Introduction

The case of Jacobson v. Revenue and Customs ([2016] UKFTT 570 (TC)) presents a pivotal examination of the application of civil penalties under Schedule 41 of the Finance Act 2008 concerning excise duty. Susan Jacobson appealed against assessments for excise duty and a subsequent penalty imposed by HM Revenue and Customs (HMRC) following the seizure of 15kg of hand rolling tobacco at Leeds Bradford International Airport. The central issues revolved around whether Jacobson was liable to pay both the excise duty and the associated penalty under the specific circumstances of importing excise goods from another EU member state.

Summary of the Judgment

The First-tier Tribunal upheld the assessment of excise duty amounting to £2,591 but dismissed the penalty of £906 imposed under paragraph 4 of Schedule 41 FA 2008. Jacobson had not contested the seizure of her goods, and HMRC deemed the handling of the tobacco as deliberate, invoking the penalty provisions. However, the Tribunal found ambiguities in the statutory language of the penalty provision, particularly regarding the definition of the "excise duty point" and whether the penalty should apply in cases of goods seized at airports without prior commercial registration.

Analysis

Precedents Cited

The Tribunal referenced several key cases to inform its decision, including:

• HMRC v Jones & anor [2011] EWCA Civ 824 (Jones): Affirmed that the seizure and condemnation of goods presumes their commercial intent.
• HMRC v Race [2014] UKUT 331 (Race): Supported the non-revisitation of seizure and condemnation decisions.
• Commissioners of Customs and Excise v Carrier [1995] 4 All ER 38 (Carrier): Addressed criminal offences related to excise duty points.
• DTL v Skatteministeriet (Dansk Transport og Logistik v Danish Tax Minister) [2010] ECR I-03799 (DTL): Explored the extinguishment of customs duty upon seizure at the first customs office.
• Euro Wines (C & C) Ltd v HMRC [2016] UKUT 359 (Euro): Clarified the application of Article 6 ECHR in penalty assessments.

These precedents collectively informed the Tribunal's interpretation of the statutory provisions and the alignment with human rights considerations.

Legal Reasoning

The Tribunal's legal reasoning focused on the ambiguity within the statutory language of paragraph 4 of Schedule 41 FA 2008. Key points included:

• Excise Duty Point: Determining the precise moment when excise duty becomes chargeable. The Tribunal questioned HMRC's interpretation, which could potentially render the penalty application "perverse" by penalizing individuals who transparently declare their goods.
• Defining "Outstanding Duty": The Tribunal scrutinized whether "outstanding" duty refers strictly to unpaid duty or encompasses scenarios where duty has not been explicitly assessed or demanded.
• Applicability to Individuals vs. Traders: The Tribunal debated whether the penal provisions, seemingly tailored for commercial importers, should extend to private individuals importing goods without commercial intent.
• Human Rights Considerations: Under Article 6 of the European Convention on Human Rights, the Tribunal examined whether the penalty assessment constituted a criminal charge and if Jacobson was afforded a fair trial.

The Tribunal invoked the principle of "doubtful penalisation," asserting that penalties should not be imposed under ambiguous legal circumstances, thereby upholding Jacobson's right against potential overreach.

Impact

This judgment has significant implications for the enforcement of excise duties, particularly concerning:

• Clarity in Penalty Applications: Establishing that penalties under Schedule 41 may not uniformly apply to all scenarios of excise goods importation, especially for private individuals.
• Human Rights Protections: Reinforcing the necessity for clear legal frameworks to prevent undue penalties, aligning with broader human rights standards.
• Administrative Practices: Prompting HMRC and other regulatory bodies to reassess and potentially clarify their guidance and procedures to avoid ambiguities that could lead to unjust penalties.

Future cases will likely reference this decision when addressing the scope and application of excise duty penalties, particularly in contexts involving non-commercial importation and border seizures.

Complex Concepts Simplified

Excise Duty Point

The "excise duty point" refers to the specific moment when excise duty becomes legally due. It typically occurs when goods enter the country for consumption, but the exact timing can vary depending on the regulations. Understanding this point is crucial for determining when duty must be paid to avoid penalties.

Schedule 41 FA 2008, Paragraph 4

This provision imposes a civil penalty on individuals or entities that handle excise goods without having paid the required excise duty after the duty point has been reached. It aims to deter the evasion of excise duties through actions like carrying or depositing dutiable goods without payment.

Potential Lost Revenue (PLR)

PLR represents the amount of excise duty that HMRC calculates as lost due to non-payment or evasion. Penalties are often calculated as a percentage of the PLR to ensure that the financial disincentive aligns with the duty evaded.

Penumbra of Doubt

This legal principle asserts that if a statute is ambiguous, courts should resolve the ambiguity in favor of the defendant. In this case, the Tribunal identified ambiguities in the penalty provision, leading to the decision to dismiss the penalty due to potential overreach.

Article 6 ECHR

Article 6 of the European Convention on Human Rights guarantees the right to a fair trial. In this context, it relates to whether the penalty imposed constitutes a criminal charge, thereby necessitating adherence to fair trial standards.

Conclusion

The judgment in Jacobson v. Revenue and Customs serves as a critical reference point for understanding the boundaries of civil penalties under Schedule 41 FA 2008 regarding excise duties. By highlighting ambiguities in the statutory language and advocating for clear legal standards in penalty applications, the Tribunal reinforced the importance of protecting individuals from potential overzealous enforcement actions. This decision underscores the necessity for regulatory clarity and the safeguarding of human rights within the framework of tax and duty enforcement.