Excise disputes run on rules that catch out practitioners from a direct tax or VAT background. Liability attaches to whoever is holding the goods, regardless of ownership or knowledge. And the choice a client makes in the first month after a seizure usually determines whether the argument they most want to run is available at all.
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Why Excise Is Different
Excise duty disputes follow rules that surprise practitioners who come to them from a direct tax or VAT background. Three features in particular catch people out, and all three are fatal if missed.
- The duty point rule casts a very wide net. Liability does not depend on ownership, profit or knowledge. A person who holds excise goods at the moment the duty becomes due can be assessed, and that includes hauliers, drivers, warehousekeepers and storage providers who never owned the goods and made no margin on them.
- Seizure and assessment run on separate tracks with different deadlines and different forums. Losing the first almost always destroys the second.
- The tribunal frequently cannot consider the argument the client most wants to make. Where goods have been condemned or deemed condemned, the First-tier Tribunal has no jurisdiction to find that they were held for personal use.
The Statutory Framework
When duty becomes payable
Excise duty on alcohol and tobacco becomes payable at the excise duty point. Goods may move in duty suspension between authorised warehouses under cover of the movement control arrangements, but duty crystallises when they are released for consumption, are diverted, or are found to be held outside a duty suspension arrangement without duty having been paid.
The person liable is, in broad terms, the person holding the goods at the excise duty point, together with any person who caused the goods to reach that point. That is a deliberately wide formulation, and it is the source of most excise assessments against hauliers and intermediaries.
Assessment and penalty
- Excise duty assessment. HMRC assesses the duty due on the person liable, in an amount it considers due to the best of its judgment where the records are incomplete.
- Excise wrongdoing penalty. Schedule 41 to the Finance Act 2008 imposes a penalty for handling goods subject to unpaid excise duty. The behaviour categories mirror the inaccuracy regime (non-deliberate, deliberate, and deliberate and concealed) with reductions for disclosure.
- Seizure and forfeiture. Goods, and the vehicle carrying them, are liable to forfeiture under the customs and excise management legislation. Seizure is a separate process from assessment.
- Registration and approval. Wholesalers of alcohol must be approved under the alcohol wholesaler registration scheme, and warehousekeepers and registered consignors require approval. Refusal or revocation of approval is separately appealable and is often more commercially serious than the duty itself.
The Two Tracks, and Why the Order Matters
| Track 1: legality of seizure | Track 2: restoration, assessment and penalty | |
|---|---|---|
| Question | Were the goods lawfully liable to forfeiture: for example, were they held for a commercial purpose? | Should the goods be returned, and is the assessment or penalty correct? |
| Forum | Magistrates’ court (condemnation proceedings) | HMRC review, then the First-tier Tribunal |
| How it starts | A notice of claim to HMRC, within the statutory period from seizure | A request for restoration and, separately, an appeal against the assessment or penalty |
| If you do nothing | The goods are deemed condemned as forfeit | The assessment stands and the penalty is due |
The deeming trap: Jones and Race
In HMRC v Jones and Jones [2011] EWCA Civ 824 the Court of Appeal held that where a notice of claim is not made, or is withdrawn, the statutory deeming takes effect and the First-tier Tribunal has no power to reopen and re-determine whether the goods were held for personal use. Mummery LJ explained that the deeming is a consequence of the claimant’s own decision, and that the tribunal’s jurisdiction is confined to the correctness of HMRC’s discretionary review decision on restoration.
The principle was extended in Race v HMRC [2014] UKUT 331 (TCC), which applied the same logic to an assessment appeal: a taxpayer cannot use the assessment appeal as a back door to argue facts foreclosed by the deemed condemnation.
Restoration Reviews and What the Tribunal Can Do
Where goods or a vehicle are seized, the owner may ask HMRC to restore them. HMRC’s decision is subject to a statutory review, and the review decision may be appealed to the First-tier Tribunal.
The tribunal’s jurisdiction here is supervisory, not appellate on the merits. It asks whether the review decision was one that could reasonably have been arrived at, whether HMRC took account of irrelevant matters, failed to take account of relevant ones, or reached a decision no reasonable officer could reach. If the tribunal allows the appeal it does not order restoration; it directs a further review.
The arguments that succeed are therefore about the decision-making, not about fairness in the abstract:
- The reviewing officer applied the policy mechanically without considering the individual circumstances.
- Exceptional hardship or disproportionality was raised and not addressed, particularly where a vehicle is the operator’s sole means of trading.
- The officer took into account a fact that was wrong, or ignored evidence supplied.
- The decision is disproportionate to the alleged wrongdoing, especially where the owner of the vehicle is a third party who was not complicit.
Challenging the Assessment and the Penalty
These are ordinary tax appeals to the First-tier Tribunal, and the usual armoury applies.
- Was the client the person liable? The duty point provisions are wide but not unlimited. Whether the client was “holding” the goods at the duty point, and in what capacity, is a question of fact worth contesting, particularly for drivers and warehouse operators.
- Is the quantum right? Where HMRC has assessed to best of judgment, the principles in Van Boeckel and Pegasus Birds apply. The tribunal’s primary task is to find the correct amount, and the burden of displacing the figure is the appellant’s.
- Behaviour. A Schedule 41 penalty categorised as deliberate carries a far higher range and can support publication and a personal liability notice. The subjective test in HMRC v Tooth and Auxilium applies, and blind-eye allegations must satisfy both limbs of The Star Sea.
- Reasonable excuse and special reduction. Both are available against a Schedule 41 penalty and should be pleaded in the alternative.
- Burden of proof. Note HMRC v Sintra Global [2025] EWCA Civ 1661, itself an excise diversion case, on who must prove the underlying liability when it is raised as a defence to a penalty. That decision is under appeal to the Supreme Court.
- Deadlines. For excise there is no power in HMRC to accept a late appeal; only the tribunal can extend time, applying Martland. This catches out advisers used to s49 TMA 1970.
Approvals: the Bigger Commercial Risk
For a trading business, revocation or refusal of an approval is frequently more damaging than the duty assessed. An alcohol wholesaler who loses approval cannot lawfully trade; a warehousekeeper who loses approval loses the business.
Approval decisions attract the same supervisory jurisdiction as restoration: the tribunal reviews the reasonableness of the decision rather than substituting its own. The practical consequences are:
- Engage at the fit and proper stage. HMRC’s concerns are usually visible long before revocation. Addressing them with evidence is far more effective than appealing afterwards.
- Due diligence is the battleground. As in a Kittel case, contemporaneous, documented checks on suppliers and customers that were actually acted upon are the core evidence.
- Consider the timing of any challenge against the commercial reality of trading without approval while an appeal is pending.
Checklist When Goods Are Seized
- Diarise the notice of claim deadline immediately. It is short, and missing it forecloses the personal use and duty paid arguments permanently.
- Decide the strategy before choosing the route. If the facts are contested, condemnation proceedings are the forum. If the facts are accepted and the issue is proportionality, restoration is.
- Do both where appropriate. A notice of claim and a restoration request are not alternatives, and filing a claim does not prevent a later restoration request.
- Identify every liable person. Driver, haulier, owner of the goods, owner of the vehicle and warehousekeeper may all receive assessments or penalties, and their interests may conflict.
- Preserve the evidence. Movement documentation, purchase invoices, supplier due diligence, weighbridge and delivery records, tachograph data and correspondence.
- Appeal the assessment and penalty separately and in time, and remember there is no HMRC route to accept a late excise appeal.
- Address the approval position before it becomes a revocation.
Frequently Asked Questions
HMRC seized my goods and my van. What do I do first?
Decide immediately whether to file a notice of claim challenging the legality of the seizure. The deadline is short. If you do not, the goods are deemed to have been lawfully forfeited, and following HMRC v Jones and Jones [2011] EWCA Civ 824 the tribunal will have no power to find that they were for personal use or duty paid. A restoration request is not a substitute. It is a discretionary remedy about returning the goods, not a route to establishing the facts.
Can I be assessed for duty on goods I never owned?
Yes. Liability at the excise duty point attaches to the person holding the goods, together with any person who caused them to reach that point. Ownership, profit and knowledge are not required. That is why drivers, hauliers, warehousekeepers and storage providers regularly receive excise assessments on consignments they had no commercial interest in.
What can the tribunal actually do about restoration?
Its jurisdiction is supervisory, not a rehearing on the merits. It asks whether HMRC’s review decision was one that could reasonably have been arrived at, whether irrelevant matters were taken into account, relevant ones ignored, or the decision was one no reasonable officer could reach. If the appeal succeeds the tribunal does not order restoration; it directs a further review.
Can HMRC accept a late excise appeal?
No. Unlike direct taxes, where s49 TMA 1970 allows HMRC to admit a late appeal where there was a reasonable excuse, there is no equivalent for excise. Only the tribunal can extend time, applying the three-stage test in Martland v HMRC [2018] UKUT 178 (TCC). Advisers used to the direct tax route waste weeks writing to HMRC in these cases.
Is losing my alcohol wholesaler approval appealable?
Yes, but on the same supervisory basis as restoration: the tribunal reviews the reasonableness of the decision rather than substituting its own view. For most trading businesses the approval is commercially more serious than the duty, so the better strategy is to engage with HMRC’s concerns at the fit and proper stage, with documented supplier and customer due diligence, rather than to appeal after revocation.