[2011] UKFTT 330 (TC)
TC01190
Appeal number TC/2009/13713
Excise
Duty – Hydrocarbon Oil Duties Act 1979, Section 6 – importation of fuel from
the Republic of Ireland – Travellers Relief (Fuel and Lubricant) Order 1995 –
use of standard tanks in a commercial vehicle - decanting of imported fuel –
whether assessment made to best judgment – Appeal Dismissed
FIRST-TIER TRIBUNAL
TAX
W.J.
BLACK & CO. Appellant
-
and -
THE
COMMISSIONERS FOR HER MAJESTY’S
REVENUE
AND CUSTOMS ("HMRC") Respondents
TRIBUNAL:
I.W. HUDDLESTON, TRIBUNAL JUDGE
A.F. HENNESSEY,
ESQ.
Sitting in public at Bedford House, Belfast on 10th February 2011
Randal McKinney, Accountant, for
the Appellant
Richard Chapman BL, instructed
by the General Counsel and Solicitor to HM Revenue and Customs, for the
Respondents
© CROWN COPYRIGHT
2011
DECISION
Appeal
1. The
appeal is against the disputed decision of HMRC to assess W.J. Black & Co.
("the Appellant") in the sum of £31,633, representing excess duty
arrears on the importation of road fuel. The assessment was issued on the 29
May 2009 and subsequently reviewed, after which the amount of duty was
reduced to £31,603. The Appellant was notified of the review and the amendment
by a letter dated the 3 August 2009, and it is against that review which he now
appeals.
Facts
2. The
Appellant carries on business as an animal feeds haulier, registered for VAT
purposes under registration number 252 352 482 and trades from premises at 2
Killyclogher Road, Cookstown, County Tyrone.
3. On
the 17 March 2009 the Appellant's vehicle, a Volvo lorry, registration number
WJI4534 ("the Vehicle") was stopped in Aughnacloy after fuelling in
Southern Ireland. The Vehicle was found to have a non-standard running tank
fitted, in addition to its standard tank. Both tanks were connected, but the
feeder switch in the pipe which connected the two tanks was in the off
position.
4. The
Appellant was later interviewed under caution by officers of HMRC and advised
his actions in relation to the fuel and use of tanks was prohibited under the
Travellers Relief (Fuel and Lubricants) Order 1995 ("the 1995
Order"). During that interview Mr. Black did accept that on occasion he
decanted fuel in other vehicles used in the Appellant's business.
5. On
7 April 2009 HMRC advised the Appellant that they would like to carry out a
fuel audit on the business, and asked for the records for the preceding three
years.
6. Based
on the inspection of those records, Clare Louise Spence, an officer of HMRC who
appeared at the Tribunal and gave evidence, prepared a schedule detailing all
of the fuel purchases for the Vehicle through the period from 6 June 2006 to
the date of detection, ie 17 March 2009.
7. The
methodology she adopted was as follows:
(1)
she established from the original supplier that the standard running
tank for the Vehicle had a capacity of 200 litres;
(2)
she therefore allowed purchases of 200 litres, but disallowed anything
above that capacity, on the basis that it was fuel for the non-standard tank;
(3)
on days where it was indicated that there were two purchases of fuel,
then she allowed the lesser quantity and disallowed the larger quantity on the
basis that any larger quantity also was likely to have been bought as fuel for
the non-standard tank.
8. On
the 6 May 2009 Ms. Spence wrote to the Appellant advising that she was
proposing to assess the Appellant on the basis of the calculations which had
been made.
9. On
the 11 May 2009 the Appellant contacted HMRC asking if he could examine the
records and make a comparison with the assessment which was to be issued.
10. There
subsequently followed a meeting on the 21 May 2009 when HMRC explained to the
Appellant the methodology which had been adopted.
11. On the 26 May
2009 HMRC issued an assessment letter with a schedule of the relevant
calculations. That assessment was for a total amount of £31,633.00.
12. On the 26 June
2009 the Appellant requested a formal review, which was undertaken and, subject
to the rectification of a small mathematical error, the assessment was upheld
in the sum of £31,603.00 – being the assessment now under appeal.
Legislation
13. Under Section 6
of the Hydrocarbon Oils Duties Act 1979 ("HODA") there is a charge to
duty (at varying rates) on hydrocarbon oil (including diesel) imported into the
United Kingdom. There is provision for relief from excise duty on the
importation of fuel into the United Kingdom from other EU Member States for
fuel actually used by vehicles in transit between member states. The reference
to "standard tanks" arises in article 8 of Council Directive 92/81/EEC
("the Directive") where it is provided that:
"Mineral oils released for consumption in
a member state, contained in standard tanks of commercial motor vehicles and
intended to be used as fuel by those same vehicles as well as in special
containers and intended to be used for the operation, during the course of
transport, of the systems equipping those containers, shall not be subject to
excise duty in any other member state."
14. Article 8 goes
on to define "standard tanks" as:
"The tanks permanently fixed by the
manufacturer to all motor vehicles of the same type as the vehicle in question,
and whose permanent fitting enables fuel to be used directly, both for the
purpose of propulsion and, where appropriate, the operation, during transport,
of refrigeration systems and other systems."
15. The Directive,
including the definition of "standard tanks", was imported into UK
law by the Travellers Relief (Fuels and Lubricants) Order 1995 (Article 3).
16. I should point
out at this stage that the Appellant also referred the Tribunal to the Road
Haulage Association guidance insofar as the concept of "standard
tanks" is applied to "used or second hand" vehicles. That
guidance provides for the following:
"Any tank already fitted to ……a vehicle
when purchased by its current owner would satisfy the "standard tank"
criteria. This means that should the original tank have been replaced
by a new larger tank prior to purchaser by a subsequent owner, then that larger
tank would be regarded as having been fitted by the manufacturer for the
purpose of the legal definition ….. "
HMRC's Case
17. HMRC's case is
relatively straightforward. We heard evidence from Clare Louise Spence, the
officer who originally prepared the first assessment based on the information
provided by the Appellant. Ms. Spence gave evidence as to the methodology she
adopted in collating the table of invoices supplied by the Appellant during the
fuel audit, and how she arrived at her assessment. The salient points of Ms.
Spence's evidence was that she, on the 28 April 2009, contacted the Volvo
dealership from which the Vehicle had been acquired and had been able to
confirm that based on the chassis number for the Vehicle that when purchased it
had one standard tank fitted holding 200 litres.
18. In carrying out
the fuel audit she accordingly allowed 200 litres against each fill of fuel in
excess of that amount, and disallowed the balance.
19. Where there were
two fills on a particular day, she gave evidence that she allowed the smaller
of the two fills and disallowed the larger, on the basis that the larger fill was
probably used to fill the non-standard tank.
20. It was on that
basis that she came to the conclusions which she discussed with the Appellant
on the 21 May 2009 and upon which the assessment was subsequently raised. HMRC
contend that nothing has been produced by the Appellant to countermand that
approach.
The Appellant's Case
21. In the appeal
notice of the 1 September 2009, the Appellant raised the following grounds of
appeal:
(1)
that the vehicle in question had been previously stopped, that the tanks
had been reviewed on that occasion, and had been approved;
(2)
that the vehicle was a "used" vehicle and that to the extent,
therefore, that there was a non-standard tank, the larger tank should be
regarded as having been fitted by the manufacturer for the purposes of the
legislation and based on the RHA quoted at paragraph 16 above;
(3)
that the duty evaded should be based on a calculation of the fuel
decanted, and not based on a calculation of the total fuel filled in the
non-standard tank.
22. Mr. Norman Black
appeared and gave evidence broadly in support of those grounds.
23. The first ground
of appeal that he adopted was that the Vehicle had been stopped on two previous
occasions between 2004 and 2008 and, in addition, had been subjected to PSV
examination during that period, but that no-one had raised the issue of a
non-standard tank.
24. The Appellant
could not, however, give dates on which the Vehicle had previously been stopped
and, although the question was put to HMRC's witnesses on cross-examination,
HMRC had no record of those events either.
25. On that basis,
the Appellant argued that he had assumed the tank had become a standard part of
the Vehicle.
26. The second
ground advanced by the Appellant was that the second tank had already been
fitted to the Vehicle when he took over the business and he, therefore, on that
basis, claimed that the tank would have come to be treated as "legal"
under the published Road Haulage Association Guidance quoted at paragraph 16
above.
27. It is worth
spending some time on this point.
28. The history of
the Vehicle was that it was acquired by Mr. Black's parents in or around
December 1997. At that point the firm of W.J. Black & Co. had two
partners, namely Albert Black and Evelyn Black, Mr. Norman Black's parent.
Norman Black, at that point, was employed as a civil servant.
29. It appears that
in 1999 an additional running tank was added to the Vehicle.
30. In July 2000 Mr.
Norman Black took a career break from his civil service post and became more
involved in the business, to essentially give himself time to establish whether
or not it was sufficiently viable for him to take it over.
31. He gave evidence
that he "took over" the business in July 2004.
32. There was some
dispute as to what this actually meant.
33. Having heard
from both Mr. Norman Black and his accountant on its specific points, what the
Tribunal finds is that at that point Mr. Norman Black became a partner in the
business, but the partnership itself and, therefore, the Appellant in these
proceedings, did not actually change.
34. We do not find
evidence, therefore, that there was a change of ownership at any stage
sufficient for the Appellant to derive any benefit from the guidance of the
Road Haulage Association upon which he sought to rely. At all material times
the Vehicle appears to have been owned by the firm of W.J. Black & Co.
35. In addition, it
was not until 2008 that the additional tank which had been fitted in 1999 was
replaced with the tank which was in place when the Vehicle was stopped on the
17 March 2009.
36. The Tribunal
notes that Mr. Black did not refer in his interview under caution to the tank
which was fitted in 1999 and, indeed, on that occasion referred only to the
tank fitted in 2008. Regardless, the Tribunal did not agree with the
Appellant's submission that the RHA guidance was of support to him in this
case.
37. The third and
final point raised by the Appellant was in the alternative, namely that if the
tank was found to be non-standard that the Appellant should not be assessed for
the full litreage in the manner adopted by HMRC.
38. In his letter of
the 26 June 2009 to HMRC, Mr. Black put together a schedule for the audit
period in which he estimated that the amount of the duty evaded by him was
£13,177.80.
39. The Tribunal
quizzed MR. Black in relation to his methodology in coming to that calculation.
40. In his evidence Mr.
Black gave evidence that he simply estimated that he decanted 200 litres on
average on each occasion that the Vehicle was filled. He also gave evidence
that he decanted fuel only on an ad hoc basis and not on every fill, but he
accepted that he had no corroborative evidence to support those assertions. He
also accepted that he at no stage had produced any evidence to support the
schedule which he had produced.
Decision
41. The jurisdiction
of this Tribunal arises pursuant to Section 16 of the Finance Act 2004 and is
supervisory. The guidelines set out in the judgment of Carnrath LJ in
Pegasus Birds v Customs and Excise Commissioners [2004] EWCA Civ 1015
in a case such as this are in point:
" ……. the Tribunal should remember that
its primary task is to find the correct amount of tax, insofar as possible, on
the material properly available to it, the burden resting on the tax payer."
42. This is a case
where, based on the Appellant's acceptance of a level of decanting, a fuel
audit of the business had been carried out and an assessment issued by HMRC to
"best judgment". In a case such as this, the onus falls to the
Appellant to disprove that assessment.
43. In the present
case, based on the evidence before it, the Tribunal finds as follows:
(1)
the larger tank fitted to the Vehicle by the Appellant in 1999, and
replaced in 2008, was a non-standard tank. Whilst it was connected to the
smaller running tank by a feeder line the switch that allowed the flow of fuel
between the two tanks was in the off position. It plainly was not being used
to fuel the vehicle in the manner required by the Directive or pursuant to the
1995 Order;
(2)
the Appellant, both in the initial interview under caution, and
subsequently, had accepted that some level of decanting had been undertaken by
him, so there does not appear to the Tribunal to be any dispute that an offence
under the 1995 Order was committed;
(3)
the methodology adopted by HMRC – based as it was on the fuel invoices
which the Appellant supplied – cannot be faulted.
44. To our mind,
therefore, that is the starting point of the assessment and it is for the
Appellant to establish that it is inaccurate in some material respect. That
onus we find the Appellant has failed to discharge.
45. We have cited
the grounds of the Appeal Notice and commented on each. Beyond that all we
have been presented with is a schedule estimating a contrary calculation of
£13,177.80 as the "correct" figure for the amount of duty evaded.
46. No information
has been provided by the Appellant in support of that schedule, other than Mr.
Black's verbal assertion that he "felt" that on each occasion he
would have decanted no more than 200 litres on average to fuel other vehicles
in the fleet.
47. The Tribunal,
however, does not find Mr. Black's verbal assertions, nor indeed the schedule
which he produced, to be sufficiently robust to displace the analysis which
HMRC had undertaken based on the fuel audit which it had carried out.
48. On that basis,
the Tribunal finds that HMRC's assessment is upheld and, therefore, dismisses
the appeal.
49. 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.
50. No order as to
costs.
IAN WILLIAM HUDDLESTON
TRIBUNAL JUDGE
RELEASE DATE: 18 May 2011
