Introduction

The case of Dawson's (Wales) Ltd v. Revenue and Customs ([2019] UKUT 296 (TCC)) adjudicated before the Upper Tribunal (Tax and Chancery Chamber) on October 4, 2019, represents a significant judicial examination of the interpretation of the term "holding" within the context of excise duty assessments. Dawson's (Wales) Ltd ("DWL"), a wholesaler of alcoholic beverages, contested a substantial excise duty assessment imposed by Her Majesty's Revenue and Customs (HMRC) amounting to £3,729,381. The core issues revolved around the proportionality of the legislation implementing Article 7(2)(b) of Directive 2008/118/EC, the jurisdiction of the First-tier Tribunal (FTT) to evaluate the reasonableness of such assessments, and the precise meaning of "holding" excise goods under the relevant regulations.

Summary of the Judgment

In this pivotal decision, the Upper Tribunal addressed both DWL's appeal against the FTT's determination of preliminary issues and DWL's concurrent claim for judicial review of HMRC’s assessment. The initial assessment by HMRC posited that DWL was liable for unpaid excise duty on goods deemed to be held outside a duty suspension arrangement. The FTT concluded that the relevant legislation was proportionate and that it did not possess jurisdiction to evaluate the reasonableness of HMRC's assessment. However, following the landmark Upper Tribunal decision in Davison & Robinson Limited v HMRC, which clarified HMRC's obligation to assess against the earliest established excise duty point, the Upper Tribunal in Dawson's remitted the case back to the FTT for a substantive hearing. The Upper Tribunal dismissed DWL’s claim for judicial review, emphasizing that statutory appeals were the appropriate remedy.

Analysis

Precedents Cited

The judgment extensively references key precedents that have shaped the interpretation of "holding" within excise duty regulations:

• B & M Retail Limited v HMRC ([2016] STC 2456): Established that excise duty assessments can be made even when earlier duty points exist, provided the earliest point cannot be definitively established.
• Davison & Robinson Limited v HMRC ([2019] STC 694): Affirmed that HMRC must assess against the first established excise duty point without discretion to choose later points.
• Perfect v HMRC ([2017] UKUT 476 (TCC)): Examined the extent of physical possession required to constitute "holding," stressing the need for de facto or legal control over goods.
• Taylor & Wood [2013] EWCA Crim 1151 and Tatham [2014] EWCA Crim 226: Explored the nuances of constructive possession and the responsibilities of agents in excise duty contexts.
• Van de Water v Staatssecretaris van Financien (Case C-325/99) (2001): Provided foundational CJEU interpretations of excise duty point and release for consumption.

These cases collectively underscore the judiciary's focus on the physical and legal control over excise goods, influencing the Upper Tribunal’s approach in Dawson’s.

Legal Reasoning

The Tribunal’s analysis centered on the definition of "holding" within the framework of the 2008 Directive and the Excise Goods (Holding, Movement and Duty Point) Regulations 2010. The crux was whether "holding" necessitates physical possession or extends to legal and de facto control without possession. The Upper Tribunal rejected HMRC’s narrow interpretation favoring physical possession, aligning instead with a broader understanding that encompasses control exercised through agency. The Tribunal emphasized that the Directive aims to prevent the free circulation of duty-unpaid goods within the EU by ensuring accurate identification and taxation at the earliest possible duty point. Consequently, the Tribunal concluded that HMRC’s initial assessment erred by not sufficiently establishing an earlier duty point and thus required remitting the case for a more factual determination.

Impact

This judgment reinforces the obligation of tax authorities to rigorously identify the first excise duty point in supply chains, limiting discretionary assessments against later holders unless adequately justified. It underscores the necessity for precise evidence concerning the control and possession of excise goods to uphold legal certainty and fairness in tax proceedings. Future cases will likely reference this decision to delineate the boundaries of "holding," influencing both tax compliance strategies and HMRC’s assessment methodologies.

Complex Concepts Simplified

Excise Duty Points: These are specific moments in the supply chain where excise duty becomes payable on goods. Determining the earliest duty point is crucial to ascertain which party is liable for the duty.

Regulation 6(1)(b) of the Regulations: This regulation stipulates that excise goods held outside a duty suspension arrangement, without excise duty being paid, trigger a duty point where the holder is liable for payment.

Holding of Goods: In this context, "holding" refers to having either physical possession or legal/de facto control over excise goods. It's not limited to mere ownership but encompasses the ability to direct the goods' use or disposition.

Duty Suspension Arrangement: These are authorized arrangements that allow the movement of excise goods within the EU without immediate payment of excise duty, provided the goods remain under control and are tracked through specified channels.

Conclusion

The decision in Dawson's (Wales) Ltd v. HMRC marks a pivotal development in excise duty law, particularly concerning the interpretation of "holding." By mandating that HMRC assess against the earliest established excise duty point and emphasizing the necessity of clear evidence regarding control and possession of goods, the Tribunal reinforced principles of legal certainty and proportionality within tax law. This judgment not only clarifies the responsibilities of both tax authorities and taxpayers but also ensures that the legislative intent of Directive 2008/118/EC is faithfully implemented to prevent tax evasion and maintain the integrity of the internal market.