Introduction

The case of Revenue and Customs v. Jacobson ([2018] UKUT 18 (TCC)) addresses critical issues surrounding the assessment of excise duty and the imposition of penalties for non-compliance. The appellant, Ms. Susan Jacobson, was intercepted carrying 15 kilograms of hand rolling tobacco (HRT) at Leeds Bradford Airport, leading to the seizure of the goods and subsequent assessments for excise duty and penalties by Her Majesty's Revenue and Customs (HMRC). The primary legal contention revolves around the determination of the excise duty point and whether the penalty under paragraph 4 of Schedule 41 to the Finance Act 2008 was appropriately imposed.

Summary of the Judgment

Ms. Jacobson was intercepted in the green channel at Leeds Bradford Airport upon arrival from Alicante, Spain, with 15 kg of HRT in her baggage. She admitted possession, and the goods were seized as liable to forfeiture. HMRC assessed her for excise duty amounting to £2,591 and imposed a penalty of £906 under the Finance Act 2008 for handling dutiable goods without paying the requisite duty.

The First-tier Tribunal (FTT) dismissed the appeal against the duty assessment but allowed the appeal against the penalty, reasoning that the excise duty point had not occurred before Ms. Jacobson entered the green channel, thereby exempting her from the penalty. HMRC appealed this decision to the Upper Tribunal (Tax and Chancery Chamber), challenging the FTT's interpretation of the duty point and the nature of the disclosure made by Ms. Jacobson.

The Upper Tribunal overturned the FTT's decision regarding the penalty, determining that the excise duty point had indeed occurred before Ms. Jacobson entered the green channel. Consequently, her conduct in handling the seizure constituted an offense warranting the imposed penalty.

Analysis

Precedents Cited

The judgment extensively references two pivotal cases:

• HMRC v Jones & Jones [2011] EWCA Civ 824: This case established that the First-tier Tribunal is bound by the statutory deeming provisions when goods are not contested in condemnation proceedings, thereby presuming the goods were imported for commercial purposes.
• HMRC v Nicholas Race [2014] UKUT 0331: Reinforcing the principles from the Jones case, it was clarified that the FTT cannot override the deeming effect of statutory provisions even when the appeal concerns the assessment of excise duty rather than the restoration of goods.

These precedents were instrumental in shaping the Upper Tribunal's understanding of how duty points are determined and the limitations of the FTT's jurisdiction in assessing penalties based on the initial seizure of goods.

Legal Reasoning

The core legal issue pertained to the definition and timing of the "excise duty point." Regulation 13(1) of the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 stipulates that the duty point is when excise goods are first held for a commercial purpose in the UK. The FTT had erroneously interpreted the duty point as occurring upon entry into the green channel, conflating the point at which duty becomes due with the availability of payment facilities.

The Upper Tribunal clarified that the duty point is independent of where or how the payment is made. Drawing parallels from the Bajwa case, it was emphasized that the duty point occurs when goods enter UK jurisdiction, irrespective of the presence of HMRC officers to accept duty payments. This interpretation aligns with the requirement that importers must arrange for the payment or deferral of excise duty before dispatching goods from another Member State.

Additionally, the Tribunal addressed the nature of Ms. Jacobson's disclosure. Initially deemed "unprompted" by the FTT, the Upper Tribunal concluded that because the duty point had already been reached, the disclosure was indeed prompted by the interception, thereby satisfying the conditions for imposing a penalty.

Impact

This judgment has significant implications for the enforcement of excise duty regulations. It clarifies that:

• The excise duty point is established at the moment goods enter UK jurisdiction for commercial purposes, not merely when individuals interact with customs channels.
• Failure to declare or pay excise duty upon the establishment of the duty point can lead to penalties, irrespective of when the individual becomes aware of their obligations.
• The ruling reinforces the limitations of tribunal jurisdictions in overriding statutory deeming provisions, ensuring consistency in the application of excise duty laws.

For importers and travelers, this emphasizes the necessity of understanding and complying with excise duty regulations promptly upon entering the UK to avoid punitive measures.

Complex Concepts Simplified

• Excise Duty Point: The specific moment when excise duty becomes payable on goods being imported for commercial purposes. It's determined by regulation and is not dependent on payment facilities.
• Green Channel: A customs control area designated for travelers who have goods to declare. Passing through here indicates declaration of dutiable goods.
• Paragraph 4(1) Schedule 41 to the Finance Act 2008: A provision that imposes penalties on individuals dealing with dutiable goods without having paid the necessary excise duty.
• Deeming Provisions: Statutory clauses that presume certain facts, such as the commercial intent behind importing goods, especially when challenges are not raised within designated legal frameworks.
• Penalty Assessment: A legal imposition of fines on individuals or entities for non-compliance with specific regulatory requirements.

Conclusion

The Upper Tribunal's decision in Revenue and Customs v Jacobson reinforces the strict interpretation of excise duty regulations, particularly concerning the determination of duty points and the consequent liability for penalties. By clarifying that the duty point is established upon entry of goods into UK jurisdiction for commercial purposes, irrespective of the availability of payment facilities at customs channels, the judgment sets a clear precedent for future cases. Importers and travelers must be vigilant in declaring dutiable goods and ensuring compliance with excise duty obligations to mitigate the risk of penalties. Furthermore, the decision underscores the limited scope of tribunal jurisdictions in overriding statutory presumptions, thereby promoting consistency and fairness in the enforcement of excise laws.