HMRC lost a case in the First Tier Tax Tribunal in the appeal of Kammac Plc [TC07062) with regard to a decision by HMRC to revoke the excise duty approvals under the Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR) 1999 and s 92 CEMA as to whether HMRC’s decision could reasonably have been arrived at.
Kammac has for many years operated a warehousing, packaging and logistics business in Northern England and obtained excise approvals to operate as a warehousekeeper in 2014.
HMRC revoked the company’s excise approvals in January 2016 having previously issued the company with a ‘minded to revoke’ letter on 05/10/15. In essence HMRC stated that Kammac had:
- Failed to recognise its customers should have a Duty rep;
- Failed to acknowledge it required a Movement Guarantee for Panache to export spirits;
- Failed to identify a valid Movement Guarantee in advance of despatch for Spendrups;
- Exported duty paid spirits without checking if the duty stamps had been obliterated [which they hadn’t];
- Allowed duty suspended alcohol to be received into the warehouse during the transit between the revocation letter and the closure.
Kammac’s first adviser had challenged HMRC’s as to whether the due diligence required by HMRC was a requirement for a warehousekeeper since it should only be concerned with its own revenue risks rather than being for the purpose of assisting the prevention of fraud in relation to alcohol duties.
Kammac appointed a second adviser in the light of the revocation letters who no longer asserted that its due diligence was to be limited mainly to its own risks; it now accepted that its approach to its due diligence had been inadequate set against the proper test; and it acknowledged that a new system was required and it proposed a satisfactory system.
The HMRC Review Officer while accepting the new due diligence procedures provided by its second adviser, cast doubt on Kammac’s ability or willingness to fulfil those proposals. The HMRC Review Officer thought there was nothing the company could do which could change her conclusion.
The tribunal set aside the HMRC decision and instructed HMRC to undertake a further review on the grounds that the review decision was unreasonable; there were relevant factors which HMRC should have taken into account and were not; and a matter was taken into account which should not have been.
Some of the points which the HMRC Review Officer did not give sufficient weight to was:
- The statement in the ‘minded to’ letter was that its object was to give Kammac a chance to mend its ways yet HMRC did not allow that opportunity;
- The statements in the HMRC PN196 that HMRC would work with the company to assists its procedures which HMRC did not do.
The tribunal queried why HMRC could not have imposed conditions on the company’s excise approvals.
HMRC could seek leave to appeal the decision; could still decide to uphold the decision on further review; or return the company’s excise approvals.
About Malcolm McFarlin
M&R Tax Advisers Ltd. is a firm of tax consultants which specialises in assisting, advising and representing clients in disputes with HM Revenue and Customs (‘HMRC’). The Directors are both ex-Customs Specialist Investigators with extensive experience both within the Department and in the private sector. We specialise in excise duty matters including the revocation or 'minded to letters' from HMRC in respect of WOWGR and AWRS. We provide a due diligence service by visiting our clients suppliers and customers which is particularly relevant to the alcohol industry.
We specialise in issue resolution with HMRC. We have expertise both in indirect (VAT, excise duties and customs duty) and direct taxes. We are highly experienced in HMRC legislation and regulations and in the Tribunal rules and procedures which govern appeals submitted to the Tax Tribunal against decisions made by HMRC. We guide professional advisers through the process of a HMRC tax enquiry.
We have successfully represented clients in negotiated settlements with HMRC’s Civil Investigation Fraud teams, thereby guaranteeing immunity from criminal prosecution for our clients.
We are authorised by the Bar Council to instruct Barristers directly in proceedings in both the Tax Tribunal and the High Court. We are a quality assured supplier of services.