Citipost Mail Ltd (formerly Citipost DSA Ltd)

JurisdictionUK Non-devolved
CourtFirst Tier Tribunal (Tax Chamber)
Judgment Date26 April 2016
Neutral Citation[2016] UKFTT 283 (TC)
Date26 April 2016
[2016] UKFTT 0283 (TC)

Judge Anne Redston, Mr Julian Stafford

Citipost Mail Ltd (formerly Citipost DSA Ltd)

Jeremy White of Counsel, instructed by Thrings LLP, appeared for the Appellant

Sarabjit Singh of Counsel, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents

Value added tax – Import VAT – Channel Islands – Appellant granted low value bulk import approval – Whether conditions of approval met – Appellant issued with demand for import VAT as a customs debt – Low value consignment relief (“LVCR”) for customs duty and import VAT – Whether packages sent to the same recipient and listed on the same manifest must be added together for the purposes of customs duty LVCR – Whether same approach applies to VAT LVCR – If a customs debt, whether appellant is the debtor – Whether waiver provisions at the Customs Code, art. 220(2)(b) apply to import VAT – Whether separate waiver appeal required – Whether tribunal has jurisdiction on this issue – Whether debt should be waived – Appeal against assessment allowed – Whether penalty charged should be upheld, discharged or varied – Penalty reduced.

Introduction and summary

[1] This appeal concerns a relief from import VAT known as Low Value Consignment Relief (“LVCR”). LVCR allows items of “negligible value” to be imported into the EU without suffering import VAT. For the first part of the period at issue in this appeal the LVCR negligible value threshold was £18; from 1 November 2011 it reduced to £15.

[2] At the relevant time, imports below the LVCR threshold could therefore be imported into the UK from the Channel Islands (“CI”) without payment of import VAT. Citipost Mail Limited (formerly Citipost DSA Limited) (“Citipost”) relied on the LVCR in relation to imports from the Channel Islands.

[3] Although this appeal only concerns import VAT, a type of LVCR also applies to customs duties, with a threshold of €150. This was originally treated as equal to £105 but later was set at £135. A key issue in this appeal is the extent to which the two LVCRs are the same.

[4] As a matter of standard customs procedure, a consignment of imported goods has to be accompanied by a “single administrative document” (a “SAD” or a “C88”). The C88 sets out details of the importation, including any customs duty and import VAT. HM Revenue & Customs (“HMRC”) grants Low Value Bulk Imports (“LVBI”) approval to certain importers, allowing them to list a number of separate negligible value packages on a manifest attached to a single C88.

[5] Citipost was given LVBI approval on 17 July 2009. Its understanding of that approval was that separate packages to the same recipient could be included on the same manifest without attracting import VAT, as long as the value of each package was below the LVCR threshold.

[6] On 22 January 2013, HMRC issued Citipost with a civil penalty for £2,500. The next day HMRC issued two post-clearance demand notes (“PCDNs” or “C18s”) for £911,739.80 and £24,488.50, being the import VAT which HMRC decided should have been paid on importations where the total value of goods to the same recipient on the same manifest exceeded the LVCR threshold. The period covered by the two C18s ran from 19 September 2011 through to 30 March 2012.

[7] Citipost asked for a statutory review of the C18s and the penalty. HMRC's Review Officer upheld all three decisions, and Citipost appealed to the Tribunal.

The issues

[8] The issues before the Tribunal were:

  1. 1) whether Citipost had failed to comply with the LVBI; and if so

  2. 2) whether that failure caused a liability to import VAT to arise by way of a customs debt;

  3. 3) if there was a customs debt, whether Citipost was the debtor;

  4. 4) if Citipost was the debtor, whether the Tribunal has the jurisdiction to consider whether the debt should have been waived under article 220(2)(b) of the Community Customs Code (“the Code”);

  5. 5) if the Tribunal does have that jurisdiction, whether the debt should have been waived; and

  6. 6) whether the penalty charged should be upheld, set aside or reduced.

[9] The parties should note that the numbering of the Issues in this decision differs slightly from that in the Statement of Issues provided to the Tribunal before the hearing.

[10] The parties agreed that matters of quantum should be stayed until the final determination of the Issues set out above.

[11] Although a number of other points were raised in correspondence between the parties, HMRC confirmed that no part of either C18 had been calculated on the basis that:

  1. 1) sales to non-EU customers had been included in the manifests;

  2. 2) the value of some imports exceeded the customs duty LVCR threshold; or

  3. 3) more than 99 items had been included on many of the manifests, although HMRC said this breached a condition of the LVBI approval, known as the “99 items rule.”

[12] HMRC also confirmed that neither (1) nor (2) above had been taken into account in relation to the penalty, but their position in relation to breaches of the 99 items rule was less clear, and we return to this at Issue 6.

Outline of the Tribunal's decision

[13] We decided that Citipost had failed to comply with the LVBI approval (Issue 1). However, there was no customs debt because the VAT LVCR applies to the individual parcel, not to grouped parcels sent to the same recipient on the same manifest. Citipost's appeal therefore succeeds on Issue 2.

[14] As a result, Issues (3) to (5) fall away. However, in case this appeal goes further and as the other Issues were very fully argued, we have set out in the main body of this decision, the parties' submissions and our reasoning. In summary, had we decided Issue 2 in favour of HMRC, we would then have found that Citipost was the customs debtor (Issue 3); that the Tribunal had the jurisdiction to consider the waiver provisions at article 220(2)(b) of the Code (Issue 4); but on the facts of this case there should be no waiver (Issue 5). Citipost's success in its appeal against the C18s therefore rests on our answer to Issue 2.

[15] We reduced the penalty from £2,500 to £500 (Issue 6).

The evidence

[16] Citipost provided a helpful bundle of documents which included:

  1. 1) the correspondence between the parties and between the parties and the Tribunal;

  2. 2) documents relating to Citpost's application for a Jersey Postal Operator's Licence;

  3. 3) documents consisting of, or relating to, agreements between businesses based in the CI (“CI companies”) and either Citipost or Citipost DSA Jersey Limited (“Citipost Jersey”); and

  4. 4) documents relating to the supply of services by Ferryspeed (CI) Limited (“Ferryspeed”) and/or Condor Ferries Limited (“Condor”) including emails, C88s and manifests.

[17] Mr Garrie Francis, currently Head of International Services at Citipost, and Mr Robert Jones, who worked as a consultant to Citipost at the relevant time, each provided two witnesses statements, gave evidence in chief, and were cross-examined by Mr Singh.

[18] Mr Anthony Allsop, an employee of Citipost at the relevant time, and Mr Michael Goddard, a director of Citipost until December 2010, provided witness statements which stood as their evidence in chief, and were cross-examined by Mr Singh.

[19] Ms Vivienne Burch, a Higher Officer of HMRC, joined HMRC in 1990 and has wide experience, including as an Assurance Officer in CITEX (Customs International Trade and Excise) and as a Caseworker in Customs Policy. She provided a witness statement, gave evidence in chief and was cross-examined by Mr White.

[20] We found all the witnesses to be honest and straightforward.

[21] From that evidence, we find the following facts. These are not in dispute other than where expressly identified. We make further findings of fact later in our decision.

The facts
Liberalisation of postal services

[22] On 15 December 1997, Directive 97/67/EC on “common rules for the development of the internal market of Community postal services and the improvement of quality of service” (“the Postal Directive”) was issued. This began the deregulation of EU postal services, and was followed by Directives 2002/39/EC and 2008/6/EC. These are known as the Second and Third Postal Directives.

[23] Against this background of change within the EU, Jersey and Guernsey both established new regulatory frameworks for postal services. These allowed for possibility of competition with Jersey and Guernsey Post, hitherto monopoly providers of postal services in those islands.

[24] Users of Jersey Post, in common with most universal postal services, were allowed to use a very short customs declaration when importing goods into the UK. Additionally, in around 2004, Jersey Post, Royal Mail, HMRC and Jersey Customs signed a Memorandum of Understanding (“MOU”) which allowed for the fast-track clearance of goods imported into the UK via Jersey Post.

[25] The Tribunal was not provided with a copy of the MOU, which was confidential to the parties. However, Mr Jones, who had been the Sales and Marketing Director of Jersey Post from 1999 to the end of 2006 and was one of the authors of the MOU, described how it worked. An Officer of Jersey Customs was based on site with Jersey Post, was authorised to visit the warehouses of companies participating in the MOU and he sample-checked the mail being sent to the UK to ensure that it satisfied the requirements of the LVCR. Before a Jersey business was allowed to participate in the MOU, it had to be approved by Jersey Customs.

[26] Mr Jones described the MOU as giving Jersey Post access to the equivalent of the green channel at Customs, whereas other businesses would have to import their goods to the UK by attaching a C88 to each parcel, and then using Royal Mail's “inward processing facility”: this was the equivalent, he said, of having to go through the “red” channel. We understand him to mean that the normal method of importing goods was slower than under the MOU and it also carried the risk that goods would be stopped on...

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