Caerdav Ltd v The Commissioners for HMRC

Caerdav’s primary ground of appeal before the FTT was referred to as the “Inward Processing ground” by the FTT and was considered at [76] to [114] of the Decision.

The Appellant’s main ground of appeal before the FTT was that when the aircraft arrived at St Athan it continued to be subject to Inward Processing so that no duty or VAT was due and it was irrelevant that the EUA had expired. In the Appellant’s submission, Shannon (in the Republic of Ireland) was the customs office of exit and the aircraft remained within the Special Procedure until it left Irish airspace on its way to the US. It was argued that there was an indirect export from Bulgaria via Ireland to the US.

The argument was that as the aircraft had been the subject of a customs special procedure throughout the time it was present in the EU, there was no liability to customs duty/VAT arising in the UK, or elsewhere in the EU (and if there had been LTS would have been responsible for it). Moreover, the fact that Caerdav’s EUA had expired before the aircraft arrived was now irrelevant because it ought not to have been declared to end-use (or to any other customs procedure on arrival in the UK) at all.

HMRC submitted that the customs office of exit was Sofia in Bulgaria as part of a direct export to the US and the aircraft was discharged from Inward Processing when it flew over Serbian airspace on its way to St Athan. On arrival it was no longer subject to EU customs control and its arrival constituted a new import on which duty and VAT were due (but would not have been had a valid EUA been in existence).

The FTT agreed with HMRC. As set out below, the FTT concluded that there was a direct export from Bulgaria to the US as opposed to an indirect export via another EU Member State (Ireland). It therefore held that the Inward Processing procedure into which the aircraft had been entered by LTS in Bulgaria had been discharged when it entered Serbian airspace after leaving Bulgaria on its journey to Caerdav’s premises in St Athan.

The FTT found as a matter fact that when the aircraft was imported in St Athan, it was the subject of a direct export from Bulgaria to the United States and not an indirect export via St Athan (or any other EU member state). It found at [110]:

It therefore concluded at [113]-[114]:

The Appellant challenges the FTT’s finding of fact that at the time that the aircraft landed at St Athan it was travelling as part of a direct export from Bulgaria to the US. There is no challenge to the FTT’s finding that the aircraft left the EU’s airspace when it flew over Serbia but it is submitted that the FTT should have found that the aircraft entered the UK as part of an indirect export through the EU.

This is a challenge to the fact-finding of the FTT and as such must meet the high threshold explained in the authorities. The Upper Tribunal summarised the position in relation to such a challenge in HMRC v Anna Cook [2021] UKUT 15 (TCC), at [18]-[19]:

“18.

An appeal to this tribunal lies only on a point of law: section 11(1) of the Tribunals, Courts and Enforcement Act 2007 (“TCEA 2007”). While there cannot be an appeal on a pure question of fact which is decided by the FTT, the FTT may arrive at a finding of fact in a way which discloses an error of law. That is clear from Edwards v Bairstow [1956] AC 14. In that case, Viscount Simonds referred to making a finding without any evidence or upon a view of the facts which could not be reasonably entertained, and Lord Radcliffe described as errors of law cases where there was no evidence to support a finding, or where the evidence contradicted the finding or where the only reasonable conclusion contradicted the finding. Lord Diplock has described this ground of challenge as “irrationality” (Footnote: ¹).

19… we have borne in mind the caveats helpfully summarised in Ingenious Games LLP & Others v HMRC [2019] UKUT 226 (TCC), at [54]-[69]. The bar to establishing an error of law based on challenges to findings of fact is deliberately set high, and that is particularly so where the FTT is called on to make a multi-factorial assessment. As stated by Evans LJ in Georgiou v Customs and Excise Commissioners [1996] STC 463, at 476:

… for a question of law to arise in the circumstances, the appellant must first identify the finding which is challenged;

secondly, show that it is significant in relation to the conclusion;

thirdly, identify the evidence, if any, which was relevant to that finding; and

fourthly, show that that finding, on the basis of that evidence, was one which the tribunal was not entitled to make.

What is not permitted, in my view, is a roving selection of evidence coupled with a general assertion that the tribunal's conclusion was against the weight of the evidence and was therefore wrong. A failure to appreciate what is the correct approach accounts for much of the time and expense that was occasioned by this appeal to the High Court.”

In FAGE UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5 Lewison LJ stated at [114]:

“Appellate courts have been repeatedly warned, by recent cases at the highest level, not to interfere with findings of fact by trial judges, unless compelled to do so. This applies not only to findings of primary fact, but also to the evaluation of those facts and to inferences to be drawn from them.”

It follows that the question before the appellate court when exercising an “error of law” jurisdiction is not whether it would have made the same decision as the first-instance tribunal. The appeal is not a re-run of the first-instance trial: as Lewison LJ also said in FAGE at [114], “the trial is not a dress rehearsal. It is the first and last night of the show”. The test is whether the FTT’s factual findings or evaluative judgments in this case were within a reasonable range of conclusions that a properly directed tribunal could have made on the evidence available to it.

Ms Choudhury argues that the FTT erred in giving its reasons for finding that the EAD was accurate when it stated that there was an export from Sofia (Bulgaria as the country of export) with the destination country in the US

She challenges each of the reasons that the FTT relied on at [103]-[114] for making its finding of fact that the EAD accurately described the true state of affairs – ie that there was a direct export from Bulgaria to the US.

Ms Choudhury submits that the FTT wrongly rejected Caerdav’s argument that there was a mistake in the EAD included in the Bulgarian documents. Caerdav had argued that the EAD should have referred to the eventual office of departure from the EU (Shannon) or to St Athan. She submits that both witnesses who spoke to that document, who the FTT said might be described as experts in the field (see [78]), agreed that there was at least one mistake in the EAD in relation to the codes used in the EAD. However, she submits, the FTT refused to contemplate the possibility of there being another mistake on the balance ofprobabilities.

We do not accept this argument.

It is not right that the FTT refused to contemplate the possibility of there being a relevant mistake on the EAD where it should have described an indirect export via Shannon. The Judge considered the possibility and set out clearly in the Decision why she was rejecting it, finding that “there [was] nothing to support this [a further mistake on the EAD] and it [was] inconsistent with the other entries on the EAD”(see [106]).

The FTT found support for its conclusion in the finding that “Caerdav did not receive an EAD or the information in it which would have indicated that the export from Sofia was an indirect export” Miss Choudhury submitsthat the FTT “disregarded”the point that Caerdav did not require a paper EAD.The FTT specifically considered the point before rejecting it on the basis of the wider evidential context explained at [108]-[109].

The FTT read and heard the evidence of Mr Hina and Officer Snow, rival, specialist witnesses for each party. It broadly preferred that of Officer Snow (see [104]). The Appellant may criticise the process by which information was provided by the Bulgarian authorities and cast doubt as to the quality of that evidence, but the FTT had to determine the appeal on the basis of the evidence before it as opposed to what was not before it and might, possibly, have existed somewhere.

Ms Choudhury further submits that the FTT failed to take into account relevant evidence. In particular, she contends that the FTT did not take into account the fact that, if its conclusion were correct that the Inward Processing procedure could be, and was, discharged by the aircraft simply departing Bulgaria, there would be no reason for the Bulgarian customs authority to have made or retained any records showing the aircraft’s subsequent destinations and its arrival in the USA. Based on the FTT’s reasoning, the Bulgarian authorities should simply have recorded it exiting the EU on its flight out of Bulgaria. The FTT referred to Mr Snow’s evidence that the documents would be processed electronically and would not pick up manuscript notes (see [90]). However, that does not explain why the Bulgariancustoms authority had made those notes or considered it necessary to do so.

Again, we reject this submission.

The Appellant points to the presence of handwritten notes on the EAD referring to the aircraft arriving in the United States on 6 January 2017 and asserts that these show that the subsequent movements of the aircraft were “being tracked”, and that this would only happen if the Bulgarian authorities were effecting an indirect export through the EU.

That theory does not appear to have been put to any witnesses and is no more than speculation. Little can reasonably be inferred from the handwritten notes one way or the other as to whether the movement was being tracked as part of an indirect export.

The Judge was entitled to reject the Appellant’s arguments and, her factual assessment is not properly open to interference by the appellate tribunal in any event.

Ms Choudhury submits that it was not established as a fact that there were no computer records in Bulgaria of an indirect export. She argues that the FTT wrongly placed considerable reliance on Mr Snow’s oral evidence regarding the necessity to record entries on the Export Control System (“ECS”) if there was an indirect export (see [107]). Despite the alleged importance of this system, it had not been referred to in his witness statement or any other document. She argues that the FTT was wrong to rely on the unsupported assertions made by Mr Snow in his oral evidence. This was particularly so given Caerdav’s witnesses had given their evidence and Caerdav had no other opportunity of responding to it. In any event, Mr Snow was not in a position to provide an opinion of how, when and why entries were made by the Bulgarian customsauthority in the ECS or any other system.

We reject this submission. The FTT was entitled to take into account Officer Snow’s evidence that there would only be entries on the ECS if it were intended to make an indirect export via another EU country and there was nothing procedurally unfair in him giving this evidence. The Appellant could have sought to recall Mr Hina if they wanted to challenge this evidence and he was available throughout cross examination of Officer Snow. The absence of any evidence as to an entry on the ECS (whose presence would be consistent with an indirect export) was a relevant piece of evidence that the FTT was entitled to rely upon.

Ms Choudhury further submits, there was no basis for the FTT’s finding at [107] that the Bulgarian customs authority would have provided copies of the ECS entries if there had been any (and assuming Bulgarian customs required such an entry to be made in theseparticular circumstances).

Again, we reject this. The FTT was entitled to take into account this evidence and gave rational reasons for doing so: ‘The information ultimately provided was comprehensive and I consider it more likely than not that if there had been any entries, copies would have been provided’ ([107]).

In summary, Ms Choudhury submits that the FTT could not have sensibly reached the conclusion that there was a direct export from Bulgaria to the US. She argues that it would make no sense for the movement of the aircraft to go through additional bureaucracy of separate importations within the EU rather than moving through special procedure where it would not need to comply with the formalities each time it entered an EU country. She submits that this would involve an alternative and unlikely reality where the aircraft was exported and reimported and reexported through the EU. She contends that the only logical conclusion was that the plane was subject to an indirect export and that there was a mistake made in the EAD.

We rejected each of the Appellant’s arguments. We are not satisfied there was anything close to an Edwards v Bairstow error in the FTT’s factual findings that there was a direct export and that the EAD accurately stated the position. There was ample material on which the FTT could properly make those findings. The FTT relied on multiple factors in reaching the view that, on the balance of probabilities, this was a direct export from Bulgaria to the US rather than an indirect export from the UK or Ireland originating in Bulgaria [105]-[110] such as:

Ms Choudhury also challenges the FTT’s interpretation and application of the law at [111] in which it states:

I also agree with Mr Snow’s and Mr Duffy’s interpretation of the relationship between Article 267 and Article 136 UCC. Article 136 refers to movements between two points in the customs territory. So if the aircraft was moving from Sofia to St Athan under a Special Procedure, the aircraft would have “temporarily left” the territory while flying over Serbian airspace. In this case, it would have remained within the Special Procedure and there would have been no new import on arriving in Wales.

Article 267 of the Commission Implementing Regulation (EU) 2015/2447 (“the IR”) provides:

“Movement of goods under a special procedure

1.

Movement of goods to the customs office of exit with a view to discharging a special procedure other than end-use and outward processing by taking goods out of the customs territory of the Union shall be carried out under cover of the re-export declaration

…

4.

Customs formalities other than keeping of records as referred to in Article 214 of the Code are not required for any movement which is not covered by paragraphs 1 to 3

…

5.

Where movement of goods takes place in accordance with paragraphs 1 or 3, the goods shall remain under the special procedure until they have been taken out of the customs territory of the Union.”

Article 136 of the Union Customs Code (“UCC”) states:

“Intra-Union air and sea services

Articles 127 to 130 and 133, Article 135(1) and Articles 137, 139 to 141, and 144 to 149 shall not apply to non-Union goods…, which have temporarily left the customs territory of the Union while moving between two points in that territory by sea or air, provided they have been carried by direct route without a stop outside the customs territory of the Union.”

Ms Choudhury submits that the FTT’s conclusion were based on Article 267(5) of the IR whereby the goods ceased to be under the special procedure (Inward Processing) until they left the EU (entering Serbian airspace). If that conclusion were correct, she maintains that it could lead to an uncertain and unworkable system with goods being inadvertently exported (or imported) if an aircraft’s flight path changed unexpectedly as it travelled across the continent of Europe. It would be impossible to keep track of such constant (re-)imports and (re-)exports.

Ms Choudhury argues that this conclusion is not supported by Article 136 of the UCC which provides that goods can travel between different parts of the Union without giving rise to customs formalities provided they leave the Union temporarily and travel by means of a direct route without a stop outside the Union. The FTT acknowledged this difficulty with its conclusion but said it was consistent with the objective of the special procedures to prevent goods being diverted to the home market without payment of duty or VAT at [112]. However, she submits that the FTT does not explain how that objective is defeated if an aircraft enters non-EU airspace while travelling to another EU destination and then leaves it without landing so that no diversion of goods could actually take place.

We reject this submission. As Mr Duffy argued, the relationship between Article 267 IR and Article 136 UCC explains why this problem would not arise: if goods were actually being exported indirectly, they would be covered by Article 136, allowing them to leave the customs territory of the EU temporarily en route to their customs office of exit. In this case, there was a direct export out of the EU and the customs office of exit was Sofia, so Article 136 UCC did not apply and Article 215 UCC did:

On that basis the FTT Judge was right to state in her decision refusing permission to appeal that the system is “a coherent regime which is not “uncertain and unworkable”as stated in paragraph 7 of the Application.”

We dismiss Ground 1.

Article 120 of the UCC provides for the remission of duty otherwise payable on the grounds of equity:

“Equity

1.

In cases other than those referred to in the second subparagraph of Article 116(1) and in Articles 117, 118 and 119 an amount of import or export duty shall be repaid or remitted in the interest of equity where a customs debt is incurred under special circumstances in which no deception or obvious negligence may be attributed to the debtor.

2.

The special circumstances referred to in paragraph 1 shall be deemed to exist where it is clear from the circumstances of the case that the debtor is in an exceptional situation as compared with other operators engaged in the same business, and that, in the absence of such circumstances, he or she would not have suffered disadvantage by the collection of the amount of import or export duty.”

The FTT ruled that Article 120 did not apply so as to allow the customs debt to be remitted for the following reasons at [137]-[144]:

Ms Choudhury challenges the FTT’s finding at [142]that Caerdav had failed to put forward any special circumstances of the exceptional kind and had not been treated any differently from other operators in the same business. She submits that both points are wrong. Caerdav has found itself in the highly unusual situation where it has incurred a customs debt of over £330,000 in relation to a maintenance job for £1,500, where: (1) there had been no actual loss of duty as the aircraft had been exported; and (2) HMRC themselves (as represented by Mr Jones) had been unsure whether a customs debt arose having indicated on two occasions that it did not. It is difficult to envisage that other operators find themselves treated in the same manner or that these circumstances cannot be regarded as “exceptional”.

Secondly, she submits that the FTT erred in holding that remission was not available on the grounds that there had been “obvious negligence” by Caerdav (see [143]). This point had not been pleaded by HMRC at any stage. However, the FTT nevertheless allowed them to rely on it because Caerdav had referred to this requirement in its skeleton argument. That, on any view, was not a sufficient reason for dispensing with the need for HMRC to plead an argument in their statement of case or address it in their evidence when they bore the burden of proof in respect of it.

She argues that there was no obvious negligence on the Appellant’s part. Even if there was negligence, it was not obvious as is clear from the fact that Mr Jones twice wrote to Caerdav stating that no liability to VAT or customs duty arose in relation to the aircraft and only changed his view after the case was reviewed internallyby HMRC.

We reject these submissions.

We will proceed on the assumption the FTT had jurisdiction to consider remission under Article 120. This is notwithstanding Mr Duffy’s objection: the fact that the Appellant had made no application for remission to HMRC; nor had it been determined by HMRC, let alone been appealed to the FTT; and the first time the issue was raised was before the FTT on the appeal. The FTT dealt with the applicability of Article 120 on its merits and so do we.

We are satisfied that the FTT did not err in finding that Article 120 did not apply so as to allow remission of the duty on the grounds of equity. There are two limbs which must be satisfied in order for a taxpayer to bring themselves within Article 120 and they are not alternative, but cumulative: special circumstances and no obvious negligence. Contrary to Ms Choudhury’s procedural point, the burden of proof was upon the Appellant in relation to each and HMRC were entitled to raise the objection that they did and when they did.

We are satisfied that the FTT’s finding that the Appellant had not established that there was “no obvious negligence”, sufficient to satisfy the second limb of Article 120(2), was one it was entitled to reach, and one with which we should not interfere applying the test in Edwards vBairstow.

The Appellant’s assertion that the burden rests on HMRC to demonstrate that there was “obvious negligence” has no basis in law: the usual principle applies that the burden on the party making the application (particularly for an exemption or other relief) and it was not for Officer Jones or for HMRC to prove that there was obvious negligence. Article 120 does not impose such a burden, merely setting a requirement for special circumstances to “exist”. The burden is on the taxpayer making the application for remission to prove they fall within the conditions of Article 120.

Even if the burden did rest on HMRC to prove that there was obvious negligence, the FTT was entitled to find it was comfortably discharged on any reasonable assessment of those facts of the case upon which it relied at [143] – ‘the Appellant failed to notice that their EUA had expired and failed to remedy the situation when it was raised by HMRC’.

This is amplified by its earlier findings at [7]-[53] of the Decision: the Appellant’s allowing the EUA to lapse; its failure to realise it had elapsed until some months later; its failure to obtain a CCG in good time; its failure prior to March 2018 to make an application for renewal (at all, let alone one seeking up to a year’s retrospective effect) all support a conclusion that there was obvious negligence on the part of the Appellant.

Further, the FTT later returned to the topic at [152] & [154]:

Thus, the FTT did not err in finding that Article 120 did not apply because it was entitled to find that there was obvious negligence on the part of the Appellant. Therefore, there is no need for us to determine the question of whether the FTT erred at [142] in finding that there were no special circumstances and that the Appellant had not been treated any differently to other operators in the same business. Nonetheless, we observe the following. The conclusion, that there were no special circumstances for the purpose of Article 120, is a finding of fact or evaluative judgment which can only be challenged on Edwards v Bairstow grounds. There may be room for argument as to whether the Appellant was treated differently compared to other operators by virtue of the fact that it was sent the HMRC letters of October and November 2017 which contained mistakes. All the same, the FTT made findings that those letters were ambiguous and were not causative of the Appellant’s negligence - failure to renew and retroactively apply for EUA and nonetheless enter the aircraft to end use. We are satisfied that the FTT’s conclusion on this issue was one that a reasonable tribunal could have arrived at on the evidence before it.

There is no material error in the FTT’s finding that the Appellant had not satisfied all the conditions in Article 120 and this ground of appeal must be dismissed.

Caerdav had relied on the EU concept of legitimate expectation before the FTT as another reason why special circumstances existed so that Article 120 applied. It argued that it had a legitimate expectation that customs duty would not be charged, based upon HMRC’s letters of October and November 2017, and this applied to the consideration of special circumstances in Article 120.

The FTT considered (at [145]-[160]) the Appellant’s argument that the EU principle of legitimate expectation applies to the question of special circumstances for the purpose of Article 120 but concluded that it did not have jurisdiction to consider the matter:

And at [62]:

Ms Choudhury submitted that the FTT erred in deciding that it did not have jurisdiction to consider the legitimate expectation arguments for the purposes of Article 120. In doing so, she argues that the FTT conflated the EU law and domestic law concepts of legitimate expectation despite them constituting two separate lines of authority. She argued that this conflation also appears in the Decision in the section dealing with the domestic law argument of legitimate expectation (e.g., at [228] and [229]). This is despite the cases based on the EU law concept including those determined in UK courts, such as R (oao Drax Power Ltd & anor) v HM Treasury [2017] QB 1221 (“Drax”), not referring to the domestic law authorities and vice versa.

As to whether Caerdav had a legitimate expectation, she contends that it had provided all the information HMRC had requested in respect of the aircraft (i.e., the invoice) prior to Officer Jones’ letter of 10 October 2017. The statement in the letter that the entry for the aircraft (as well as others) “… had not caused any underpayments of customs duty or import VAT” satisfies the requirement for legitimate expectation of a statement which is “precise, unconditional and consistent” and came from an HMRC officer and thus an “authorised and reliable source”.

At [152], the FTT stated that Caerdav should have known that as its EUA had expired, duty was due and HMRC’s statement was erroneous. However, this completely ignored Mr Jones’ evidence that he considered this to be the correct position at the time he sent his letters and only changed his mind after HMRC’s internal review of the case. If the customs debt were not remitted, this would therefore not be compatible with the legitimate expectation held by Caerdav.

She relied, before the FTT and us, on the fact the CJEU has confirmed a post-clearance demand needs to be compatible with the fundamental principle of legitimate expectations.

First, she relied on Case C-250/91 Hewlett Packard France [1993] ECR I-1819, in which a company declared goods to the wrong tariff classification as a result of information, ultimately, provided by a member state customs authority and became liable for duty as a result. No duties would have been due had the correct tariff been used. The company sought waiver of the post-clearance recovery of duty under Article 5(2) of Regulation 1697/79. The ECJ said at [44]-[46]:

“44 The information thus supplied may cause the trader to entertain legitimate expectations on the basis of which he may believe that he declared his goods in conformity with the tariff rules in force. In those circumstances, the obligation to pay import duties ex post facto is clearly unfair.

45 As regards the absence of any negligence or deception, it is for the national court to find whether or not, in circumstances such as those in the present case, those conditions are fulfilled.

46 That determination must, however, take account of the fact that Article 13 of Regulation No 1430/79 and Article 5(2) of Regulation No 1679/79 pursue the same aim, namely to limit the post-clearance payment of import and export duties to cases where such payment is justified and is compatible with a fundamental principle such as that of the protection of legitimate expectations. Seen in that light, the question whether the error was detectable, within the meaning of Article 5(2) of Regulation No 1679/79, is linked to the existence of obvious negligence or deception within the meaning of Article 13 of Regulation No 1430/79, and therefore the conditions laid down by the latter provision must be assessed in the light of those laid down in Article 5(2) of Regulation No 1679/79.”

Second, she relied on C-48/98 Firma Söhl & Söhlke Hauptzollamt Bremen, in which the ECJ stated at [54]:

“It follows from the judgment in Case C-250/91 Hewlett Packard France [1993] ECRI-1819, paragraph 46, that Article 13 of Regulation No 1430/79 and Article 5(2) of Council Regulation (EEC) No 1697/79 of 24 July 1979 on the post-clearance recoveryof import duties or export duties which have not been required of the person liablefor payment on goods entered for a customs procedure involving the obligation to paysuch duties (OJ 1979 L 197, p. 1), pursue the same aim, namely to limit the postclearancepayment of import and export duties to cases where such payment isjustified and is compatible with a fundamental principle such as that of the protectionof legitimate expectations. It follows that the conditions to which the application of those articles is made subject, that is to say that no negligence or deception may be attributed to the person concerned in the case of Article 13 of Regulation No 1430/79 and that no error has been made by the customs authorities which could reasonably have been detected by the person liable in the case of Article 5(2) of Regulation No 1697/79, must be interpreted in the same manner.” [emphasis added]

Ms Choudhury submitted that, contrary to the FTT’s conclusion on this issue and by analogy with the above cases, it too had a legitimate expectation which ought to be protected and this constituted a special circumstance for the purposes of Article 120.

The Appellant’s argument is not about whether or not a legitimate expectation arose, but whether the FTT was right to conclude that it had no jurisdiction to consider the EU law concept of legitimate expectation as part of the question of special circumstances for the purpose of Article 120.

Under this ground, the Appellant argues that the FTT conflated the domestic law and EU law concepts of legitimate expectation, and that this case was about the latter. The Appellant argues that this alleged error infected the FTT’s approach to whether Article 120 applied, because the existence of a legitimate expectation might impact upon whether there were ‘special circumstances’ to justify remission.

Neither of the two authorities relied upon by Ms Choudhury (Hewlett Packard and Firma Sohl) concerned Article 120 of the UCC or its predecessor but do concern the payment of or waiver of customs duty following a post clearance demand. Our view is that the free-standing substantive EU law concept of legitimate expectation may apply to Article 120 but does not add substantively to the matters which may be relied upon under Article 120. The application of Article 120 to any case allows for special circumstances to be considered which would embrace a wide range of factual circumstances including those might give rise to a legitimate expectation under EU law.

Assuming that legitimate expectation, as explained in EU law, does arise in the application of Article 120, its consideration does not give any additional life to the consideration of special circumstances. In other words, any promise or statement made by a customs authority to a taxpayer which might be capable of being relied upon as giving rise to a legitimate expectation for EU law purposes would also be capable of being relied upon as giving rise to special circumstances for the purpose of Article 120. Therefore, there may be a distinction without a difference.

Nonetheless, assuming that the FTT wrongly interpreted and distinguished the CJEU authorities and the principle of legitimate expectation in EU law applies to Article 120 (either as a separate and additional principle which must be directly and independently considered, or at least through consideration of the lens of special circumstances) this does not assist the Appellant.

Legitimate expectation, as explained in EU law, could not arise on the facts of the Appellant’s case because, given the FTT’s factual findings as discussed and approved below, none of the three conditions as referred to at [62] of Drax were satisfied. We will go on to consider but reject the domestic law principle of legitimate expectation as arising on the facts when considering Ground 5 (and dismiss its applicability in any event as falling outside the jurisdiction of the FTT on an appeal).

It is the inevitable consequence of the FTT’s factual findings when applying the domestic law concept of legitimate expectation that the statements made in HMRC’s October and November 2017 letters: (1) did not give precise, unconditional and consistent assurances; (2), were not such as to give rise to a legitimate expectation on the part of the person to whom they were addressed; (3), were not consistent with the applicable rules on the imposition of customs duty and VAT which mandated their payment.

Therefore, there could be no legitimate expectation created by HMRC for the purposes of EU law which would entitle the Appellant to remission of the duty pursuant to Article 120 (ie. there was not legitimate expectation which could give rise to special circumstances or otherwise lead to the remission of duty).

Further, any error as to the applicability of legitimate expectation to Article 120 would be immaterial given that it was not (and could not) be shown that there was “no obvious negligence” (see our conclusion on Ground 2, above). So even if the Appellant were right that (a) it had a legitimate expectation, (b) the FTT had jurisdiction to consider it and (c) it ought to have done so, and (d) if it had then it would have concluded that ‘special circumstances’ exist, this would only ever satisfy part of the Article 120 test.

It is important to note that Grounds 2, 3 and 4 overlap. All concern the question whether the customs debt ought to have been remitted under Article 120 of the UCC. Therefore, the difficulties we have identified above in relation to the application of Article 120 to this question are fatal to Grounds 3 and 4.

This ground must be dismissed as there was no material error in the FTT’s ruling.

The FTT considered the question of proportionality and its applicability to Article 120 at [161]-[164] in the following terms:

Ms Choudhury submits that the FTT erred in its analysis. She submits that Caerdav has incurred a customs debt of over £330,000 in relation to a maintenance job for less than £1,500 and where there is no dispute that there has been no diversion of the aircraft in question into the EU without the payment of duty and VAT.

She argues that the FTT made a further and serious error in failing to take any account of whether the duty demand was proportionate, and whether this constituted an exceptional or special circumstance for the purposes of Article 120 in the Decision. She contends that the FTT’s reasons for refusing to consider proportionality at [162] to [164]disclose several errors.

She submits that the FTT appears to have completely disregarded the fact that proportionality is a general, and substantive, principle of EU law under Article 5(4)EU of the EU Treaty, which states, “Under the principle of proportionality, the content and form of Unionaction shall not exceed what is necessary to achieve the objectives of the Treaties.”

The FTT, however, appeared to treat proportionality as a principle of judicial review as opposed to substantive EU law.

When applying the principle to the facts, she contends that a demand for duty and VAT of almost a third of a million pounds, especially when arising from work done that earned less than £1,500, is wholly disproportionate. According to Mr Coleman’s evidence on behalf of Caerdav, it may even be “a fatal blow” for it. In this context, it is worth noting that Caerdav’s failure to produce the documents requested by HMRC resulted in a demand of just over £12,000 in respect of other import entries and a penalty of £4,000 in respect of four entries including that for the aircraft. It cannot be regarded as justification for the demand of over £330,000 which is the subject of the appeal.

In summary, Ms Choudhury contends that the FTT erred in not taking proportionality into account at all and further erred in not considering that proportionality, as well as legitimate expectation, formed part of the consideration of whether exceptional circumstances existed so that the amount demanded ought to be remitted under Article 120 of the UCC.

We reject these submissions.

While we may have some sympathy for the Appellant as regards the size of the demand compared to the value of the work done on the aircraft, in reality the Appellant’s submission as to proportionality is a complaint about the customs and VAT regime as a whole as opposed to how the FTT approached this case. It was not the FTT’s decision that customs and VAT ought to be charged as a percentage of the value of goods, as opposed to via some other method of calculation – rather, the legislation compelled it.

The importance of that ‘wide lens’ approach to proportionality can be illustrated by the facts of this case – there is a system that charges duty as a percentage of the value of goods, but the same system provides for customs special procedures like End Use and Inward Processing that enable taxpayers to avoid or reduce the otherwise potentially blunt effect of that overarching system. Further, Article 120 provide an additional method of redress should a taxpayer be able to satisfy the conditions for the remission of duty on the grounds of equity which includes the application of special circumstances. The FTT did not err in dealing with this point as it did at [163]-[164], i.e. that the question of proportionality in EU law applies to the proportionality of the legislation as a whole. For the reasons it gave, it was right to find that the scheme – the EU and domestic legislation under consideration - is proportionate.

Therefore, we reject any suggestion that the FTT – out of a concern for proportionality – ought to have frustrated the application to this case of the EU-wide system for the assessment of VAT and customs duty on the facts of this case. If it were right, then it would prevent the lawful imposition of customs and VAT debts in any case where the value of the goods appeared disproportionate to the amount of the debt. This would replace a rule of EU law – that duty is owed relative to the value of goods per se – with another rule altogether – that duty is owed relative to the value of goods to the taxpayer. That cannot be right. It would also entail a breach of the UK’s unqualified duty under EU law (at the time) to collect customs duty.

Therefore, the FTT was not compelled to consider any further question of proportionality based on the facts of this case. The relevant legislation as a whole is proportionate and it was lawfully applied in the Appellant’s case.

In any event, just as we have found in relation to legitimate expectation, applying the principle of proportionality to the specific facts would not expand the application or scope of Article 120. The test of special circumstances would embrace any finding of disproportionality on the facts so that the application of additional principle or concept of proportionality in EU law would add nothing. The terms of Article 120 would be wide enough to cover a proportionality assessment on the facts of any given case. A proportionality assessment would not add to or amplify the threshold for remission on the grounds of special or exceptional circumstances under Article 120 which the Appellant did not satisfy.

Importantly, the FTT properly considered the question of remission on the grounds of equity under Article 120 but refused it on the grounds of obvious negligence. Therefore, even were we satisfied that there is a free-standing principle of proportionality which applies to each individual set of facts and which should be considered as part of the factual matrix under Article 120, it would have made no material difference to the outcome before the FTT.

For the same reasons as we have set out above in relation to Ground 3, Ground 4 is academic. It faces the same immateriality as Ground 3, because even if we were to find that there was a failure to consider proportionality on the specific facts, and the question of proportionality could go to the existence of ‘special circumstances’ under Article 120 UCC, the Appellant would still have faced the obstacle that the FTT did not err in finding the Appellant had not satisfied the “no obvious negligence” condition in Article 120. There was no material error in the FTT finding Article 120 didnot apply.

We dismiss this ground of appeal.

it did not have jurisdiction to consider this issue in this particular statutory context;

a legitimate expectation could only arise as a result of a “ruling” by HMRC; and

no legitimate expectation arose on the facts.

The FTT ruled it did not have jurisdiction to consider legitimate expectation as a ground of appeal and it was only a matter that could be raised on judicial review. The FTT concluded it did not have jurisdiction to consider this argument as a matter of statutory construction of the applicable provisions of s.83(1)(b) Value Added Tax Act 1994 (‘VATA’) and the relevant provisions in Finance Act 1994. The FTT considered the arguments at [180]-[200] and stated that this was on the basis that these provisions were concerned with the mandatory wording as to appealing the amount of tax due as opposed to HMRC’s powers to assess which are expressed in discretionary terms.

It concluded at [192] onwards:

Ms Choudhury submits that the FTT erred in law in holding it did not have jurisdiction to consider an appeal ground based on the domestic law principle of legitimate expectation. She submits that the FTT came to this conclusion notwithstanding the relevant and recent UT authority in the case of KSM Henryk Zeman PP Z.o.o. v HMRC [2021] UKUT 182 (TCC) (“Henryk”).

In Henryk, the Upper Tribunal (‘UT’) carried out an extensive review of the relevant authorities stating that the FTT may have jurisdiction to consider arguments based on public law (such as legitimate expectation) depending on the particular statutory context. It stated at [69] to [70]:

“69.

It is clear from the detailed list of appeal subjects in section 83 that the FTT does not have a general supervisory jurisdiction (Corbitt). We agree with that proposition and nothing we say is intended to derogate from it.

70.

That is not, however, the same thing as saying that a taxpayer may not in at least certain of the cases described in section 83(1) defend himself by challenging the validity of a decision on public law grounds. The starting point is that he should be able to (see Beadle at [44]). The question which arises is whether the statutory scheme expressly or by implication excludes the ability to raise a public law defence (again, see Beadle at [44]).”

The UT in Henryk went on to hold that the FTT in that appeal did have jurisdiction to consider a legitimate expectation argument on an appeal brought under s. 83(1)(p) VATA brought against an assessment made under s. 73 VATA. In Oxfam [2009] EWHC 3078, the High Court had also considered that the FTT did have jurisdiction to consider a public law argument in relation to s. 83(1)(c).

Ms Choudhury submits that, adopting a similar approach to that in Henryk, the wording of sections 83(1)(b) VATA and 13A(2) & 16(5) Finance Act 1994 are wide enough to permit a taxpayer to rely on public law arguments such as legitimate expectation when bringing an appeal. Section 13A(2) defines “relevant decision” as “any decision by HMRC, in relation to any customs duty…of the European Union”. Section 16(5) provides the FTT with full appellate jurisdiction on appeal from such a decision.

She submits that there is nothing in this particular statutory context to suggest that the FTT could not consider an argument based on legitimate expectation (cf. the statutory regime regarding partner payment notices at issue in Beadle v HMRC [2020] EWCA Civ 562 where the FTT does not have jurisdiction to consider public law arguments in an appeal against a penalty imposed under that regime). She maintained the submission made to the FTT that s. 83(1)(b) VATA is closer in wording to s. 83(1)(p) which was considered in Henryk than to s. 83(1)(c), as held by the FTT.

The FTT dealt with the jurisdictional question at [155]-[160] and [180]-[203]. It concluded [202]that “[i]t is clear from the authorities referred to above that this [a legitimate expectation ground of appeal] is not a matter within the jurisdiction of this Tribunal.”

There was no error of law in that conclusion. The starting point as to the FTT’s jurisdiction to consider legitimate expectation arguments is as correctly recorded by the FTT at [196] in the arguments on behalf of HMRC:

The starting point is therefore that appeal grounds which concern public law arguments should be pursued in judicial review proceedings rather than before the FTT. However, we, like the FTT, accept that the FTT may have jurisdiction to consider appeal grounds based on public law arguments (such as legitimate expectation) depending on the statutory provisions under consideration.

Thus, the statutory context is key, as the UT in Henryk explains.

In this appeal, the taxpayer appeals under s.83(1)(b) VATA, which permits appeals to the FTT with respect to “the VAT chargeable… on the importation of goods from a place outside the member States.” Like the right of appeal under s.83(1)(c) VATA, the VAT chargeable on the importation of goods is not a matter of discretion but is mandatory and in an appeal the FTT is concerned with whether the conditions prescribed for a charge to arise under the legislation are present and the amount of the charge.

This is in contrast to the manner in which s.83(1)(p) VATA provides a right of appeal against the discretion of HMRC whether to make an assessment under section 73(1). Hence there is a distinction drawn between subsections 83(1)(c) and (p) VATA set in the authority on which the Appellant relies – Henryk:

“We note one point immediately, which is that on the face of it, the scope of section 83(1)(p) is broader than the scope of section 83(1)(c) (the provision in issue both in Oxfam and Noor), because an appeal lies only with respect to the amount of an assessment but instead with respect to “an assessment… under section 73(1).” And the wording of section 73(1), on the face of it, is permissive not mandatory – ‘the Commissioners may assess the amount of VAT due to the best of their judgment and notify it.”

There is a discretion inherent in s.83(1)(p) VATA read together with section 73, which were the statutory provisions considered in Henryk which led it to decide public law arguments could be pursued in the FTT appeal. However, there is no discretion conveyed by subsections 83(1)(b) or (c) VATA which are the mandatory provisions concerning the appeals applicable in this case and in Noor respectively.

The same point applies to the appeal against the Customs duty. Section 13A(2) of the Finance Act 1994 defines a relevant decision for customs duty:

“(a)

any decision by HMRC, in relation to any customs duty or to any agricultural levy of the [European Union], as to

(i)

whether or not, and at what time, anything is charged in any case with any such duty or levy;

(ii)

the rate at which any such duty or levy is charged in any case, or the amount charged;

(iii)

the person liable in any case to pay any amount charged, or the amount of his liability; or

(iv)

whether or not any person is entitled in any case to relief or to any repayment, remission or drawback of any such duty or levy, or the amount of the relief, repayment, remission or drawback to which any person is entitled.”

These are mandatory provisions. As noted in Noor at para 194 “all Member States must apply the common external tariff to imports from third count[r]ies. HMRC does not have a discretion about whether or not to apply a customs duty”. On an appeal (Footnote: ²), the FTT is concerned with whether the facts prescribed for a charge to arise are present and the amount of the charge.

We thus agree with the FTT’s analysis set out at [200] above and reject Ms Choudhury’s suggestion that the statutory provisions under consideration conveyed any right of appeal against the exercise of a discretionary power by HMRC. There was no error of law in the FTT concluding that, as a matter of statutory interpretation, it had no jurisdiction to consider public law grounds, such as legitimate expectation, in appeals brought under sections 83(1)(b) VATA and sections 13A(2) and 16(5) Finance Act 1994.

Notwithstanding its ruling on jurisdiction being terminal for the Appellant’s case, the FTT nonetheless considered the application of legitimate expectation to the facts at [237]-[243]. In particular, it decided that HMRC did not make a clear and unambiguous statement to the Appellant that customs duty would not be payable on the importation of the aircraft such as to give rise to any legitimate expectation:

Thereafter at [245]-[254] the FTT decided that HMRC’s letters of October, November and December 2017 did not cause the Appellant not to pursue the retrospective EUA application by November 2017 (the one year deadline in which it could have obtained an end use authorisation covering the period from 1 November 2016 when the aircraft was imported).

Finally, at [255] – [260], the FTT gave reasons for its conclusions that even if the Appellant had relied on HMRC’s mistaken statement in the October 2017 letter, it did not cause detriment to the Appellant.

In order to found a claim of legitimate expectation, a promise or representation relied upon must be "clear, unambiguous and devoid of relevant qualification": R v Inland Revenue Comrs, Ex p MFK Underwriting Agents Ltd [1990] 1 WLR 1545, per Bingham LJ at 1569G. Bingham LJ's classic test has been widely approved and applied. In R (Bancoult) v Secretary of State for Foreign and Commonwealth Affairs (No. 2) [2009] AC 453, Lord Hoffmann said, at [60]:

As further explained by Sir Ross Cranston in Glint Pay Services Ltd, R (On the Application Of) v Commissioners for His Majesty's Revenue & Customs [2023] EWHC 1621 (Admin) at [36]-[38] there is a high threshold to satisfy before legitimate expectation can be made out in the taxation context:

Given our decision that the FTT did not err in ruling that it had no jurisdiction to consider legitimate expectation as a ground of appeal in this case, we do not need consider the remaining challenge to its factual findings. Nonetheless, we go on to consider the FTT’s finding that the statements made by HMRC in correspondence with the Appellant were not such as to give rise to any legitimate expectation.

First, Ms Choudhury argues that HMRC’s two letters of October and November 2017 made clear and unambiguous statements that the Appellant would not need to pay customs duty and VAT on the importation of the aircraft notwithstanding the expiry of its end use authorisation.

Second, she argues that the FTT took a very narrow approach to the circumstances in which a claim based on legitimate expectation can arise and that it could only do so where Caerdav had sought and obtained a “ruling” from HMRC [238]. As it had not done so, no legitimate expectation arose. However, “ruling” in this context simply means a representation by HMRC on which a taxpayer has relied. The higher courts are often asked to determine judicial review applications based on HMRC published guidance which cannot, on any view, be regarded as a “ruling” in respect of a particular taxpayer: see, for example, the Supreme Court’s decision in R (oao) Davies & anor v HMRC [2011] 1 WLR 2625 which concerned HMRC’s guidance in their booklet IR20 and R (oao Aozora GMAC Investment Ltd) v HMRC [2019] EWCA Civ 1643 which concerned HMRC guidance in their published internal international tax manual. The FTT thus erred at [238] that the statements in Mr Jones’ letters to Caerdav that no liability arose in relation to the aircraft could not found a legitimate expectation because they did not amount to “rulings”.

Thirdly, the FTT made a further error in considering whether the statements in Mr Jones’ letters of 10 October and 10 November 2017 had been relied on by Caerdav to its detriment. The FTT held at [239] that the statements in those letters that no underpayment of customs duty or import VAT caused by errors in import entry for the aircraft could be regarded as clear, unambiguous and devoid of relevant qualification. It then went on to state that they had to be viewed in context of the earlier correspondence that they should have at least raised a doubt in Caerdav’s mind as to whether this really meant that duty was not to be pursued on the import of the aircraft, especially as the non-monetary errors were stated to relate to a failure to producedocuments.

We do not accept the Appellant’s first submission for the reasons set out below.

In respect of the second alleged error, even though the need for a ruling from HMRC is not necessary where the ‘EU law’ or domestic law concept of legitimate expectation is concerned, we do not read [238] of the Decision as stating that a ruling was required. Rather, we read the FTT as noting the absence of a ruling as part of the factual matrix when finding that there were no clear and unambiguous assurances given by HMRC.

In respect of the third submission, we are unconvinced there is any error in the FTT’s findings that the Appellant did not rely on the statements in HMRC’s letters to its detriment (see [246]-[259] of the Decision). It was entitled to reach the findings it did on the facts at [253]-[254]:

Nonetheless, we will assume for current purposes that the Appellant did not need to prove that the statements made by HMRC in the October and November 2017 letters caused it any detriment – see Aozora at [44]: ‘It is true as Leggatt J said in GSTS, that some cases have recognised a legitimate expectation without detrimental reliance….But Leggatt J’s observation was limited to stating that it is not essential in all cases but that it is still relevant, he said, to the question of whether it would be unjust for the authority to frustrate the expectation created.’

Even had there been jurisdiction to consider legitimate expectation, we are not satisfied that the FTT erred in finding it did not arise on the facts. It is implicit in its Decision that the FTT did not find there was any outrageous unfairness created by HMRC’s demand for customs duty and VAT notwithstanding the statements made in the letters. The FTT was entitled to find that HMRC had not made clear and unambiguous statements in its October and November letters that were devoid of relevant qualification and which gave rise to a legitimate expectation that the Appellant was not liable to customs duty and VAT on the importation of the aircraft.

The FTT was entitled to find that the statements in HMRC’s letters of October and November 2017 were not clear and unambiguous based on terms of the letters, the context and the history of its contact with HMRC.

This was part of a determination by the FTT reached after a careful review of the facts (addressing legitimate expectation on the facts across 59 paragraphs of its judgment at [204]-[262]). The FTT was entitled to reach the determination it did on those facts – the findings were within a reasonable range of findings open to a properly instructed tribunal. The FTT was entitled to find that the statements in the letters fell short of creating any legitimate expectation for the reasons it gave, in particular due to the history and context of correspondence, the terms of the wording and caveats supplied and absence of consistency: there was no error in the FTT’s findings and reasons given at [237]-[245] as set out above.

We dismiss this ground of appeal. There was no material error of law in the FTT’s decision.

The FTT rejected the Appellant’s application, made on the third day of the hearing, to introduce a new ground of appeal and evidence on the value of the aircraft. It gave its reasons beginning at [263]:

The lateness is extreme.

Ms Choudhury submits that the FTT was wrong to refuse Caerdav permission to argue that the wrong customs value had been used in determining the amount of customs duty and VAT due because it had been raised too late. In relation to this ground, she accepts that this was a case management decision with which the appellate tribunal will be slow to interfere: BPP Holdings Ltd & Ors v HMRC [2017] UKSC 55 at [33] citing Walbrook Trustee (Jersey) Ltd v Fattal [2008] EWCA Civ 427. Nevertheless, she contends that the FTT made an error of law.

She argues that in reaching its conclusion on this issue, the FTT stated at [268]that Caerdav had already made one late application to amend its grounds of appeal on 1 October 2021. That date was incorrect. The application to amend had been made on 17 September 2021 but the Tribunal only determined it on 1 October. This is a clear error. The FTT sought to excuse it in its permission to appeal decision as not material to its conclusion not to grant permission.

However, the FTT clearly had Caerdav’s actions in mind and made no reference to why it had made the application to amend when it did, i.e. the late disclosure by HMRC of the Bulgarian documents. The FTT only made a brief reference to this in [271]. There was a further brief reference at [5] to HMRC having received them “following a requestfor assistance which was requested by Caerdav”.

Ms Choudhury contends that the FTT focused exclusively on Caerdav’s conduct with barely any reference to how HMRC had produced the evidence late in breach of earlier directions and after Caerdav had to ask HMRC to rectify their earlier errors in making the mutual assistance request (going so far as to raise the prospect of a judicial review claim if it refused to do so).

However, even if it did, the FTT applied the wrong legal test when doing so. It merely focused on the lateness of the point. It did not consider the duty of the FTT to determine the correct amount of tax in accordance with the “venerable principle” as discussed by the Court of Appeal in Investec Asset Finance plc & anor v HMRC [2020] EWCA Civ 579 at [60] (see [264]) which is a clear distinction from the position in the civil courts where the judge is required to adjudicate a dispute between two private parties.

Further, such a dispute must be determined in accordance with the overriding objective which includes the requirement to avoid undue formality: see the recent discussion of how a late application to amend ought to be determined bearing in mind the FTT’s role in determining the correct amount of tax in Exchequer Solutions v HMRC [2022] UKFTT 181 (TC).

We reject each of these submissions.

Ultimately, the Appellant challenges a discretionary case management decision. It is trite that a generous ambit of discretion is entrusted to first instance judges taking such decisions.

We would have to be satisfied that the FTT was “plainly wrong” before interfering: see for example, Westminster Trading Ltd v HMRC [2017] UKUT 23 (TCC), paras 49-50.

We are satisfied that there was no error of law in the FTT’s case management decision and it was not close to being plainly wrong. It performed a multifactorial assessment taking into account: the lateness of the application; the reason for this, the reliability of the material to be presented; the practical consequences of it needing to be tested and HMRC filing evidence in reply; the prejudice to HMRC in admitting the material; and the overriding objective - whether it was just and fair to both parties to admit the evidence and consider the appeal ground. It gave more than sufficient reasons in its decision at [275]-[284] as set out above.

The suggestion that the error of date mentioned “was materialto the FTT’s conclusion not to grant permission” is not credible in the overall context of the numerous factors considered by the FTT at [263-284]. Whether that - other - application was made on 17 September or on 1 October 2021, it was plainly very late, meaning the Judge was right to note that the Appellant “had already applied to make one late amendment to the grounds of appeal to take account of the Bulgarian documents…” [268]. As the Judge pointed out, if the Appellant had “any doubt about the value, they have had five years to query it” [281]. In her decision refusing permission on Ground 6, the Judge confirmed that the error in the date of the (other) late application “is not material”. She went on to observe that the “lateness of the application was extreme”.

The suggestion that inadequate weight was given to the procedural history and to every aspect of it is also an insufficient ground on which to appeal the decision. The Judge stated when refusing permission to appeal that she “did not consider it necessary to rehearse the history of how the Bulgarian Documents came to be received when they were. I was well aware of the background, as set out in the facts section of the Decision.” The FTT took into account the key point that the Appellant had had to deal with the Bulgarian documents at a fairly late stage (August 2021), noting that the point had not then “been made because, Ms Choudhary [Counsel for the Appellant] admitted, she had missed it given the amount she had to do and the documents she had to review since receipt of the Bulgarian documents in August.” The Judge’s conclusion was that there “was no good reason why the value was not challenged following receipt of the Bulgarian documents” [282].

The Appellant also asserts that the FTT “did not consider the duty of the FTT to determine the correct amount of tax in accordance with the “venerable principle”…”, referring to the Investec case. Yet the FTT expressly considered that principle, including with reference to Investec at [264], [266] & [272].

The FTT referred to the overriding objective at [266], [269] and [284], and it is apparent that it did not simply rely upon the lateness of the application but performed a multifactorial assessment which was reasoned and reasonable. There was no error of law in its analysis.

We dismiss this ground of appeal.

In our view, the FTT’s Decision was careful and well-reasoned. It contained no material error of law. Each of the Appellant’s grounds of appeal is dismissed and the FTT’s Decision is confirmed.

The Union Customs Code (“UCC”) governed the import and export of goods in the EU at the time the aircraft entered the UK. It is supplemented by the Commission Delegated Regulation (EU) 2015/2446 (“the DR”) and Commission Implementing Regulation (EU) 2015/2447 (“the IR”).

The “customs territory of the Union” is defined in Article 4 of the UCC where it lists the territories of the EU Member States and includes their territorial waters, internal waters and airspace. The other definitions used in the UCC are set out in Article 5. These include:

"customs procedure" means any of the following procedures under which goods may be placed in accordance with the Code:

release for free circulation;

special procedures;

export;

"customs debt" means the obligation on a person to pay the amount of import or

Title III is headed “Customs Debt and Guarantees”. Section 1, Chapter 1 includes Article 79, “Customs debt incurred through non-compliance”, which states as follows:

For goods liable to import duty, a customs debt on import shall be incurred through non-compliance with any of the following:

one of the obligations laid down in the customs legislation concerning the introduction of non-Union goods into the customs territory of the Union, their removal from customs supervision, or the movement, processing, storage, temporary storage, temporary admission or disposal of such goods within that territory;

one of the obligations laid down in the customs legislation concerning the end use of goods within the customs territory of the Union;

a condition governing the placing of non-Union goods under a customs procedure or the granting, by virtue of the end-use of the goods, of duty exemption or a reduced rate of import duty.

The time at which the customs debt is incurred shall be either of the following:

the moment when the obligation the non-fulfilment of which gives rise to the customs debt is not met or ceases to be met;

the moment when a customs declaration is accepted for the placing of goods under a customs procedure where it is established subsequently that a condition governing the placing of the goods under that procedure or the granting of a duty exemption or a reduced rate of import duty by virtue of the end-use of the goods was not in fact fulfilled.

In cases referred to under points (a) and (b) of paragraph 1, the debtor shall be any of the following:

any person who was required to fulfil the obligations concerned;

any person who was aware or should reasonably have been aware that an obligation under the customs legislation was not fulfilled and who acted on behalf of the person who was obliged to fulfil the obligation, or who participated in the act which led to the non-fulfilment of the obligation;

any person who acquired or held the goods in question and who was aware or should reasonably have been aware at the time of acquiring or receiving the goods that an obligation under the customs legislation was not fulfilled.

In cases referred to under point (c) of paragraph 1, the debtor shall be the person who is required to comply with the conditions governing the placing of the goods under a customs procedure or the customs declaration of the goods placed under that customs procedure or the granting of a duty exemption or reduced rate of import duty by virtue of the end-use of the goods.

Section 3, Chapter 3, Title III of the UCC is headed “Repayment and remission”. Article 116 relevantly states:

Subject to the conditions laid down in this Section, amounts of import or export duty shall be repaid or remitted on any of the following grounds:

overcharged amounts of import or export duty;

defective goods or goods not complying with the terms of the contract;

error by the competent authorities;

equity.

The customs authorities shall repay or remit the amount of import or export duty referred to in paragraph 1 where it is EUR 10 or more, except where the person concerned requests the repayment or remission of a lower amount…

Subject to the rules of competence for a decision, where the customs authorities themselves discover within the periods referred to in Article 121(1) that an amount of import or export duty is repayable or remissible pursuant to Articles 117, 119 or 120 they shall repay or remit on their own initiative.

No repayment or remission shall be granted when the situation which led to the notification of the customs debt results from deception by the debtor…”.

Article 120 states:

In cases other than those referred to in the second subparagraph of Article 116(1) and in Articles 117, 118 and 119 an amount of import or export duty shall be repaid or remitted in the interest of equity where a customs debt is incurred under special circumstances in which no deception or obvious negligence may be attributed to the debtor.

The special circumstances referred to in paragraph 1 shall be deemed to exist where it is clear from the circumstances of the case that the debtor is in an exceptional situation as compared with other operators engaged in the same business, and that, in the absence of such circumstances, he or she would not have suffered disadvantage by the collection of the amount of import or export duty.”

Title IV concerns goods brought into the customs territory of the Union. It includes Article 136 which states:

The aircraft constituted “non-Union goods” as it originated from outside the Union. The Articles referred set out various conditions which need to be complied when goods are brought into the customs territory.

Section 4, Chapter 2, Title V of the UCC sets out the provisions applying to all customs declarations. Article 174 states:

The customs authorities shall, upon application by the declarant, invalidate a customs declaration already accepted in either of the following cases:

where they are satisfied that the goods are immediately to be placed under another customs procedure;

where they are satisfied that, as a result of special circumstances, the placing of the goods under the customs procedure for which they were declared is no longer justified.

The Articles concerning special procedures are in Title VII and include both end-use (Article 254) and Inward Processing (Article 256). Chapter 1, Title VII is headed “General provisions”. Article 214 imposes a requirement for keeping appropriate records. This Article is supplemented by Article 178(1) of the DR which specifies the records in question.

Article 215 is headed “Discharge of a special procedure” and states:

…

The customs authorities shall take all the measures necessary to regularise the situation of the goods in respect of which a procedure has not been discharged under the conditions prescribed.

The discharge of the procedure shall take place within a certain time-limit, unless otherwise provided.”

Article 219 is headed “Movement of goods” and states:

This Article is supplemented by Article 179 of the DR. Article 179(1) states:

Article 267 of the IR also supplements Article 219. It states:

Movement of goods to the customs office of exit with a view to discharging a special procedure other than end-use and outward processing by taking goods out of the customs territory of the Union shall be carried out under cover of the re-export declaration

Customs formalities other than keeping of records as referred to in Article 214 of the Code are not required for any movement which is not covered by paragraphs 1 to 3

Where movement of goods takes place in accordance with paragraphs 1 or 3, the goods shall remain under the special procedure until they have been taken out of the customs territory of the Union.”

Finally, Article 329 of the IR sets out how the customs office of exit is determined:

Except where paragraphs 2 to 7 apply, the customs office of exit shall be the customs office competent for the place from where the goods leave the customs territory of the Union for a destination outside that territory.”

The customs office of exit is the office from which the goods leave the EU. It may be the same or different from the customs office of export where the goods are declared for export.

At the relevant time, s. 1(1)(c) of the Value Added Tax Act 1994 (“VATA”) provided that VAT was charged on the importation of goods from places outside the member states. Section 1(4) provided:

Section 15 VATA provided:

For the purposes of this Act goods are imported from a place outside the member States where—

having been removed from a place outside the member States, they enter the territory of the European Union;

they enter that territory by being removed to the United Kingdom or are removed to the United Kingdom after entering that territory; and

the circumstances are such that it is on their removal to the United Kingdom or subsequently while they are in the United Kingdom that any Community customs debt in respect of duty on their entry into the territory of the European Union would be incurred.

Accordingly—

goods shall not be treated for the purposes of this Act as imported at any time before a Community customs debt in respect of duty on their entry into the territory of the European Union would be incurred, and

the person who is to be treated for the purposes of this Act as importing any goods from a place outside the member States is the person who would be liable to discharge any such Community customs debt.”

Section 16(1) VATA then provided:

Subject to such exceptions and adaptations as the Commissioners may by regulations prescribe and except where the contrary intention appears—

the provision made by or under the Customs and Excise Acts 1979 and the other enactments and subordinate legislation for the time being having effect generally in relation to duties of customs and excise charged on the importation of goods into the United Kingdom; and

the EU legislation for the time being having effect in relation to EU customs duties charged on goods entering the territory of the European Union, shall apply (so far as relevant) in relation to any VAT chargeable on the importation of goods from places outside the member States as they apply in relation to any such duty of customs or excise or, as the case may be, EU customs duties.”

Section 83(1) VATA in so far as relevant provides:

Article 44 of the UCC gives a person a right of appeal against any decision taken by the customs authorities relating to the application of the customs legislation which concerns that person. This right is given effect in domestic law by certain provisions in Finance Act (“FA”) 1994. Section 13A(2) provides:

any decision by HMRC, in relation to any customs duty or any agricultural levy of the European Union, as to –

whether or not, and at what time, anything is charged in any case with any such duty or levy;

the rate at which any such duty or levy is charged in any case, or the amount charged;

the person liable in any case to pay any amount charged, or the amount of his liability; or

whether or not any person is entitled in any case to relief or to any repayment, remission or drawback of any such duty or levy, or the amount of the relief, repayment, remission or drawback to which any person is entitled.”

The right of appeal against a “relevant decision” is provided by s. 16 FA 1994. S.16(5) states: