HMRC Tax Penalty For Dishonesty Over Customs Duty

Overview Of HMRC Tax Penalty For Dishonesty

An HMRC Tax Penalty for dishonesty was upheld in the case of Mottram v HMRC [2022] FTT 33 (TC).

Mr Mottram did not attend his appeal at the Tax Tribunal so the matter was heard notwithstanding his absence.

On 9 January 2019, John Mottram was strolling down the Green Channel at Terminal 1 of Manchester Airport, having flown to the UK from Gilbraltar, when he was stopped by Officer Currin (“the Officer”).

He was asked if he had anything to declare and he informed the Officer of his sizable amount of tobacco in his hand luggage.

Mr Mottram said that he had come from Gibraltar that he thought was part of Spain. It appears that he was then corrected as to the sovereignty of Gibraltar.

Baggage Search

When a baggage search was undertaken 11kg of tobacco sprouted, spread across both his hand luggage and a small suitcase.

Suspected Dishonesty

Afterward, HMRC wrote to Mr Mottram about suspected dishonesty and on 10 February 2020, HMRC wrote imposing Penalties.

The statutory provisions imposing penalties for evasion of duties is in Section 25 Finance Act 2003:

In any case where—

(a)a person engages in any conduct for the purpose of evading any relevant tax or duty, and

(b)his conduct involves dishonesty (whether or not such as to give rise to any criminal liability),

that person is liable to a penalty of an amount equal to the amount of the tax or duty evaded or, as the case may be, sought to be evaded.

Where any person engages in any conduct for the purpose of evading duty, and that person’s conduct involves dishonesty, then that person shall be liable to a penalty of an amount equal to the amount of the duties evaded or sought to be evaded.

Burden Of Proof Of Dishonesty

The burden of proof of dishonesty lies on HMRC by virtue of Section 33(7) Finance Act 2003.

The standard of proof is the ordinary civil standard (being the balance of probabilities): Khawaja v HMRC [2013] UKUT 0353(TCC).

The applicable test for dishonesty was stated by the Supreme Court in Ivey v Genting Casinos (UK) Ltd t/a Crockfords [2017] UKSC 67 (at [74]) :

When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.

The Tax Tribunal Findings

The Tax Tribunal made findings because:

1. Mr Mottram had been abroad previously and so ought to have been aware of allowances for duty.
2. He did not present himself to the something to declare red channel.
3. When Mr Mottram wrote to HMRC at a later date he referred to Gibraltar as an ‘English Colony’, not part of Spain as he had suggested previously.
4. He did not volunteer to the Officer when stopped that there was tobacco in the suitcase.

Result: HMRC Tax Penalty For Dishonesty

The HMRC Tax Penalty was upheld.

HMRC had already provided Mr Mottram with a reduction of 30% for cooperation and a further 30% for disclosure.

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This page HMRC Tax Penalty For Dishonesty is not legal advice and should not be relied upon as such. This article HMRC Tax Penalty For Dishonesty is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

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