Terra Firma member, Derek Francis, successfully appeared in the Tax Chamber in Butlers Ship Stores Ltd & Ors v HMRC [2012] UKFTT 371 (TC) (“BSSL v HMRC”) for HMRC. The case concerned duty on consignments of vodka and whisky dispatched from an excise warehouse in Aberdeen which were fraudulently diverted en route to Estonia and Spain. The assessment on the warehousekeeper who dispatched the goods using its guarantee was upheld – this despite the fact that the Tribunal found that the warehousekeeper had acted in good faith, was a stranger to the fraud and used every reasonable measure to avoid participation in fraud.

For the first time, the Tribunal held that there was no scope for EU principles of proportionality and legal certainty to attenuate liability of an innocent warehousekeeper in what Directive 92/12/EEC required the UK to transpose as a scheme of risk allocation and insurance in which the warehousekeeper, as provider of a guarantee, was primarily liable. Such scope existed only where risk is shared between taxpayer and state. Here the UK legislation rightly transposed strict liability to domestic law.

A fall-back ground based on exemptions (Art. 14, which the UK failed to transpose) for fortuitous events and force majeure was also dismissed. ECJ cases showed that the event required to be unforeseeable: diversion fraud was not. “losses” for the purposes of such exemptions had to be irretrievable loss of the dutiable thing. Diversion fraud, to the contrary, meant that re-emergence of goods in the EU market was likely.

Counsel for the taxpayer were Julian Ghosh QC, Pump Court Tax Chambers and Philip Simpson, also of Terra Firma.

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