[2011] UKFTT 197 (TC)

TC01066

Appeal reference: TC/2009/11113

Hydrocarbon oil – excise duty point – importation into United Kingdom – transport company- vehicle detected – driven by husband of Appellant – fuel pod containing diesel in rear of vehicle – diesel imported from Republic of Ireland into Northern Ireland – non payment of excise duty upon Importation – Notice of Seizure – records requested to enable fuel audit to be carried out – only limited provision of records – assessments – request for formal departmental review – decision to uphold assessments – appeal – whether assessments made to best judgment – adjustment allowed

FIRST-TIER TRIBUNAL

TAX CHAMBER

JANET ESTHER HERRONAppellant

T/A HERRON TRANSPORT

- and -

THE COMMISSIONERS FOR

HER MAJESTY’S REVENUE AND CUSTOMSRespondents

Tribunal: Alistair F W Devlin (Judge)

John B Adrain (Member)

Sitting in public in Belfast on23September 2010

Mr. Ronan Lavery of counsel for the Appellant

Ms Kim Tilling for the Respondents

© CROWN COPYRIGHT 2011

DECISION

Introduction

  1. This is an appeal brought by Janet Ester Herron [“the Appellant”] against a decision taken on review to uphold in full the earlier decision to assess the Appellant in the sums of £1,823 under reference EXB519/08 dated 13 October 2008, and £13,024 under reference EXB511/08 dated 13 October 2008. The decision on review from which the Appellant appeals to this Tribunal was duly notified to her by letter dated 14 May 2009.

The factual background

  1. The Appellant has at all material times carried on in business under the name or style of ‘Herron Transport’. The Appellant’s principal place of business was at 258, Ballygowan Road, Dromore, CountyDown, from where the Appellant carried on in business as a road haulier.
  2. On the afternoon of 25 November 2007 officers of the Respondent stopped a Ford Transit van registration number WJI 5720 on the main road running between Belfast and Dublin, known as the A1. The vehicle was at the time being driven by the Appellant’s husband, David Herron. The vehicle had been heading northwards. On inspection of the vehicle the Respondent’s officers noticed that in the rear of the Ford Transit was a large plastic cube, set inside in a reinforcing metal case, known as a ‘pod’, which appeared to contain hydrocarbon fuel. Considering that they had at that time sufficient grounds to arrest David Herron in connection with the alleged unlawful smuggling of hydrocarbon fuel from the Republic of Ireland into Northern Ireland, the Respondent’s officers proceeded to arrest him. Subsequently, David Herron was formally interviewed under caution at Banbridge police station.
  3. Upon being interviewed under caution, David Herron informed the Respondent’s officers that before being stopped he had been travelling home from Dundalk in the Republic of Ireland, and that the main purpose of his journey had been to fill up with DERV the pod which had been located in the rear of the Ford Transit. He told the officers that he had made payment for that fuel on this occasion by means of a Fuelways fuel card, and that the business operated other fuel cards such as Morgan and DCI. David Herron then went on to inform the officers that the business had three lorries at that time, namely a Volvo lorry, which he said had a 600 litre tank [‘NDZ 1811’], together with two others, a Scania and another Volvo, each of which he said were fitted with 400 litre tanks [‘M374 PCP’ and ‘L777 JDS’]. The business he went on to say also owned a Range Rover, a white liveried Astra van, a small vintage tractor, and two diggers. The tractor and the diggers he explained ran on red diesel. David Herron also claimed that the Ford Transit was a vehicle which he used to attend site visits, and also to deliver workmen to sites. He said that the business had no facilities at its premises in which to store fuel, and that as a result he would take lorries across the border into the Republic, usually two or three times a week, for refuelling operations. If a lorry or lorries were to be already in the Republic, they would be refuelled whilst there. Whenever necessary he said that he also bought fuel in Northern Ireland. The business he explained kept records of all fuel purchases made. David Herron claimed that he had never decanted fuel from one vehicle into another, nor he said had he ever decanted fuel from one vehicle into a storage tank. As regards the cube, David Herron said that the fuel in the cube had been intended to be used to fill up lorries, but that it had only been in the back of the vehicle for one day, and that it had never been used by him before. He however accepted that the fuel in the cube or ‘pod’ was going to be used by him to fuel the vehicles.
  4. Inside the vehicle the Respondent’s officers found a number of fuel receipts, one of which was dated 21 November 2007 and which showed a single purchase of 1000 litres of diesel made in the Republic. Upon being questioned in respect of this, David Herron replied that on that occasion the three lorries had been working at the border, and had attended for refuelling across the border at the same time. Mr Herron also stated that the reason the business had been purchasing fuel in the Republic was by reason of it being less expensive there than in the United Kingdom. Upon being asked how he would get the fuel from the pod into the vehicles, David Herron said that he would ‘normally use a hose you know five gallon drums and run it into them as I need you know’.
  5. David Herron also said during the course of this interview that he understood that United Kingdom fuel duty had not been paid on the fuel which he had carried in the pod, and further accepted that in bringing the filled cube containing diesel over the border he was intending to evade such fuel duty.
  6. The Respondent’s officers, upon conclusion of the interview, being satisfied that the diesel contained within the cube had not been legally imported into the United Kingdom, issued the Appellant with a Seizure Notice in respect of the 1000 litres of DERV contained in the cube and also in respect of the vehicle WJI 5720. This Notice of Seizure, handed personally to David Herron advised inter alia that specified records relating to the ownership and operation of all vehicles of the business over the previous three years were being requested, so as to enable a road fuel audit to be undertaken, and that any failure to produce such records could lead to further penalties being levied. David Herron had been asked to sign to confirm receipt of this Notice of Seizure, and he did so sign. Amongst the records specifically sought were:

‘2. Details of all vehicles operated within the business to include:

a. Date of purchase, sale and hire or lease

b. Average weekly mileages, & Average miles per gallon

c. Vehicle fuel tank capacities

d. Details of any additional fuel tanks fitted

e Period of inactivity

f Current odometer readings for each vehicle.

3. Tachographs for all commercial vehicles.

4. Vehicle logbooks/Maintenance Records

5. …………….

6. ………………………………………..’.

The Notice of Seizure went on to specify as follows:

‘We require records for the last 3 years. Please note that this case cannot be resolved until the audit is resolved. Please note that any failure to produce these records may result in penalties being levied’.

The Appellant accepted that this Notice of Seizure which she described as ‘some sort of paperwork’ had been handed to her by her husband, David Herron. She stated that this notice had in turn, about one week later, been handed by her over to her solicitors, and that she had also handed over to her solicitors all documentation which her solicitors had asked her to provide. However, whilst certain fuel receipts do certainly appear to have been obtained directly from David Herron and also from a search of the interior of the vehicle which he had been driving at the time of the original detection, and certain additional fuel invoices may well have been provided to the Respondent’s officers on or about the day after the detection, it was common case that apart from these invoices, no further or additional records at all had subsequently been produced by the Appellant. In particular, no vehicle logbooks, maintenance records, commercial vehicle tachographs or other vehicle details were ever provided.

  1. The Respondent’s officers subsequently made further requests for production of all tachograph documentation held by the Appellant in relation to any lorries owned by the Appellant during the period of three years immediately prior to 25 November 2007 being the date of detection. These records were still not produced.
  2. The Respondent’s officers proceeded to have a reverse vehicle check carried out so as to search for vehicles registered to either the Appellant, or to her husband David Herron, or to Herron Transport. This check appeared on the face of it to suggest that significantly more than the three lorries referred to by David Herron on 25 November 2007 may have been registered to the Appellant, or to David Herron, or to Herron Transport at different times during the course of the three year period between November 2004 and November 2007. The information obtained as a result of the reverse vehicle check was however clearly incomplete. In mid January 2008 the Respondent’s officers then visited the premises of the Appellant. In March and April 2008 fuel invoices relied upon by the Appellant when making 8th Directive claims for the refunding of fuel purchased in the Republic of Ireland were then sought and obtained by the Respondent’s officers from the Republic of Ireland’s Revenue Commissioners. These invoices were sought by the Respondents on 10 March 2008 and duly provided on 7 April 2008.
  3. The Respondents subsequently issued a Notice of Assessment in form EX601 in the sum of £1,823 under reference EXB519/08 dated 13 October 2008. The Respondents also issued on the same date a further Notice of Assessment in form EX601 in the sum of £13,024 under reference EXB511/08. In each instance, a covering letter bearing the same date was also issued by the Respondents to the Appellant, enclosing a copy of the schedule of calculations relied upon by them.
  4. By letter dated 18 November 2008 the Appellant’s solicitors wrote to the Respondents on behalf of their client indicating that their client disagreed with the decision in both assessments, and requesting that their correspondence should be treated as a request for a formal departmental review of both assessments. By further letter dated 9 December 2008 the Appellant’s solicitors wrote again to the Respondents in the following terms:

‘………..Our client is in the process of obtaining statements from various parties which he hopes will show that at the various times and dates sighted [sic] by revenue and customs more then one of his vehicles were involved in filling up with diesel.

Without prejudice our client takes issue with the Revenues [sic] assertion that the one vehicle was used in purchasing diesel on the dates listed. Herron Transport says that on each of the dates in question, more than one of these Vehicles were obtaining a fill of diesel.

Herron Transport are in the process of obtaining statements from both their drivers and the fuel station, to this effect and we will forward there for your consideration as soon as they are received.’

By further letter dated 15 January 2009 the Appellant’s solicitors provided the Respondents with a statement from Four Counties Oil Co. Limited of Dundalk, and with statements signed, it was claimed, by four drivers.

  1. By means of a review letter dated 14 May 2009 a Review Officer of the Respondents concluded that the decisions as to the two assessments as notified to the Appellant by letter dated 13 October 2008 should be upheld. The Review Officer stated that her reasons were because the Appellant had been found to be smuggling UK duty unpaid fuel from the Republic of Ireland and to be decanting this fuel. The Review Officer stated that she had additionally considered the additional material submitted on behalf of the Appellant, and in particular the statements referred to above.
  2. By means of a Notice of Appeal dated 11 June 2009 the Appellant appeals to this Tribunal against that review decision.

Grounds of appeal

  1. The grounds of appeal were stated in the Notice of Appeal to be as follows:

‘HMRC have failed to take account of the way this business is run. Vehicles could have travelled together for purposes of obtaining fuel, especially when one fuel card only exists.

HMRC have failed to take proper consideration of statements from staff at Four Counties Oil Co. Ltd.

The decision by HMRC would effectively mean this company pays tax on fuel twice, in two different EU countries. This surely is not right or equitable.’

At the outset of the hearing, counsel for the Appellant advised the Tribunal that the third of these three grounds of appeal was not being proceeded with, and could be regarded as having been withdrawn.

Evidence and additional findings of fact

  1. On behalf of the Appellant, the Tribunal heard evidence from Janet Ester Herron herself, and also from David Herron. On behalf of the Respondent, the Tribunal heard oral evidence from Leona McArdle On the basis of the evidence adduced before it, the Tribunal makes the following additional findings of fact.
  2. The Tribunal is satisfied that the business was that of the Appellant. We also find that in addition to owning the business, it was the Appellant who looked after the accounts, wages and everything to do with the running of the office. The Appellant herself also looked after payments. The business was a transport business; it had started up concentrating on heavy haulage, and later had moved on to using eight wheeled tipper vehicles. During the period covered by the assessments, the business purchased diesel by means of fuel cards. Various accounts were held at different times, with fuel card operators such as Fuelwise, Morgans and DCI. The way in which the fuel cards operated was so as to enable the business to make use of them at a variety of retail fuel outlets, located both in Northern Ireland and in the Republic. The cards were generally held in the office and given to drivers as and when required, rather than being let out for drivers to hold onto; sometimes however individual drivers would have been given a fuel card to hold onto, but this practice had been a rarity only essentially being confined to one particularly trusted driver who had left some four years previously. Diesel fuel was on occasions purchased in the Republic of Ireland by means of the fuel cards. Drivers would on occasions have gone together to the Republic in order to purchase diesel.
  3. As to how often and in what precise manner the Appellant’s drivers business had purchased diesel fuel for its lorries in the Republic of Ireland for subsequent importation into Northern Ireland, the evidence adduced on behalf of the Appellant was mutually inconsistent. The Appellant began by stating that the drivers, as she put it, ‘sometimes’ would go together to the Republic of Ireland to buy fuel. Under cross examination, she readily accepted that the drivers would not have always have travelled together to buy fuel in the Republic; doing the best that she could her best estimate was that more than half the time, or then she stated perhaps two thirds of the time, the drivers would have travelled together in order to purchase fuel in the Republic.
  4. In support of this, the Appellant at the hearing sought to rely upon the contents of a number of ‘statements’ which had been supplied to the Respondents by the Appellant’s solicitors, under cover of a letter dated 15 January 2009. The provision of these documents accordingly post-dated the issue and notification of the two assessments, but was provided to the Respondents in advance of the review having been undertaken. These documents consisted of: firstly, a letter dated 12 January 2009 on notepaper headed ‘Four Counties Oil Co. Ltd., purporting to come from a John Quigley, but signed by one Mary Connolly, in which it was stated that the practice of David Herron over ‘approximately five or six years’ would have been, on what was described as ‘numerous occasions’, to arrive with two lorries, fill both and hand us his fuel card, both fills going through as one transaction using one registration only. Neither John Quigley nor Mary Connolly attended or gave evidence before the Tribunal; nor was the Tribunal informed as who these persons were, or purported to be, nor what, if any, authority they may have had to sign this document on behalf of Four Counties Oil Co. Ltd. In addition, the Tribunal was presented with three undated statements from what appeared to be drivers of the Appellant stating that on numerous occasions they would each have followed David Herron in a lorry and filled up with diesel.