future."[128]We reject section 16(4)(a) as an approach. There are easily sufficient grounds for HMRC to have sought to impose record-keeping requirements which went beyond those already required by the force-of-law provisions of Excise Notice 192.[129]Section 16(4)(b) is appropriate here. HMRC are required to further review the Decision, and its record-keeping requirements, and in particular should consider whether these should extend beyond:(1) Customer's name and contact details(2) Vehicle registration number(3) Volume of rebated fuel purchased(4) Date/time of each rebated fuel sale(5) Method of sale (eg drum/running tank)(6) Copy of daily sales records which must include monetary values/litres sold per transaction(7) Details of opening and closing stock (in litres) of each category of rebated fuels for each week, for each site(8) Copies of all fuel purchase invoices(9) Current selling price.

The Information Requirement

[130]It does not seem to us that the Information Requirement, requiring the provision of information, once collected, to HMRC on a weekly basis, is inherently objectionable or unreasonable or disproportionate.[131]However, it has to be read in the light of our view of the details which should lawfully be taken under the Record-Keeping Requirement.

The Suspicion Requirement

[132]Notice 192 already deals with this in the following way. "5.17 Indicators to identify suspicious use of rebated fuel This paragraph has the force of law. There are circumstances which could give rise to suspicion that a customer ordering rebated fuel may be intending to misuse it. You should: record any concerns you have share your concerns with your staff (including those delivering the fuel) consider whether it is appropriate to supply the fuel HMRC has produced a checklist for identifying suspicious supplies when fuel is ordered, or when it is delivered to the customer. If any of the reasons for significant concern or a combination of reasons for possible concern are present at the time of ordering or delivery, you must report the facts to HMRC, in accordance with Regulation 9(2) of the RDCO Regulations 2002. Read paragraph 5.23 for more information about reporting suspicious supply or use. Section 8 ‘Action taken if you fail to meet your obligations as an RDCO’ outlines the action we may take if you fail to meet this obligation of your RDCO status. Checklist of suspicious supplies The following indicators of suspicious supplies have been endorsed by the United Kingdom and Ireland Fuel Distributors Association (UKIFDA). If you’re a RDCO, to meet your obligations under the scheme you must make your staff aware of these indicators before they take orders or make deliveries. Significant concerns at the point of ordering include: email address given is not a company address or does not match the name of the business placing the order; name of company and business activity does not match the claimed permitted use (there may be credit related issues or other reasons for this, but these must be documented); new customer with an apparent lack of concern with product price; a company that sells rebated fuel does not have an RDCO number, or other evidence to show they hold a valid approval to deal in controlled oils; delivery required away from main site without a reasonable explanation; delivery address is changed after the order is made without a reasonable explanation payment to be made by someone other than the recipient; request for an unusually large volume of gas oil, HVO or biodiesel to a domestic address or other non-industrial site; request for gas oil and kerosene to be delivered into the same tank and the customer cannot confirm that this will only be used for heating; request for a rebated fuel to be delivered into a tank that is not correctly labelled (for example, a tank labelled ‘Diesel’) — read Section 8 of Excise Notice 179 for more information sudden large increase in volumes of rebated fuel purchased by an established customer without a plausible reason; volumes that appear to be excessive for the claimed legitimate use — for example, large or frequent orders of kerosene during summer months frequency of repeat orders which are not consistent with claimed legitimate use — for example, a repeat order placed when volume previously delivered could not realistically have been used for the stated purpose; large quantities of rebated fuel ordered by a customer whose legitimate use for it has ceased or is due to cease; aggressive or evasive responses to requests for more information on intended use or any other details relating to the supply; Possible concerns at the point of ordering include where a customer: gives only a mobile phone number for contact, with no other details such as email, home or personal addresses provided; offers full payment in advance of delivery as an incentive to supply; asks to pay in cash Significant concerns at the point of delivery include: evidence or suspicions of illicit activities such as fuel mixing or adulteration, for example fuel laundering — such as traces of solid or liquid residues noticeable at, or around, the site; inappropriate product for the apparent site requirements, such as, but not restricted to: rebated fuel delivered to domestic premises without an appropriate heating system or generator; changes in the delivery address from that on the order invoice; requests for rebated fuel to be delivered into the back of vans, interconnected tanks, poor quality tanks, incorrectly labelled tanks, or temporary storage, for example static road tankers or intermediate bulk containers; rebated fuel delivered to a construction site, plant or haulage company, garage, scrap yard or other site with no apparent equipment used for legitimate purpose; avtur to a buyer with no apparent reason to use it in an aircraft; sites occupied by the operator of vehicles, machines or appliances with no apparent legitimate entitlement to use rebated fuel, or subject to frequent visits by users of such vehicles, machines or appliances; delivery into one or more large drums or intermediate bulk containers; Possible concerns at the point of delivery include: nervous or unusual behaviour by people on site, possibly with excessive site security for the type of business indications of frequent or multiple deliveries by other suppliers at the location delivery of rebated and non-rebated fuels required into adjacent tanks delivery into non-standard or adapted tanks, for example tanks without a draw-off point at the bottom Suspicions, or confirmed suspicions, must be reported to all concerned colleagues. Under no circumstances should they be made apparent to the customer. 5.18 What you should do if you have suspicions about a customer The standard checks necessary to meet your obligations in the supply of controlled oil are set out in paragraph 5.16. However, despite the precaution of standard checks being followed, there will be some occasions where circumstances give rise to suspicion that a customer may be misusing the product. These circumstances are detailed in paragraph 5.17. If you have any suspicions about a customer you have supplied oil to, you should tell us as soon as possible. You can report tax fraud or avoidance to HMRC online, or by phoning our dedicated HMRC fraud hotline: Telephone: Monday to Friday, 9am to 5pm (except bank holidays) 5.19. Recording checks136. If any of the indicators in paragraph 5.17 are identified after making a supply, report the facts to HMRC (read paragraphs 5.18 and 5.24) and make records of the suspicious circumstances and the action you have taken.137. You must also make these records available to HMRC upon request.138. This paragraph has the force of law.139. Under Regulation 6 of the Revenue Traders (Accounts and Records) Regulations 1992, you must record details of all checks you have made to establish that your customers have a legitimate use for rebated fuel, in order to satisfy us that you have carried them out.140. Based on the checks you have made and the existence of any indicators as detailed in paragraph 5.17, you should tell HMRC about the information that you have gathered and the reason for your decision if you decide not to supply. 5.20. Customers not entitled to receive controlled oil or using it for an improper purpose 142. This paragraph has the force of law. 143. If you have either a suspicion based on the standard checks (read paragraph 5.16) or you have evidence that the customer is making improper use of the controlled oil by using it as road fuel, you have a duty as an RDCO to tell us immediately under Regulation 9 (2) of the RDCO Regulations 2002. 144. You’re advised not to supply a customer if you suspect that they do not have a legitimate use for the oil, under conditions imposed under Regulation 8 (2) of the RDCO Regulations 2002. 145. You must not supply a customer if you have reason to believe the oil will be put to a use which attracts a higher rate of duty. You should not make any further supplies to that customer until you have carried out the additional checks and have enough information to show that your cause for concern was groundless. 146. HMRC will act against you if you supply a customer while having reason to believe the fuel will be misused. This includes where we consider there were enough indicators for you to have had reason to believe the fuel was going to be misused.[133]In effect, the Suspicion Requirement is either(i) recapitulating the existing force-of-law parts of Notice 192; or(ii) is converting the non force-of-law guidance into a formal condition.[134]As to (i), the force-of-law provisions are binding, and not a matter for us.[135]As to (ii), and insofar as the Suspicion Requirement does not already have the force of law, it seems to us that requiring the taxpayer 'to report any suspicious transactions, or requests to direct fill a road vehicle, to the HMRC fraud hotline' is not only reasonable, but suitable appropriate and necessary.

Outcome

[136]To the extent identified above in relation to the Records-Keeping Requirement, but only to that extent, the appeal is successful and HMRC should conduct a further review.[137]In relation to the Information Requirement and the Suspicion Requirement, the appeal is dismissed. There is no requirement to review in relation to those requirements.[138]We note HMRC's position in its Closing Note that the Additional Conditions may be amended or removed once compliance systems are shown to be adequate. Unfortunately, as matters stand before us, and on the basis of the evidence before us, for the reasons already set out, the Appellant's compliance systems have still not been shown to be adequate. Release date: 19 June 2026