Molson Coors Brewing Company (UK) Ltd v The Commissioners for Her Majesty's Revenue & Customs, TC 05819
| Jurisdiction | UK Non-devolved |
| Judge | John BROOKS |
| Judgment Date | 20 April 2017 |
| Neutral Citation | [2017] UKFTT 0342 (TC) |
| Respondent | The Commissioners for Her Majesty's Revenue & Customs |
| Appellant | Molson Coors Brewing Company (UK) Ltd |
| Reference | TC 05819 |
| Court | First-tier Tribunal (Tax Chamber) |
[2017] UKFTT 0342 (TC)
TC05819
Appeal number: TC/2015/00361
EXCISE DUTY – Beer duty – Constructive removal of beer – Whether duty
chargeable on actual ABV or ABV as stated on labels, invoices and delivery
notes – Appeal allowed
FIRST-TIER TRIBUNAL
TAX CHAMBER
MOLSON COORS BREWING
COMPANY (UK) LIMITED
Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY’S Respondents
REVENUE & CUSTOMS
TRIBUNAL:
JUDGE JOHN BROOKS
GILL HUNTER
Sitting in public at Royal Courts of Justice, Rolls Building, Fetter Lane, London
EC4 on 27, 28 February and 1, 2, 3 March 2017
Sam Grodzinski QC, instructed by Pinsent Masons LLP, for the Appellant
Andrew Macnab, instructed by the General Counsel and Solicitor to HM
Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2017
DECISION
1. The issue arising in this appeal is whether duty on beer produced in the United
Kingdom should be charged on the basis of its actual alcoholic strength or the higher
strength shown on its packaging.
2. By way of a brief introduction, beer brewed in the United Kingdom is subject to
excise duty at a rate determined by its alcoholic strength as measured by its alcohol by
volume (“ABV”). Under Regulation 18 of the Beer Regulations 1993, the strength of
the beer is “deemed” to be the greater of its actual strength or that stated on a
packaging label, invoice, delivery note or similar document.
3. Under the Excise Goods (Holding, Movement and Duty Point) Regulations
2010, an excise duty point arises when the beer is “released for consumption”, which
in the case, such as the present, of a duty suspension arrangement includes the time
the beer left the brewery. However, Regulation 15A of the Beer Regulations 1993
allows a registered brewer to constructively remove the beer so that it is deemed to
have left the premises at a time before it actually leaves the brewery. As paragraph 7.5
of HM Revenue and Customs Notice 226 ‘Beer Duty’ explains:
“If you consider it would help your business to account for duty on any
duty suspended beer in advance of delivery from registered premises,
you may do so. This is known as ‘constructive removal’ and allows the
registered holder of the beer to change the status of the beer held on
registered premises from duty suspended to duty paid, on payment of
the proper duty, without the need to remove the beer from those
premises.”
4. Since September 2012 Molson Coors Brewing Company (UK) Limited
(“MCBC”), a registered brewer, has calculated excise duty relying on a constructive
removal of the beer from duty suspension using the actual ABV of each batch of beer
at that point in time. However, HM Revenue and Customs (“HMRC”) say that MCBC
should have calculated its liability by reference to the higher ABV shown on its
packaging, invoices and delivery notes and have issued assessments for duty in the
sum of £40,911,423, relating to the two year period from 1 September 2012 to 31
August 2014; and in the sum of £10,417,345, relating to the period from 1 September
2014 to 31 January 2015. This is MCBC’s appeal against those assessments.
5. Mr Sam Grodzinski QC, who appears for MCBC, submits that MCBC was
correct to have calculated its liability to duty by reference to the actual ABV of the
beer whereas Mr Andrew Macnab for HMRC contends that MCBC has not made out
its case on facts; that the relevant regulations do not bear the construction sought by
MCBC; and that HMRC’s interpretation of the regulations is consistent with
European Union (“EU”) law.
Evidence and Facts
Evidence
6. We heard from the following witnesses on behalf of MCBC:
(1) Mr Philip Rutherford, Vice President of Tax for Molson Coors Europe;
(2) Mr Neil Hayward MCBC’s Head of Distribution;
(3) Mr Goran Matic, the Brewing Manager at MCBC’s Burton Brewery;
(4) Mr Edward Storr, the Head of Global Supply Chain Transformation for
MCBC;
(5) Mr Alan Thompson, who was, until he retired on 1 April 2016, the
Packaging Manager of MCBC
7. Mr Rutherford began his evidence with a “WebEx” – a live demonstration,
linked by internet to MCBC’s Burton brewery, of the way in which MCBC’s
constructive removal records and systems operate, before explaining these in greater
detail and how they are used by MCBC in the calculation of its liability to duty. Mr
Rutherford told us that MCBC typically has the lowest margin in the supply chain and
regularly looks for ways in which its cost base can be reduced and has previously
introduced more efficient methods in its use of materials and staff. The rationale for
introducing the new method of calculating its liability to duty was to achieve a
reduction in its costs base as less duty would be payable on the actual ABV of the
beer than if calculated on the basis of that stated on the label. He said that a “key
driver” for the decision not to change the labelled ABV was to protect MCBC’s cost
base saving as many of its customers would “demand a slice” of the saving if this was
reduced explaining that where other cost base saving methods had previously been
introduced these were not necessarily communicated to customers.
8. In relation to the calculation of duty, Mr Rutherford in his first witness
statement had said that the relevant record for constructive removal was the issuing of
a packaging process order in the SAP system for the beer concerned or the issuing of
a packing schedule in the case of its Prism system. In his second witness statement Mr
Rutherford said that the point of constructive removal was the time when the beer left
the bright beer tank (a large steel vessel used during the brewing process – see below).
In his third witness statement Mr Rutherford explains the constructive removal
process in greater detail. When cross-examined, he accepted that his explanation of
the constructive removal process in his first two witness statements was too general
and should have been more detailed and that the clarification in the third statement,
which referred to the ‘Historian’ database not mentioned previously was necessary.
He said that it was a “mistake” not to have mentioned “Historian” in the earlier
witness statements.
9. However, and notwithstanding the failure to refer to the Historian database until
his third witness statement, Mr Rutherford’s evidence, which we accept in its entirety,
was both clear and consistent. Cross-examined for a day Mr Rutherford explained that
MCBC always understood that the relevant categories of beer were identifiable by
their product codes and that the flow meters marked the duty point when beer was
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