Len Lothian Holdings Limited v The Commissioners for HMRC

The provisions of the ED(HMDP)R 2010, so far as they are relevant to the Assessment, are as follows:

“Part 2: Excise Duty Points and Payment of the Duty

Goods released for consumption in the United Kingdom-excise duty point

5.

Subject to regulations 7(2) and 7A, there is an excise duty point at the time when excise goods are released for consumption in the United Kingdom.

…

6.—

(1)

Excise goods are released for consumption in the United Kingdom at the time when the goods—

…

(b)

are held outside a duty suspension arrangement and excise duty on those goods has not been paid, relieved, remitted or deferred under a duty deferment arrangement;

…

…

10.—

(1)

The person liable to pay the duty when excise goods are released for consumption by virtue of regulation 6(1)(b) (holding of excise goods outside a duty suspension arrangement) is the person holding the excise goods at that time.

(2)

Any other person involved in the holding of the excise goods is jointly and severally liable to pay the duty with the person specified in paragraph (1).”

Accordingly, liability turns on whether Len Lothian “held” the goods when they were discovered by HMRC, since:

In Case C-279/19 HMRC v. WR, ECJ (10 June 2021), ECLI:EU:C:2021:473 (“WR”) the CJEU considered the meaning of “holds” in the context of the relevant Directive that is transposed into domestic legislation in the ED(HMDP)R 2010. The CJEU reformulated the question they were asked to consider as:

“in essence, whether Article 33(3) of Directive 2008/118 must be interpreted as meaning that a person who transports, on behalf of others, excise goods to another Member State, and who is in physical possession of those goods at the moment when they have become chargeable to the corresponding excise duty, is liable for that excise duty, under that provision, even if that person has no right to or interest in those goods and is not aware that they are subject to excise duty or, if so aware, is not aware that they have become chargeable to the corresponding excise duty.”

In summary, the CJEU found:

The CJEU concluded in the dispositif that:

“In the light of the foregoing, the answer to the questions referred is that Article 33(3) of Directive 2008/118 must be interpreted as meaning that a person who transports, on behalf of others, excise goods to another Member State, and who is in physical possession of those goods at the moment when they have become chargeable to the corresponding excise duty, is liable for that excise duty, under that provision, even if that person has no right to or interest in those goods and is not aware that they are subject to excise duty or, if so aware, is not aware that they have become chargeable to the corresponding excise duty.”

The CJEU thus concluded, contrary to the earlier decisions in that case of the FTT and the UT, that “the entirely innocent agent” could be liable. They rejected such a limitation, as it would “make it difficult, in practice, to collect that duty from the person with whom the competent national authorities are in direct contact and who, in many situations, is the only person from whom those authorities can, in practice, demand payment of that duty”: at [34]. They cited (at [33]) how the Advocate General had favoured a “broad definition… to ensure, so far as possible, that such duty is collected”.

In his Opinion Advocate General Tanchev had advised that there was no requirement for knowledge and liability was therefore strict (see [44] to [46]). This was based on two key policy considerations. The first is that the purpose of the 2008 Directive is to ensure that the excise duty is collected. The second is that those engaged in commerce assume the risk of being liable for the actions of those with whom they do business. Those entrepreneurs are best placed to identify and take steps to guard against those risks (see [37] to [39]).

Importantly, the judgment was in the context of a referral where physical possession was not in dispute. Hence it does not necessarily limit holding to circumstances where there is physical possession.

The referral, which was made by the Court of Appeal, was considered in HMRC v Perfect [2022] EWCA Civ 330; [2022] STC 642.

Dawson’s concerned an assessment being challenged on the basis of there being an earlier excise duty point against which the assessment should have been made.

Asplin LJ approved both the decision of the Advocate General and that of the CJEU in WR (at [70]-[73]). She noted (at [95]) that “it is inevitable that a detailed consideration of the facts is necessary in order to determine whether that person was ‘holding’ the goods”.

In Hartleb v HMRC [2024] UKUT 34 (TCC) (“Hartleb”) Johnson J and Judge Tilakapala stated that the four factors identified by the UT in Dawson’s (Wales) Ltd v HMRC [2019] UKUT 296 (TCC) “to be a useful guide in determining who to regard as holder in circumstances where physical possession and de facto and/or legal control are separated” (at [78]). This was notwithstanding the fact that in Dawson’s the factors were intended to aid identification of an earlier excise duty point. Those four factors were:

Johnson J and Judge Tilakapala also confirmed that physical possession is not determinative: at [80], [82] and [90]-[92]. However, physical possession is the appropriate starting point: at [68], [81] and [83].

HMRC also rely on the following passage in Hartleb where Johnson J and Judge Tilakapala quote the Opinion of Advocate General Tanchev in WR:

“93.

More specifically, and relevant to the issue in this case, we also note his further comments (our italics);

‘As the United Kingdom Government added, to import a knowledge requirement into the concept of ‘holding’ or ‘making the delivery’ in Article 8(1)(b) and Article 33(3) of the Directive would undermine its object and purpose. It would create a means by which excise duty could be evaded relatively easily. Thus an individual found in physical possession of chargeable goods, could – such as WR had done here – simply fail to identify the person who had employed him or her to transport the goods or any other details concerning ownership of the goods (either wilfully or because he or she had been given false details). [37]

Again, this would make it difficult to combat fraud and abuse, whereas the scheme of the Directive itself and recitals require that the national authorities must ensure that the tax debt is in fact collected …” [38]

94.

His acknowledgment of and response to the following submission made by WR is also instructive (again our italics):

[the submission]

“A decision that someone in WR’s position is liable to excise duty would cause commercial chaos because it would mean that a delivery driver (say, working for DHL) who collected a case of wine from point A and delivered it to point B would (simply because he knew or should have known from the markings on the package that it contained wine) be liable to account for duty if it turned out that no duty had been paid on that case [15]”

[the response]

“The argument raised by WR in relation to the example of a DHL driver (in point 15 of the present Opinion) can be easily dismissed, A person making a delivery for DHL would not be liable, but DHL – the undertaking itself – would. As the Netherlands Government pointed out, WR is to be regarded as self employed and thus as an entrepreneur who accepted to work without any written contract and to be paid in cash. Entrepreneurship involves entrepreneurial risk and that includes an entrepreneur being personally responsible for the persons with whom he or she does business and from whom he or she accepts commissions. Furthermore, an entrepreneur can protect himself or herself against such risks through insurance or by assigning those risks contractually to the clients” [39]

HMRC say that this passage is authority that the lack of identifiability of a person (A), who would otherwise be a holder, may make another person (B) liable.

HMRC also rely on Kent Couriers Ltd v HMRC [2024] UKFTT 145 (TC) at [30] in which Judge Beare held that only one person may be holding goods at a given excise point. However they submit lack of identifiability of a person who would otherwise be a holder (if identified) can make another a holder.

Len Lothian rely on Bunting v HMRC [2024] UKFTT 431 (TC) in which Judge Staker considered storage units that were rented out on a farm. He considered a number of instances where a person does not have such physical possession of excise goods merely because they own the property on which the goods are being held by a third party. These included (at [36]) a self-storage unit business. However, whilst in many circumstances this may be the case, it is clear that a detailed consideration of the facts is necessary in each case and the starting point must be physical possession.

The provisions of the FA 2008, so far as they are relevant to the Penalty, are as follows:

“Schedule 41: Penalties: failure to notify and certain VAT and excise wrongdoing

…

Handling goods subject to unpaid excise duty etc

4.—

(1)

A penalty is payable by a person (P) where—

(a)

after the excise duty point for any goods which are chargeable with a duty of excise, P acquires possession of the goods or is concerned in carrying, removing, depositing, keeping or otherwise dealing with the goods, and

(b)

at the time when P acquires possession of the goods or is so concerned, a payment of duty on the goods is outstanding and has not been deferred.

…

Amount of penalty: standard amount

6.—

(1)

This paragraph sets out the penalty payable under paragraph 1.

(2)

If the failure is in category 1, the penalty is—

(a)

for a deliberate and concealed failure, 100% of the potential lost revenue,

(b)

for a deliberate but not concealed failure, 70% of the potential lost revenue, and

(c)

for any other case, 30% of the potential lost revenue.

…

6A.—

(1)

A failure is in category 1 if—

(a)

it involves a domestic matter…

…

Potential lost revenue

…

9.

In the case of—

(a)

the doing of an act which enables HMRC to assess an amount of duty as due under a relevant excise provision, or

(b)

supplying a product knowing that it will be used in a way which enables HMRC to assess an amount as duty due from another person under a relevant excise provision,

the potential lost revenue is the amount of the duty which may be assessed as due.

Reductions for disclosure

12.—

(1)

Paragraph 13 provides for reductions in penalties—

(a)

under paragraph 1 where P discloses a relevant failure that involves a domestic matter, and

(b)

under paragraphs 2 to 4 where P discloses a relevant act or failure.

…

(1B) Sub-paragraph (2) applies where P discloses—

(a)

a relevant failure that involves a domestic matter,

(b)

a non-deliberate relevant failure that involves an offshore matter, or

(c)

a relevant act or failure giving rise to a penalty under any of paragraphs 2 to 4.

(2)

P discloses the relevant act or failure by—

(a)

telling HMRC about it,

(b)

giving HMRC reasonable help in quantifying the tax unpaid by reason of it, and

(c)

allowing HMRC access to records for the purpose of checking how much tax is so unpaid.

…

(3)

Disclosure of a relevant act or failure—

(a)

is “unprompted” if made at a time when the person making it has no reason to believe that HMRC have discovered or are about to discover the relevant act or failure, and

(b)

otherwise, is “prompted”.

…

13.—

(1)

If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table (a ‘standard percentage’) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.

(2)

But the standard percentage may not be reduced to a percentage that is below the minimum shown for it—

(a)

for a prompted disclosure, in column 2 of the Table, and

(b)

for an unprompted disclosure, in column 3 of the Table.

(3)

Where the Table shows a different minimum for case A and case B—

(a)

the case A minimum applies if—

(i)

the penalty is one under paragraph 1, and

(ii)

HMRC become aware of the failure less than 12 months after the time when the tax first becomes unpaid by reason of the failure, and

(b)

otherwise, the case B minimum applies.

Standard %	Minimum % for prompted disclosure	Minimum % for unprompted disclosure
30%	case A: 10% case B: 20%	case A: 0% case B: 10%
70%	35%	20%
100%	50%	30%

…

Special reduction

14.—

(1)

If HMRC think it right because of special circumstances, they may reduce a penalty under any of paragraphs 1 to 4.

(2)

In sub-paragraph (1) “special circumstances” does not include—

(a)

ability to pay, or

(b)

the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another.

(3)

In sub-paragraph (1) the reference to reducing a penalty includes a reference to—

(a)

staying a penalty, and

(b)

agreeing a compromise in relation to proceedings for a penalty.

…

Reasonable excuse

20.—

(1)

Liability to a penalty under any of paragraphs 1, 2, 3(1) and 4 does not arise in relation to an act or failure which is not deliberate if P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the act or failure.

(2)

For the purposes of sub-paragraph (1)—

(a)

an insufficiency of funds is not a reasonable excuse unless attributable to events outside P’s control,

(b)

where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the relevant act or failure, and

(c)

where P had a reasonable excuse for the relevant act or failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the relevant act or failure is remedied without unreasonable delay after the excuse ceased.

It is common ground that excise duty on the Goods had been neither paid nor deferred. Thus, Len Lothian is liable to the penalty charged by the Penalty Assessment if, and only if, after an excise duty point arose, Len Lothian “acquired possession” of the Goods, or was “concerned in… keeping” the Goods.

It is common ground that even if Len Lothian had possession of the Goods or was “concerned in… keeping” the Goods then the act was not “deliberate”.

We heard live witness evidence in the following order:

We have also considered the evidence contained in an electronic bundle of 515 pages in addition to the affidavit of Mr Melvin (2 pages).

We have also benefited from skeleton arguments and notes of evidence provided by both parties. In addition we have a four page response to questions sent by the Tribunal to the parties on the day before the hearing, sent by HMRC. The questions largely concerned Scots law. At the start of the hearing Len Lothian confirmed that they were in broad agreement with most of the responses.

Both parties accept that Mr Lees and Officers Bernard, Stevenson and Murray were credible and reliable witnesses. We agree. They answered the questions put to them in a straightforward manner.

We found Mr Lothian to be a partial witness: who was keen to justify the conduct of his company. He seemed relatively unconcerned that the business had been used to facilitate the evasion of excise duty. He regarded the purpose of customer due diligence to be about protecting the business from default rather than involvement in nefarious activity. He appeared less knowledgeable of the day-to-day affairs of the business: for example Mr Lees stated that they no longer took cash, but Mr Lothian suggested they would in certain circumstances. Whilst we accept he did not seek to deliberately mislead the Tribunal, for the reasons detailed below, we find that he was unreliable when he asserted that identity documents for Chelsea Kelly had been deleted. Overall, we found him to be a less reliable witness.

We have decided to place no weight on the affidavit of Mr Melvin, as we find it unreliable. The affidavit implies that the contract was taken on an iPad, however the evidence of Mr Lees is that it was later when iPads were introduced. Further, it is clear from the agreement that it was in a printed file. There is also no reason why the contract would not have been uploaded immediately if it was originally created in electronic format.

Further, there is no reason given as to why Mr Melvin would have recalled Chelsea Kelly or why he recalled he signed her as a customer. It is unclear if he was prompted. He does not describe her or anything memorable about her. She would have been one of many customers he would have come into contact with in his 14 years working for Len Lothian.

Whilst Mr Melvin asserts he saw Chelsea Kelly’s driving licence, we consider this unlikely. If he had he would likely have entered her date of birth on the system. Yet that field is blank.

Whilst Mr Melvin claims he met Chelsea Kelly, we consider this is unlikely as an address was provided that she had ceased to live at. Using a past address would be more consistent with the theft of her identity. If she wished to mislead she would have been more likely to provide an address that was not connected with her.

Mr Melvin does not also address why the agreement is not signed.

In Gestmin SGPS SA v Credit Suisse (UK) Ltd & Anor [2013] EWHC 3560 (Comm) at [19] Leggatt J discussed the challenges of evidence based on recollection and the unreliability of human memory in relation to events which occurred several years ago. Cross-examination allows such memories to be tested. However Mr Melvin chose not to attend, but rather provided an affidavit.

Given the foregoing inconsistencies, our lack of knowledge as to how the affidavit was prepared and the inability to cross-examine Mr Melvin, we have decided to place no weight on the affidavit.

Len Lothian operates a self-storage facility at 31–35 MacLellan Street, Kinning Park, Glasgow.

Customers hire the use of units. The units are secured by customers using padlocks that the customers provide. Len Lothian does not keep keys to these padlocks. The doors to the units contain the ability to attach a second padlock. This second padlock position would be used by Len Lothian to secure the unit, a process termed “overlocking”, including when a customer fails to pay the storage fee.

The units are all located off a long corridor. The corridor is accessed either via a door leading from the front-office, or via a shutter at the end of the corridor. When customers are there the shutter is often raised and so other customers can access the corridor without going through the front-office. Customers are issued with a fob which can open the door in the front-office leading to the corridor. There is a button inside the corridor that customers can use to raise the shutter.

The facility is locked from 6pm until the facility re-opens in the morning. While the facility is closed customers have no access.

The business involves leasing storage units to customers under standard self storage licence agreements, based on the standard terms of the Self Storage Association UK. The relevant standard form terms, in which Len Lothian is referred to as “FO” (an abbreviation for Facility Operator) include the following:

“STORAGE:

1.

So long as all fees are paid up to date, You: (a) are licensed to store Goods in the Unit allocated to You by FO from time to time and only in that Unit…

…

5.

You are responsible to pay: (a) the Storage Fee…

DEFAULT - RIGHT TO SELL OR DISPOSE OF GOODS:

6.

FO takes the issue of prompt payment seriously and has a right of lien, which is a right to seize and sell or otherwise dispose of some or all of the Goods as security for Your obligation to make payments under this Agreement, if any sum owing to FO and other fees related to it are not paid when due (Debt), You authorise FO without further notice to: (a) refuse You and Your Agents access to the Goods, the Unit and the Facility and overlock the Unit until the Debt has been paid in full; (b) enter the Unit and inspect and/or remove the Goods to another unit or site and to charge You for all reasonable costs of doing so on any number of occasions; and (c) apply the Deposit against the Debt and, if insufficient to clear it in full, hold onto and/or ultimately sell or dispose of some or all of the Goods in accordance with Conditions 8 to 10. You acknowledge that (a) FO shall be entitled to continue to charge for storage from the date the Debt becomes due until payment is made in full or the Goods are sold or disposed of; (b) FO will sell the Goods as if FO was the owner and will pass all rights of ownership in the Goods to the buyer; and (c) if You do not pay fees on the Due Date, the value of any discounts and special offers (including periods of free storage) which You have received will be payable by You in full.

ACCESS:

12.

You have the right to access the Unit during Access Hours as posted by FO and subject to the terms of this Agreement. FO will try to provide advance warning of changes to Access Hours by notice at the Facility and/or by SMS or email, but reserves the right to change Access Hours temporarily to other reasonable times without giving prior notice.

13.

Only You or others authorised or accompanied by You (Your Agents) may access the Unit. You are responsible for and liable to FO and other users of the Facility for Your own actions and those of Your Agents. FO may (but is not obliged to) require proof of identity from You or any other person at any time and, at FO’s sole discretion, may refuse access to any person who is unable to produce satisfactory proof.

14.

FO may refuse You access to the Unit and/or the Facility where moneys are owing by You to FO, whether or not a formal demand for payment has been made, or if FO considers the safety or security of any person, unit or goods on or at the Facility has been threatened or may be put at risk.

15.

You should not leave a key with or permit access to the Unit to any person other than Your own Agent who is responsible to You and subject to Your control. If You do so, it is at Your own risk.

16.

You authorise FO and its agents and contractors to enter the Unit in the following circumstances and to break any lock if reasonably necessary to gain entry: (a) on not less than 7 days’ notice to inspect or carry out repairs or alterations to the Unit or any other part of the Facility; (b) without prior notice (but with notice as soon as practicable after the event) in the event of an emergency (including for repair or alteration) or to prevent injury or damage to persons or property; (c) if FO believes the Unit is being used to store prohibited goods or for a prohibited purpose; (d) if FO is obliged to do so by law, by the Police, Fire Services, Trading Standards, HM Revenue & Customs, other competent authority or by a Court Order; or (e) to relocate the Goods or exercise FO’s lien or power of sale or disposal in accordance with this Agreement.

CONDITIONS:

17.

You will be solely responsible for securing the Unit and ensuring it is locked so as to be secure from unauthorised entry at all times when You are not in the Unit. FO will not be responsible for securing any unlocked Unit. You are not permitted to apply a padlock or other device to the Unit in FO’s overlocking position and FO may have any such padlock or device forcefully cut off at Your expense. Where applicable, You will secure the external gates and/or doors of the Facility.

18.

You must not store (or allow any other person to store) any of the following in the Unit: (a) food or perishable goods unless securely packed so they are protected from and do not attract vermin; (b) any living creatures; (c) combustible or flammable substances such as gas, paint, petrol, oil, cleaning solvents or compressed gases; (d) firearms, explosives, weapons or ammunition; (e) chemicals, radioactive materials, biological agents, toxic waste, asbestos or other potentially hazardous substances; (f) any item that emits fumes, or odours; (g) any illegal item or substances or goods illegally obtained such as illicit (counterfeit/smuggled) tobacco or alcohol and unlicensed or unsafe goods (such as toys, electrical goods, medicines, aerosols, cosmetics, fireworks); (h) goods which are environmentally harmful or that are a risk to the property of any person; (i) currency, deeds and securities; and (j) items which are unique in nature and/or where the value to You cannot be assessed on a financial basis. You will be liable under Condition 29 for any breach of this Condition 18.

19.

You will use the Unit solely for the purpose of storage…

…

22.

This Agreement does not confer on You any right to exclusive possession of the Unit and FO reserves the right to relocate You to another Unit not smaller than the current Unit: (a) by giving 14 days’ notice during which You can elect to terminate this Agreement under Condition 37; or (b) on shorter notice if an incident occurs that requires the Unit or section where it is located to be closed or sealed off. In these circumstances, FO will pay Your reasonable costs of removal if approved in writing by FO before removal. If You do not arrange removal by the date specified in FO’s notice, then You authorise FO and its agents to enter the Unit and move the Goods as Your agent on Your behalf and at Your risk (except for damage caused wilfully or negligently which is subject to the limitations in Condition 27). Following removal this Agreement will be varied by substitution of the new Unit number but otherwise continues on the same terms at the storage rates in force for the original Unit at the time of the removal.

…

RISK AND RESPONSIBILITY:

…

31.

If FO has reason to believe that You are not complying with all relevant laws FO may take any action it considers necessary, including, but not limited to, action outlined in Conditions 16 and 37, contacting, cooperating with and/or submitting Goods to relevant authorities, and/or immediately disposing of or removing Goods at Your expense. You agree that FO may take such action at any time even though FO could have acted earlier.

OTHER IMPORTANT TERMS:

…

43.

This Agreement shall be governed by Scots law and any dispute or claim that either party brings will be decided by the Scottish Courts.”

On 14 August 2020, a quote was first provided by Mr Melvin, on behalf of Len Lothian, to book a storage unit. The quote was for a person said to be Chelsea Kelly.

On 10 December 2020, a licence agreement was created in the name of Chelsea Kelly for unit B1022, for the period 10 December 2020 to 9 February 2021 (renewing automatically thereafter, unless at least 7 days’ notice was given by either party). The agreement was signed by Mr Melvin, but not by Chelsea Kelly. The unsigned agreement was later scanned into Len Lothian’s system in March 2022.

Len Lothian allowed goods to be stored in Unit B1022, and received regular payments against regular invoices.

The storage fee was paid in cash by a man. He would regularly access the unit and was known to staff and was captured on CCTV. They got to know he was called “Kami” as one day he had a discussion with a staff member about football. (We refer to him as Kami in this Decision, although that may not be his real or legal name.) They assumed he had Chelsea Kelly’s permission to access the unit as they assumed he had a key allowing him to open the padlock. Staff assumed Kami was associated with Ms Kelly: he was never asked for identification or proof of Chelsea Kelly’s permission to access the unit.

On 28 February 2023, HMRC officers attended Len Lothian’s premises unannounced as part of a random inspection, when Mr Lees was on duty as site manager. At that point Mr Lees had no reason to suppose HMRC were going to find excise goods on which duty had not been paid on the premises. Specifically, he had no reason to suspect there were such goods in Unit B1022.

Mr Lees cooperated with the HMRC officers. He gave access to the site and provided a layout. Officer Bernard took a statement from Mr Lees and recorded the content of that statement in his notebook.

Officer Green inspected the site with Tobacco Detection Dog Delta (“TDD Delta”). TDD Delta indicated the presence of tobacco in Unit B1022.

Mr Lees indicated that Unit B1022 was leased to Chelsea Kelly. Mr Lees provided the mobile contact details he had on record. Officer Stevenson called the number. A man answered and denied knowledge of the unit. We consider it likely that the man who answered was Kami and he was aware of the tobacco.

Mr Lees gave permission for HMRC to access Unit B1022 and offered to open Unit B1022 with bolt cutters. However HMRC declined the offer to use bolt cutters.

Officer Bernard opened the padlock that was securing the unit using a skeleton key. HMRC officers seized 85,640 non-UK duty paid cigarettes and 140.3 kilograms of hand-rolling tobacco. They left a seizure notice (form ENF156) and public notice 12A inside the unit and re-locked it.

Mr Lees saw boxes being removed from the unit on CCTV. He did not know what was inside them. Before the unit was relocked while walking past the unit he saw there were other boxes and furniture still in the unit.

HMRC officers did not provide any guidance to Mr Lees or Len Lothian about restricting access to Unit B1022, requiring ID from anyone who sought access to Unit B1022 or offered payment in respect of it, or retaining records following the seizure.

Len Lothian’s records show an address for Chelsea Kelly at 136 [LA], Glasgow. They also show two mobile phone numbers, one labelled “Kami”. An email address is for “Rizwan-butt@hotmail.com”. Their records show that invoices were emailed to this address. Len Lothian also communicated with the customer via text message.

Len Lothian’s system does not contain photographic ID or a date of birth for Ms Kelly. Mr Lothian suggested that photo and other ID had been deleted in accordance with GDPR after the contract ended, which would have been in accordance with Len Lothian’s usual policies. Mr Lees confirmed that no photo ID was held and that he had checked the system at the time of the seizure. We infer that no photo ID was ever taken in this case, despite it being the policy to take photo ID. If photo ID had been taken with a driving licence, we think it likely Chelsea Kelly’s date of birth would have been recorded. We therefore infer that photo ID was never taken.

On 10 March 2023, the man known as Kami accessed the unit and removed all remaining items from within it.

Kami arrived at the site in a vehicle bearing registration number, which was traced to KA, who denied involvement and stated it had been loaned to an unidentified third party. That third party could not be traced.

No further payments were made, and the lease was considered terminated.

On 4 July 2023 Officer Murray was appointed as decision maker.

Officer Murray ascertained that a Chelsea Kelly had lived at the address recorded in Len Lothian’s files until 7 October 2019, so she moved out before the agreement commenced.

Officer Murray sent letters to Ms Kelly at a number of addresses. The letters were sent on 7 July 2023, 16 October 2023, 10 January 2024 and 21 February 2024. No reply was received to any of these letters. No HMRC officer visited any of the addresses.

Len Lothian engaged a private investigator to locate Chelsea Kelly and provided the resulting report, dated 8 January 2024, to HMRC. This report suggested that Chelsea Kelly does indeed exist and may currently be residing within council run homeless accommodation in Glasgow. The report also provided two possible email addresses for Chelsea Kelly. There was no link identified between her and any man called Kami.

On 9 January 2024 Officer Murray sent e-mails to Ms Kelly at the two different e-mail addresses identified by the private investigator. No reply was received to either e-mail. One e-mail received an automated response to the effect that the mailbox in question was full.

No person other than Kami has been identified as accessing Unit B1022. He clearly had a key. We find he placed the Goods in Unit B1022. We accept that Kami was unconnected to Len Lothian.

No party has provided convincing evidence for Chelsea Kelly knowing of the unit at Len Lothian. Whilst her name was on the agreement her address was incorrect at the relevant time – that suggests one possibility is that someone else was using her identity. If she wished herself to avoid detection she would, more likely, use a false address rather than an old address.

The only evidence we have of a woman attending Len Lothian’s premises in relation to Unit B1022 is the affidavit of Mr Melvin. However, we attach no weight to that evidence.

It would have been open to either party to apply for a citation (in England what is called a “witness summons”) to be issued under r.16 against the Chelsea Kelly identified by the private detective, to force her to attend and give evidence, if they thought she was involved in this matter. Neither party did so. In such circumstances we find that Chelsea Kelly had no involvement with either the Goods or Unit B1022. We find Len Lothian has not discharged the burden of proof to show that she was involved in renting the self-storage unit.

In those circumstances we find that Chelsea Kelly did not enter the self storage licence agreement.

The self storage licence agreement is on its face not a lease (as Len Lothian’s skeleton suggests) but a licence. This is evident from clause 22 that denies “exclusive possession”. Although, as a practical matter however, given that the user applies their own padlock to the door, it is difficult to see how in practice they do not enjoy exclusive possession.

More fundamentally, again in clause 22, a user can be required to relocate on 14 days’ notice which suggest that the area used is subject to change and so not adequately defined to be a lease: Magistrates of Perth v Assessor for Perth & Kinross 1937 SC 549.

Further the user can only access the unit during Access Hours, so there is only intermittent possession on the part of the hirer: see by analogy Joint Administrators of Rangers Football Club plc, Noters 2012 SLT 599 at [29] to [31].

It is also suggested by the title to be a “licence agreement” – although legal rights rather than labels are determinative.

In any event, we find Chelsea Kelly did not enter the agreement as it has not been shown she has had any involvement with this matter. From HMRC’s response to our pre-hearing questions, we understand the Scots law position on this to be that:

“Where an agent purports to contract on behalf of a principal for whom he has no authority the purported agreement is not binding on the principal.

The principal then has a choice as to whether or not to ratify the agreement. If the principal ratifies the agreement then it is treated as always having been authorised.

Where the principal does not ratify the agreement, the agreement is void. The agent is not personally liable on the agreement unless the terms of the agreement make it clear that this was intended (see Halifax Life Ltd v DLA Piper Scotland LLP [2009] CSOH 74). Instead, the agent is liable to the third party for a breach of warranty of authority (see Irving v Burns 1915 SC 260).”

Thus if, as we find most likely, Kami entered the agreement falsely purporting to have authority from Chelsea Kelly the agreement is therefore void, as there is no evidence she has ratified the agreement.

It follows that at the relevant time Unit B1022 was the property of Len Lothian. However, we accept that Len Lothian thought there was (and acted on the basis that there was) a valid licence agreement.

Turning to the four factors that the Upper Tribunal in Hartleb considered relevant to the question of holding:

On any reasonable use of everyday language, at the relevant time:

Kami, of course, has not been identified. We accept there may be circumstances (such as the employer/employee example of the Advocate General in WL, or where there is collusion, or a person deliberately withholds information) where the inability to identify person A may make person B liable, but we do not consider this to be one of those circumstances. We note the authority for such circumstances from WL and Hartleb relates to employment situations, which is not in point here. More fundamentally, we consider that liability cannot be so attributed to person B unless they can be said to be holding or in possession of the relevant goods applying the usual meaning of those terms in everyday language, taking into account the context in which they are used and the objectives pursued by the legislation of which they form part.

We accept, as discussed at [19] above, part of the objective of the 2008 Directive is to ensure that the excise duty is collected and a key policy consideration is that those engaged in commerce assume the risk of being liable for the actions of those with whom they do business. However, that cannot permit such a strained and unnatural interpretation of “held” or “possession” as to find Len Lothian held the goods or were in possession of them.

It follows that the Appeal in relation to the Assessment must be allowed.

Given the concession noted above at [5] it also follows that the appeal against the Penalty must also be allowed.

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.