Ifeoma Nwadei v The Commissioners for HMRC

The Appellant, Ms Ifeoma Nwadei, has made an in-time appeal to the First-tier Tribunal (‘FTT’) against a decision by the Respondents (‘HMRC’) to refuse Ms Nwadei’s application to be registered under the Alcohol Wholesaler Registration Scheme (‘AWRS’) as an approved wholesaler of alcoholic goods. HMRC refused the application because they were not satisfied that Ms Nwadei was a fit and proper person to carry on the activity of a wholesaler of dutiable alcoholic liquor.

This is an appeal under section 16 of the Finance Act 1994 (‘FA 1994’) and the FTT’s powers to deal with such an appeal are limited by section 16(4). The FTT can only review HMRC’s decision to determine whether it was reasonable. The only issue in this appeal is whether HMRC’s decision to refuse Ms Nwadei’s application for approval under the AWRS as a wholesaler of alcoholic goods was one that the decision maker could not reasonably have made.

For the reasons set out below, we have decided that it was reasonable of HMRC to conclude that Ms Nwadei had not met the fit and proper requirement in section 88C of the Alcoholic Liquor Duties Act 1979 (‘ALDA’). Accordingly, HMRC’s decision to refuse Ms Nwadei’s application for approval to carry on the activity of a wholesaler of dutiable alcoholic liquor stands and Ms Nwadei’s appeal is dismissed.

On 24 March 2023, the FTT notified the parties that this appeal was listed to be heard on Tuesday 25 April. In accordance with the FTT’s directions dated 5 October 2022, the parties were required to serve their skeleton arguments on each other and the FTT not later than 4 April.

On 30 March, HMRC applied for a seven day extension to serve their skeleton argument on 11 April. The FTT granted the extension unless Ms Nwadei objected. Ms Nwadei did not make any objection or any application for an extension of time in which to serve her skeleton argument at that time. HMRC served their skeleton argument on 11 April.

On 17 April, Ms Nwadei applied to the FTT for “an extension of time for three weeks to enable me arrange myself and get a barrister to assist me prepare a response to my skeletal (sic) argument.” In her application, Ms Nwadei stated that she had been unable to comply with the FTT’s direction to provide her skeleton argument by 4 April because she had received a link to access HMRC’s Hearing Bundle by email on 20 February 2023 but the link had expired after one week and before she could access it. Ms Nwadei said that she only obtained a new link to access the bundle on 13 April which did not allow her sufficient time to instruct a barrister to assist with the skeleton argument or seek legal advice. She also referred to a family bereavement and explained that she had had to attend a funeral which a document attached to her email showed took place between 13 and 16 April.

Read literally, Ms Nwadei’s application appeared to be asking for an additional three weeks from 4 April in which to serve her skeleton argument. Three weeks from 4 April was 25 April, ie the day of the hearing. In a letter dated 19 April, I granted the application on the aforementioned basis in order to avoid the hearing being cancelled with the inevitable delay that would follow before it could be re-listed.

In the same letter, I stated that Ms Nwadei’s application could be read as an application to postpone the hearing for three weeks. I stated that, if that was what Ms Nwadei was asking for then I was not prepared to grant the application. My reason for refusing to postpone the hearing was that it seemed to me that Ms Nwadei had not shown any grounds which justified postponing the hearing. She had not explained why she had not accessed the Hearing Bundle within one week of receiving the link on 20 February. Ms Nwadei had also not explained why she had not instructed a barrister at that stage to assist her. Ms Nwadei had been notified of the hearing on 24 March and that should have prompted her to obtain access to the Hearing Bundle and, if she needed it, legal advice to prepare her skeleton argument. She did not say when she contacted HMRC to ask for the link to be re-sent but it seemed to me that it would have been no earlier than April. I also considered that, as Ms Nwadei was familiar with the nature of the appeal and the reasons given by HMRC for their refusal of her AWRS application, there was no reason why she could not have instructed a barrister to start to assist her at any time before the link was sent on 13 April, eg when she was notified of the hearing in March, and in good time for the hearing.

Accordingly, I directed that the time for Ms Nwadei to provide her skeleton argument was extended until 09:00 on 25 April, the day of the hearing, but I refused any application to postpone the hearing of the case on that day.

Ms Nwadei did not provide a skeleton argument by 09:00 on the day of the hearing. At the start of the hearing, Ms Nwadei renewed her application for it to be postponed. She stated that she had an appointment with her barrister. She explained that HMRC had sent her a link but she had been unable to use it as it was too much for her. She said that when she wanted to see the barrister the link had expired. Ms Nwadei said that she had arthritis and her daughter was ill with skin cancer. She stated that she just wanted support in making the appeal and did not necessarily want to instruct a barrister to represent her. Ms Nwadei said that she was not prepared for the hearing but if we wanted the hearing to go ahead, we could just ask her questions and she would answer them. In response to a question from the Tribunal, Ms Nwadei said that she had contacted the barrister in April.

Ms Hickey, who presented the case for HMRC, opposed Ms Nwadei’s application to postpone the hearing. She submitted that the fact that Ms Nwadei could not access the electronic hearing bundle was irrelevant as HMRC had sent Ms Nwadei a paper hearing bundle on 2 February 2023. Ms Hickey said that she had a spare clean copy of the paper bundle which Ms Nwadei could use at the hearing.

Ms Nwadei stated that she could not remember whether she had received the paper hearing bundle in February or not. Ms Nwadei produced a Royal Mail ‘We could not deliver your parcel’ card dated 14 April which was shown to the Tribunal and HMRC. Ms Hickey said that the date showed that the parcel was the authorities bundle.

We adjourned the hearing for a few minutes to see if HMRC could produce a signature for receipt of the paper hearing bundle in February. After the short adjournment, HMRC stated that they had found a signature acknowledging receipt of the paper hearing bundle but it was not possible to determine whose signature it was.

The Tribunal decided that there was no good reason why the hearing should be postponed and Ms Nwadei’s application should be refused for the reasons given in the letter refusing the original application by email. Accordingly, the hearing proceeded with Ms Hickey opening HMRC’s case and calling their only witness.

Ms Nwadei produced a witness statement of 8 pages dated 16 January 2023 for her appeal. HMRC Officer Caroline Ames produced a witness statement of 8 pages dated 29 November 2022. In addition, we were provided with a hearing bundle of 807 pages containing various documents produced as exhibits in the case. There was also a bundle of authorities.

At the hearing, the witnesses’ statements stood as their evidence in chief. Officer Ames was asked questions by the FTT and by Ms Nwadei. Ms Hickey cross-examined Ms Nwadei. The panel asked Ms Nwadei to provide further information in relation to certain deposits by the Department of Work and Pension (‘DWP’) into Ms Nwadei’s bank account and to clarify her answers to the questions asked by HMRC on 12 October 2021 (see [40] below).

Much of Ms Nwadei’s witness statement and several exhibits dealt with matters that are not relevant to the issues in this appeal such as an allegedly unlawful eviction from rented accommodation in 2005 and allegedly wrongful convictions for assault and obstructing a police officer. The details of those matters are completely irrelevant to the issue in this appeal and we do not describe them further and have disregarded them in reaching our decision.

On the basis of the witness statements and documents produced in evidence, the evidence given by Ms Nwadei and Officer Ames at the hearing and the information and comments submitted by the parties subsequently, we find the material facts to be as set out below.

Ms Nwadei was born in Nigeria and came to the United Kingdom in 2001. She has lived in the United Kingdom since then and is a British Citizen.

Before coming to the United Kingdom, Ms Nwadei worked as a Sales Dealer with Siemens, a German communications company with branches in Nigeria. Ms Nwadei was selected to receive training in Germany as a business researcher for Siemens with a view to representing them in Nigeria and Africa as a whole. After training in Germany in 2000, Ms Nwadei was invited to go to the United Kingdom by a Siemens company for business research purposes which is how she came to move to the United Kingdom in 2001.

Ms Nwadei ran a hotel in Nigeria and distributed beer. She said that she had noticed bars and restaurants in the UK and decided that she would start an alcohol wholesale business.

Ms Nwadei first applied for AWRS approval on 22 January 2021. The application was dealt with by HMRC Officer Farah Aslam. After an exchange of correspondence and a telephone interview, Officer Aslam rejected the application in a letter dated 14 April on the ground that the “business, the legal business entity and other key persons within the business are not ‘fit and proper’ to carry out a controlled activity, in this case the wholesale of alcohol”. The letter set out eleven points which caused HMRC concern and led to the conclusion that the fit and proper requirement had not been met. None of the points mentioned anything about Ms Nwadei’s previous convictions but in evidence at the hearing she said that Officer Aslam said that she was not a fit and proper person because of her criminal record. We do not accept Ms Nwadei’s evidence on this point for two reasons. The first is that if Officer Aslam had considered that Ms Nwadei’s criminal record was a reason to conclude that she was not a fit and proper person then we would have expected her to mention it in her letter of 14 April. The second reason is that Ms Nwadei’s evidence is contradicted by the AWRS Pre-registration Aide Memoire completed by Officer Aslam before she issued the decision letter and included in the hearing bundle. That document clearly stated in box 3 of section 4 ‘Fit and Proper Tests’ that:

“PNC results revealed 2 spent convictions. These are considered not relevant.”

Ms Nwadei requested a review of Officer Aslam’s decision. On 21 June, HMRC issued their review conclusion letter to the Appellant, upholding the refusal of 14 April.

Ms Nwadei made a second application for AWRS approval on 2 July. This application was considered by Officer Ames who realised that Ms Nwadei had previously applied for AWRS and been refused.

On 27 July, Officer Ames sent Ms Nwadei an email explaining that her new application would only be considered if she supplied the information previously requested by Officer Aslam. Officer Ames asked for a response by 4 August. On 5 August, when nothing had been received, Officer Ames telephoned Ms Nwadei on the number provided on the application. The number was not available. Officer Ames then sent an email to Ms Nwadei saying that if no response was received by 9 August the application would be rejected.

On 10 August, as no response had been received from Ms Nwadei and it appeared that the previous reasons for refusal had not been addressed, Officer Ames sent Ms Nwadei a rejection letter.

Ms Nwadei contacted Officer Ames on 10 September. She said that she had been out of the country. After a further exchange of emails and a telephone conversation, Ms Nwadei asked Officer Ames to reconsider her decision of 10 August.

On 14 September, Officer Ames emailed Ms Nwadei and asked her to provide:

On the same day, Ms Nwadei emailed the following documents to Officer Ames:

Officer Ames replied to Ms Nwadei by email on 16 September stating that the intent to trade letters should be from her potential customers. Officer Ames asked Ms Nwadei to provide the intent to trade letters as soon as possible.

Ms Nwadei telephoned Officer Ames on 17 September. She explained that she was finding it difficult to get her potential customers to supply a letter of intent. Officer Ames explained that they were necessary for the application and required as evidence that she had potential customers for the products she intended to sell. Ms Nwadei stated that she would write a statement and get the customers to sign it.

On 19 September, Ms Nwadei emailed Officer Ames two identically worded letters of intent from potential customers, Lush Bar African Restaurant and Ecowas Kitchen. Ms Nwadei also gave contact details of other potential customers who had either agreed verbally to purchase from her or in respect of which she would “supply letters from soon”. Officer Ames emailed Ms Nwadei to acknowledge receipt of the information and inform her that she was awaiting further intent to trade statements.

Ms Nwadei telephoned Officer Ames on 21 September and told her that she would like the application to go ahead with the information that had already been supplied. Officer Ames asked Ms Nwadei where her funding would come from and she replied that she was training in law and worked for Graceland Solicitors. Ms Nwadei’s bank statements showed that she had received amounts described as pay from Graceland on 18 June and 24 August. Ms Nwadei explained that a £20,000 payment received on 14 September was for a student loan which she intended to put into her business. Officer Ames asked for evidence of the student loan.

On 21 September, Ms Nwadei emailed Officer Ames with confirmation of a student loan of £11,222 and a Santander bank statement for the period March to April 2021 which she said included a deposit of £5,000 by Stella Ezedebe-Odia on 15 April.

Officer Ames submitted her initial recommendations to her manager on 23 September. This included an aide memoir document and a ‘Fit and Proper Test’ document which stated that, at that time, Officer Ames considered that Ms Nwadei had met the fit and proper person criteria.

Officer Ames had a case discussion with her manager and reviewed the application again on 1 October. 2021. They decided that the information that had been provided by Ms Nwadei was not sufficient to meet the fit and proper test described in Excise Notice 2002: Alcohol Wholesaler Registration Scheme (‘EN 2002’) and that further information was required. At the hearing, Officer Ames told us that they always had a second pair of eyes, ie the manager, look at the figures and when they discussed the information that had been provided, they realised that the calculations of profits did not stack up and that the initial start-up figure had not been shown to be money available to the business.

After the meeting with her manager, Officer Ames sent an email to Ms Nwadei on 1 October asking for more information to enable her to consider the approval. The information requested included the following:

Ms Nwadei responded by email on 1 October stating that she had been unable to open a business bank account without AWRS approval and forwarding an email from Santander requesting confirmation of AWRS to progress.

On 5 October, Ms Nwadei sent Officer Ames an email with answers to the questions in her email of 1 October and ten attached documents. Ms Nwadei provided:

On 12 October, Officer Ames emailed Ms Nwadei to ask for clarification of the information she had provided. The further information requested was as follows:

Ms Nwadei replied by email on 14 October. The answers given by Ms Nwadei to Officer Ames’s questions were as follows. Ms Nwadei provided a list of 12 products but not all of them were alcohol, eg some were fruit juice and one was rice. She stated that there were no direct sellers of the Nigerian brand products that she proposed to sell so customers would be unlikely to buy them direct (although her supplier of Nigerian brands of alcohol was based in the UK). Her response in relation to funding was vague, referring to £7,000 from her friend and her student finance loan. Ms Nwadei stated that the sales of watches and bracelets were a one-off transaction.

On 19 October, Officer Ames had a further case discussion with her manager. Officer Ames considered that the information provided by Ms Nwadei did not indicate a credible business and they considered rejecting the application. Officer Ames decided to give Ms Nwadei another opportunity to supply information and evidence of a potential viable alcohol wholesale business. On the same day, Officer Ames sent Ms Nwadei another email requesting further information, a list of all of Ms Nwadei’s sources of income in a month and explanations of some figures previously provided.

Officer Ames had not received a reply from Ms Nwadei by 15 November so she sent a reminder email stating that if she did not hear from Ms Nwadei by 22 November, she would assume that Ms Nwadei no longer required AWRS approval and would reject the application.

In a letter dated 6 December 2021, Officer Ames informed Ms Nwadei that, having reconsidered it as requested by Ms Nwadei on 13 September, the decision of 10 August to reject Ms Nwadei’s application for AWRS approval was maintained. Officer Ames stated that she remained unclear about eight points:

“1.

On your email of 05/10/21 you state that you ‘completely have no clue of any income of £142,500’, however on your 2019/20 Self-assessment return your authorised agent VG & Co Accountants & Management Consultants Ltd, have submitted the following figures: Turnover £142,500, Expenses £132,834 and Net Profit £9,666. You have not explained what this income relates to, or provided a copy of your accountant’s workings, as requested in my email of 19/10/21.

2.

On the 19/10/21 I also requested a list of ALL of your sources of income in a month. I have not received this.

3.

In your business plan you indicated that the start-up capital needed is £32,000, however you have not been able to explain where the start-up capital will be funded from. Initially you said that the start-up loan of £7,000 was to be provided by the DWP, but this is no longer the case. You said that you have your student loan of £11,222, but according to your Barclays Bank Statement dated 13/09/2021, you have a balance left of £3,926.44 remaining. You have not explained how you anticipate the £7,000 loaned to you from Stella Odiah to be enough? Nor what agreement has been made to pay this off.

4.

In the business plan provided, under potential customers you indicate that your monthly revenue is £454. And your yearly income would be £65,435 respectively. 12 times monthly income of £453 equates to a yearly turnover of £5,448. No explanation of this has been received.

5.

The business plan mentions that you have secured 6 customers who have restaurants, drinking bar, shops in the area. I have only received evidence from Ecowas Kitchen and Lush Bar African Restaurant. You have not provided letters of intent, as requested, from the remaining 4 potential customers on their business headed paper to confirm that they would be interested in purchasing alcohol from you.

6.

In the costings break down you have provided in your email dated 14/10/2021, you have shown prices for the Guinness – product 1 and product 2 in Schedule 1. The price that you have shown is the net price, once you add VAT onto this price, you will be selling the goods at below the price inc. VAT that you will have paid for the goods. You have the cost price of 325 ml Guinness at £26.40, this price excludes VAT at 20%. The cost to you is therefore £31.68, your selling price is shown as £30.00, the same applies for the 600ml, the cost price inc. VAT is £30.32, your selling price is £29.77.

These figures are therefore not credible.

7.

You have said that there are no direct suppliers. The pro-forma invoice you have provided is from Kato Enterprises Ltd, who are located at Croydon, you have not explained what is to stop potential customers going direct to Kato Enterprises or other stores and buying the product from them.

8.

It is important that we assess the credibility and viability of the potential alcohol business. You have not explained how you will be able to run an alcohol supply business alongside your solicitor work/training third party agent UK higher Education institution and the other businesses you have mentioned i.e., jewellery supply and catering.”

On 3 January 2022, Ms Nwadei submitted her notice of appeal to the FTT to which she attached HMRC’s decision of 6 December 2021. In the space for stating the grounds of appeal, Ms Nwadei wrote:

“Application for AWRS since 5th November 2020 have been refused. The decision has been reviewed by Ms. Farah Aslam have reviewed and ask that I reapply which I have done. I don’t want more to do.

Its all about criminal record for an offence I did not commit. Due Diligence.

I was told I am not a fit and proper person”

The grounds of appeal did not address the reasons given by Officer Ames in the decision letter, which is the subject of this appeal, and referred to the first refusal letter in April 2021 (see [22] above) which was not appealed. The grounds also refer to a criminal record and due diligence which were not matters mentioned by Officer Ames in the decision letter. At no point in her correspondence with Ms Nwadei did Officer Ames refer to any criminal record. Her evidence was that, although she was aware that Ms Nwadei had two spent convictions, she did not take them into account when making her decision to refuse the AWRS approval because she considered that they were not relevant. We accept Officer Ames’s evidence on this point.

In the Notice of Appeal, Ms Nwadei stated that her desired outcome of the appeal was as follows:

“I want to be issued with AWRS approval to do my business properly. I have been paying for storage, Website etc for over a year without a business.”

On 6 May 2022, HMRC submitted an application to the FTT for a direction that Ms Nwadei provide further and better particulars, essentially asking Ms Nwadei to respond to the eight points raised in Officer Ames’s letter of 6 December 2021.

The FTT made the direction for further and better particulars and, on 19 July 2022, Ms Nwadei responded as follows (using the same numbering as in HMRC’s letter of 6 December 2021):

“1.

I registered online for AWRS on the 6th of August 2020, HMRC alerted me to this issue where an accountant had misrepresented my tax returns and gave me the information above. I told them I did not have a clue about what they were saying. I am a caterer and love cooking. I was a student at the University of East London and finished in May 2016. It was church harvest for Celestial Churches in the UK. I was contracted by Late Julius Shebioba who was the Head of Administration in CCC UK/Northern Island [sic] for catering services from May 2016 to September 2016. I was self-employed, and I should pay my tax myself. He got an accountant to help me. The earlier returns were a mistake and indicate the church expenditure, not mine. I was paid £9666.00 at the end of the contract. I had to trace the accountant, met him Mr. Sam Goffrey for the first time on 18th November 2021 and he sent the document as enclosed, See NWADE Tax Returns.

2.

I don’t have a source of income. I was a Detention Custody Officer, with Serco at the Gatwick Immigration Detention Centre. My only source of income would have been supplying alcohol wholesale but waiting for registration.

3.

I reported to Jobcentre after my ordeal with IRC to report myself jobless and that I wanted to start a business. All documentation have been supplied to this question.

4.

There was a typo error which have been corrected to you.

5.

All calls were recorded HMRC requested two when I explained the stress going through having to disturb Clients without an active business.

6.

I am going to get my supply in pallet as a wholesaler and the more quantity I buy the price becomes lower.

7.

When in Nigeria I owned hotels with my partner and it is a business I am used to. I personally went to Nigerian Guinness, Breweries to inquire about my new business abroad as I was their distributor years back. They introduced me to Kato to do business with. The barriers are the connections which I established years of networking and relationship building.

8.

I don’t do jewelry [sic], I help some buy jewelry [sic] when it was on sales, UK higher education agent is part of my law job. I am a student and no maintenance allowance. I have to work/do my AWRS business to survive.”

In her witness statement, dated 16 January 2023, Ms Nwadei purported to clarify the points made in her response to the direction to provide further and better particulars. Ms Nwadei’s statements in relation to points 1, 2, 4, 6, and 8 were materially the same as those in her response of 19 July 2022. In relation to point 3, Ms Nwadei said in her witness statement that she had not been able to obtain business loans from banks but her children and a friend would provide funds and were only waiting for the AWRS license to be approved. In relation to point 5, Ms Nwadei said in her witness statement that she had only provided two letters of intent from potential customers and had not provided such letters from the other four persons referred to in her business plan because they were not, at present, willing to supply any documentation. In relation to point 7, Ms Nwadei said in her witness statement:

“[HMRC] is asking me ‘why can’t my propose [sic] customers buy directly from them?’ the respondent’s questions here is neither understood nor make any arguable sense. Are they saying that everyone who trades in alcohol must buy directly from Kato?”

In her witness statement and at the hearing of the appeal, Officer Ames set out her reasons for refusing Ms Nwadei’s application to be registered under the AWRS as an approved wholesaler of alcoholic goods on the ground that she was not a fit and proper person. The different reasons why Officer Ames concluded that Ms Nwadei was not a fit and proper person to carry on the activity of a wholesaler of dutiable alcoholic liquor may be summarised as follows.

Having considered the points above, Officer Ames did not believe that there was enough evidence to show that the proposed alcohol business was credible or financially viable. Officer Ames said that she refused Ms Nwadei’s AWRS application because, when considered together, the points above showed that neither Ms Nwadei nor her business met the fit and proper test. Officer Ames referred to section 6.9 of EN 2002 which states that “HMRC will not approve applicants where they find that they cannot substantiate that there’s a genuine plan to legitimately trade from the proposed date”.

In her grounds of appeal and in her witness statement, Ms Nwadei said that her application for AWRS approval had been refused because of her criminal record for an offence that she did not commit. In her evidence, Officer Ames confirmed that, although she was aware of Ms Nwadei’s criminal record, it did not form part of her decision to refuse the AWRS approval because she did not consider that it was relevant. We accept Officer Ames’s evidence on this point. If she had considered that Ms Nwadei’s spent convictions meant that she was not a fit and proper person then we would have expected Officer Ames to mention it in the decision letter but she did not do so.

Officer Ames also considered the further and better particulars provided by Ms Nwadei on 19 July 2022 (see [49] above). Officer Ames stated that she did not consider that the information provided affected her decision to refuse Ms Nwadei’s application for AWRS approval for reasons which may be summarised as follows (using the same numbering as Ms Nwadei):

In summary, having considered the further information provided by Ms Nwadei, Officer Ames was not satisfied that Ms Nwadei was a fit and proper person to be approved under the AWRS due to the conflicting information received and the lack of any reasonable evidence of a credible and viable business.