Successful Appeal for R&N HMRC Team in the First Tier Tax Tribunal
Rogers and Norton’s HMRC Litigation team, led by Peter Hastings and supported by Lauren Nelson-Smith and Maria Taylor, successfully appealed a VAT demand for its London based client who owns and runs a food supplies business. HMRC alleged that our client had undervalued the bottled water imported from 2017 and issued a tax demand in for £434,384.17 in respect of VAT on these imports. Our team had challenged the Assessment from the outset and repeatedly set out the facts and law to HMRC.
The appeal was heard before the First-Tier Tribunal Tax Chamber in March 2025, with the Judgment being handed down on 1 May 2025.
The grounds of our client’s appeal were that, although it had made payments in excess of the amount that he declared VAT on, these payments were in respect of an agreement between our client and his supplier in Turkey, which was made to secure a better price for the imports. They were not payments in respect of the import of the actual goods. Being able to secure these goods at a better price meant that our client was able to sell his goods for a lower price than his competitors.
The VAT demand from HMRC was based on the belief that the bottled water being imported must have been undervalued by an amount in excess of £2 million due to the difference in the payments made by our client to his supplier, compared to the amount upon which he declared tax. HMRC did not consider that the agreements were sufficient proof that no additional import tax was required.
After this assessment by HMRC, a demand was initially issued in a sum of £434,384.17 but was later reduced to the sum of £121,321.93 in accordance with the time limits imposed by the Union Customs Code, which gives HMRC 3 years and 30 days to notify the debt. Our client was notified in May 2021, which meant that any debt predating April 2018 could not be claimed.
The Tribunal allowed our client’s appeal against the reduced tax demand in the full sum of £121,321.93. They considered that our client was a credible witness and accepted that the payments made to his supplier under the terms of their agreements were to secure a better overall price for the water and not in relation to specific imported goods. They also found that HMRC’s argument in respect of the alleged undervaluation was unclear and that they had not provided sufficient evidence to convince the Tribunal what the difference in value – between what was paid to our client’s supplier and what was declared for tax purposes – was for. For those reasons, the appeal was allowed.
The Tribunal’s decision also makes it clear that HMRC, when using a method 1 valuation as they did in this case, must only value goods that have been imported and cannot merely assert that sums sent to a supplier are in respect of imported goods, which give rise to customs duty.
This case was a huge success for our client and demonstrates an interesting point of law in relation to tax declaration for imported goods.
Legal Framework
We relied on the Customs and Excise Management Act 1979, the Value Added Tax Act 1994, and the Union Customs Code. As the VAT demand related to imports before the UK left the EU, the Tribunal confirmed that it was appropriate to apply the Union Customs Code to the case.
Key provisions included:
- Customs and Excise Management Act 1979 – dealing with customs procedures and enforcement
- Value Added Tax Act 1994 – setting out when VAT is due on goods imported from outside the UK
- Union Customs Code (EU Regulation 952/2013) –
- Article 5(18) – confirms a customs debt must relate to specific goods
- Article 70 – sets out how customs value is based on the price paid for the actual goods
- Article 77 – explains when a customs debt arises
- Time limits – HMRC must notify a customs debt within three years and 30 days from when it becomes known
These provisions formed the foundation of our case that VAT is only chargeable on goods that were actually imported, and not on advance payments for future supplies.
We were pleased to work alongside Joshua Carey of Devereux Chambers, whose input on the customs valuation aspects of the case was invaluable. Devereux is widely recognised for its strength in Employment, Personal Injury and Tax.
Joshua shares further insights into the judgment and its implications in his article: Joshua Carey appears in successful customs appeal for taxpayer
The Tribunal’s judgment can be found in full here: Turkish Food Supplies Limited v The Commissioners for HMRC – Find Case Law – The National Archives
For further advice and assistance in HMRC enquiries please contact Peter Hastings at ph@rogers-norton.co.uk or phone 01603 675639
For more information on our legal services or to arrange an appointment with a member of our team, contact us at 01603 666001, email enquiries@rogers-norton.co.uk or complete the ‘Request a Consultation’ enquiry form on our website.
*This article is provided for general information purposes only and does not constitute legal or any other professional advice.