CAERDAV LTD v THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS [2023] UKUT 00179 (TCC)
| Jurisdiction | UK Non-devolved |
| Judge | Mr Justice Rajah,Judge Rupert Jones |
| Subject Matter | 25 July 2023 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
| Published date | 25 July 2023 |
Neutral Citation: [2023] UKUT 00179 (TCC) Case Number: UT/2022/000085
UPPER TRIBUNAL
(Tax and Chancery Chamber) Sitting in public at the Rolls Building, London
Keywords
Heard on: 23-24 May 2023
Judgment date: 25 July 2023
Before
MR JUSTICE RAJAH
JUDGE RUPERT JONES
Between
CAERDAV LTD
Appellant
and
THE COMMISSIONERS FOR HIS MAJESTY’S REVENUE AND CUSTOMS
Respondents
Representation:
For the Appellant: Sadiya Choudhury, Counsel, for the Appellant
For the Respondents: Jim Duffy, Counsel, instructed by the General Counsel and Solicitor to
His Majesty’s Revenue and Customs
1
DECISION
INTRODUCTION
1. The Appellant, Caerdav Ltd (“Caerdav”), appeals the Decision of the First-Tier Tribunal
(‘FTT’) dated 16 March 2022 ([2022] UKFTT 00105 (TC)). The FTT dismissed Cardaev’s
appeal against a C18 demand note issued by His Majesty’s Revenue and Customs (‘HMRC’)
dated 23 April 2018 for £330,633.45 (“the demand”). It was made up of customs duty of
£275,547.12 and import VAT of £55,086.33.
2. The demand had been issued in respect of Caerdav’s importation of an aircraft
(registration number 5HFJA) (“the aircraft”) in November 2016. The aircraft had flown from
Sofia in Bulgaria and entered the UK at St Athan in Wales for a service check, repairs and
maintenance to be conducted by Cardaev on behalf of the aircraft’s lessee, Fastjet plc. The
aircraft then left the UK for the Republic of Ireland before going on to its final destination in
the United States of America (‘US’).
3. HMRC were initially of the view that no liability arose for Caerdav in respect of the
aircraft and suggested as such in two letters in October and November 2017. HMRC then came
to a different view and raised a demand for customs duty and VAT in April 2018 on the basis
that Caerdav had entered the aircraft into the European Union (‘EU’) customs special procedure
known as “end-use”, but it was not entitled to do so because its authorisation to use this
procedure had expired. It is not in dispute that the end-use authorisation had expired, or that
this was due to an oversight on Caerdav’s part.
4. Similar issues arise in this appeal to the Upper Tribunal as were before the FTT. They
are set out in full below but include: whether the aircraft’s importation into the UK was as part
of an indirect export through the EU from Bulgaria and onwards to Ireland and the USA such
that the importation qualified for relief under a special procedure, namely Inward Processing;
if not, whether the duty payable could and should be remitted by HMRC; and whether HMRC’s
statements to Caerdav in letters in October and November 2017 gave rise to a legitimate
expectation that duty would not be imposed.
5. We are grateful to Ms Choudhury for the Appellant and Mr Duffy for HMRC for the
quality of their written and oral arguments on this appeal. We have not found it necessary to
refer to Mr Duffy’s arguments throughout but have agreed with many of them when giving our
reasons.
The issues before the FTT
6. The issues before the First-Tier Tribunal (‘FTT’) were whether Caerdav was liable for
the demand under the applicable provisions of EU customs legislation and, if it was, whether
there was any other reason under the applicable law why the demand ought not to be upheld.
The FTT dismissed Caerdav’s appeal on all grounds finding that the customs debt and VAT
were due.
7. The Appellant pursued a number of grounds of appeal before the FTT. The first and
primary question in the appeal was whether a special procedure applied, namely Inward
Processing, such as to relieve the imposition of any duty or VAT. The FTT next considered
whether HMRC should remit the liability under Article 120 of the Customs Code. Third, it
considered whether a simplified end use procedure was in breach of EU law and ultra vires.
That ground and issue is not pursued before us. Fourth, the FTT considered whether the
Appellant had a legitimate expectation, based on letters from HMRC, that the duty and VAT
were not due.
8. The FTT recorded its conclusions at [285]:
2
285. For the reasons set out above, I have decided:
(1) That the aircraft was imported under an expired EUA and that it was not subject to the Inward
Processing procedure on arrival in the UK [because it had left the EU when flying through
Serbian airspace and was travelling as part of a direct export from Bulgaria to the USA].
Accordingly, the customs debt and VAT are due;
(2) The principles of Terex do not apply to require HMRC to remit the customs debt and VAT.
Nor can the Appellant require remission on the ground of equity under Article 120 UCC. To the
extent that the Appellant seeks to rely on the EU principle of legitimate expectation, this Tribunal
does not have jurisdiction in the matter.
(3) This Tribunal does not have jurisdiction to consider the ultra vires ground which would not
assist the Appellant in any event; and
(4) This Tribunal does not have jurisdiction to consider the UK legitimate expectation ground in
the context of this appeal and, in any event, the conditions for legitimate expectation are not made
out.
Grounds of appeal before the Upper Tribunal
9. The Appellant was granted permission to appeal to the Upper Tribunal on six grounds
through which it submits the FTT erred in law:
(1) By holding that the aircraft was no longer subject to the Inward Processing special
procedure once it left EU airspace. It is submitted the FTT erred in finding it was moving
as part of a direct export from Bulgaria to the US when it should have found that it was
moving as part of an indirect export through the EU and via Shannon in Ireland.
(2) By holding that the customs debt could not be remitted on the grounds of equity
under Article 120 of the Union Customs Code (‘UCC’).
(3) By holding that a legitimate expectation did not arise as a matter of EU law.
(4) By failing to take any account of proportionality in its decision.
(5) By holding that (a) it did not have jurisdiction to consider legitimate expectation in
the particular statutory context, (b) a legitimate expectation could only arise as a result
of a ‘ruling’ by HMRC; and (c) no legitimate expectation arose on the facts.
(6) In the exercise of its discretion when considering whether to allow the Appellant
to dispute the amount of the customs debt (i.e. whether to allow the Appellant to pursue
an argument not raised before the latter stages of the FTT hearing).
The findings of the FTT in relation to the background facts
10. The FTT made its findings in relation to the background facts in its Decision at [7] to
[53]. These are summarised below along with reference to paragraph numbers in square
brackets.
11. The findings are relevant to the questions of whether the customs debt could be remitted
on the grounds of equity under the UCC and whether HMRC’s statements in letters and its
actions thereafter gave rise to a legitimate expectation that the duty and VAT would not be
imposed (grounds of appeal 2, 3 and 5).
12. The FTT had heard evidence from Caerdav’s finance director at the time, Christopher
Coleman, and its customs consultant, Robert Hina. Officers Rhys Jones and Kevin Snow gave
evidence for HMRC.
13. None of these findings are challenged on appeal.
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