Customs and excise quarterly - August 2021

Published on 24 August 2021

In this update we report on (1) European Commission Guidance on UK import formalities; (2) HMRC's new and updated guidance for imports and exports following the end of the Brexit transition period; and (3) HMRC's updated guidance on returned goods relief on items exported from Northern Ireland.

We also comment on three recent cases relating to (1) the illegal import of cigarettes; (2) customs valuation; and (3) the application of the dishonesty test when determining penalties.


European Commission publishes guidance on UK import formalities 

The European Commission has published guidance for EU exporters on the UK's deferred import formalities which apply until 31 December 2021.  

Until 31 December 2021, authorised UK importers can defer customs declarations on the import of goods for up to 175 days.  From 1 January 2022, standard import declarations must be made for all goods at the time of importation.  If pre-authorised, importers may still benefit from simplified customs procedures with an obligation to complete the formalities within a month.  

UK importers may require EU exporters to make out a statement on origin for the moment where the claim on origin is made in the UK.  In this way, UK importers can benefit from preferential treatment in accordance with the provisions of the EU-UK Trade Cooperation Agreement.  

The guidance can be viewed here

HMRC publishes updated guidance on imports and exports following the end of the Brexit transition period 

HMRC has published new and updated guidance on a range of areas to reflect changes following the end of the Brexit transition period, including guidance on: 

  • How to make an import or export declaration of human substances such as blood for emergency transplants. The guidance can be viewed here.
  • How to prepare to access the Customs Declaration Service and the Trader Dress Rehearsal Service to allow businesses to prepare to make declarations using the Customs Declaration Service. The guidance  can be viewed here and here
  • Declaring reusable packaging for Great Britain imports and exports. The guidance can be viewed here
  • What businesses will need in order to apply for an Advance Tariff Ruling. The guidance can be viewed here
  • What information businesses will need to be able to register for access to the EU Customs Trader portal. The guidance can be viewed here
  • Visa requirements for UK HGV drivers operating in the EU. The guidance can be viewed here
  • Moving goods to common or EU transit countries. The guidance can be viewed here
  • Customs debt liability and what happens if you underpay import or export duties and who is responsible for the debt. The guidance can be viewed here.

HMRC has updated its guidance on claiming relief (to pay less import duty and VAT) if you re-import goods to the UK 

You can obtain relief if you re-import goods into the UK that have previously been exported or transported from the UK. This is known as Returned Goods Relief.

The guidance sets out the conditions which must be satisfied in order to claim Returned Goods Relief.

The updated guidance can be viewed here.


Case reports

Puiu – appeal against penalties allowed as taxpayer had a "reasonable excuse" 

In Gheorghita Puiu v HMRC [2021] UKFTT 0255 (TC) the First-tier Tribunal (FTT) dismissed an appeal against an excise duty assessment but allowed the appeal against penalties on the basis that the behaviour was not deliberate.   


Mr Puiu was stopped at Luton Airport on 6 October 2018 by Border Force on his return from Romania. 9,600 cigarettes were seized from Mr Puiu on the basis that he was bringing them into the UK for commercial purposes and he had sought to evade duty. Mr Puiu was asked various questions in order to try to determine whether the cigarettes were for personal consumption only. However, Mr Puiu did not remain at the airport to complete his interview. Mr Puiu believed that if he left the cigarettes at the airport that would be the end of the matter and he was free to leave. Mr Puiu was not issued with a Seizure Notice nor was his right to appeal the seizure, the process and time frame for doing so, explained to him.

On 30 July 2019, HMRC issued Mr Puiu with an excise duty assessment for £2,719 and a notice of penalty assessment for £1,046.  The penalty was calculated on the basis of Mr Puiu's deliberate attempt to evade duty when importing the goods for a commercial purpose.

Mr Puiu appealed both the assessment and the penalty to the FTT.

FTT decision

The appeal against the excise duty assessment was dismissed and the appeal against the penalty was allowed.  

In relation to the excise duty assessment, the FTT confirmed that it did not have jurisdiction to determine whether the cigarettes were imported for personal use.  That was because the FTT cannot go behind the deeming provisions of paragraph 5, Schedule 3, Customs and Excise Management Act 1979 (CEMA), which provide for the goods to be duly condemned if the owner does not challenge the legality of the seizure in the allocated court by invoking and pursuing the appropriate procedure.  Mr Puiu did not challenge the legality of the seizure within one month of the seizure which meant that the goods were deemed forfeited and had to be treated as having been brought into the UK other than for personal use. 

In relation to the penalty, HMRC contended that Mr Puiu's behaviour must be treated as having been "deliberate" for the purpose of the penalty rules as a result of the deeming under paragraph 5, Schedule 3,  CEMA.  The FTT applied the Supreme Court's recent decision in HMRC v Tooth [2021] UKSC 17, when considering whether Mr Puiu's behaviour was deliberate.  In Tooth, the Supreme Court said: "deliberate is an adjective which attaches a requirement of intentionality to the whole of that which it describes, namely "inaccuracy".  The FTT considered that in light of Tooth, the deeming provisions in CEMA should not be viewed as deeming what a person's intention is.  

The FTT found that following the principles enunciated in Perrin v HMRC [2018] UKUT 156 (TCC), Mr Puiu did have a "reasonable excuse" for the purpose of paragraph 20, Schedule 41, Finance Act 2008, as he only intended to use the cigarettes for personal use and for use by his immediate family, therefore it was objectively reasonable for him to proceed on the basis that there would be no excise duty due. This reasonable excuse meant there was no liability to pay a penalty.  


This decision demonstrates the importance of challenging a seizure of goods in the correct manner and within the prescribed time period.  The case also provides helpful guidance on the meaning of "deliberate" behaviour and what constitutes a “reasonable excuse” when considering penalties.   

The decision can be viewed here.

Lifosa – Cost of transport should not be added to the customs value of goods 

In "Lifosa UAB" v Muitinės departamentas prie Lietuvos Respublikos finansų ministerijos case (C-75/20), the European Court of Justice (CJEU) confirmed that the cost of transport should not be added to the customs value of goods where those costs were incurred by the seller and the delivery terms stipulate that transport costs are covered by the seller. 

Lifosa UAB (Lifosa) is a company based in Lithuania that imported goods from a seller in Belarus to use in the production of fertilizers. The goods were imported under a "Delivered at Frontier" (DAF) Incoterms 2000 contract, which stipulated that the cost of transporting the goods to the Lithuanian border was to be borne by the seller. Lifosa would declare the customs value of the goods as the amount it had paid for them under the contract. The declared value did not therefore take into account the cost incurred by the seller in transporting the materials to the border, even though the transport costs actually exceeded the price Lifosa paid for the goods. 

The Lithuanian Customs Office noticed this apparent discrepancy during an audit and issued a decision to correct the customs value of the materials to include the transport costs. It issued Lifosa with a notice to pay a total of €255,932 in respect of unpaid customs duty, VAT and interest and a penalty of €42,598. 

Lifosa appealed to the Muitinės departamentas prie Lietuvos Respublikos finansų ministerijos (the Customs Department under the Ministry of Finance) which upheld this Customs Office's decision. Lifosa then brought an action in the Lithuanian Administrative court, which referred the issue to the CJEU. 

While the parties agreed that the sales price of the imported materials included the delivery charges, the Lithuanian Customs Office maintained that because the costs of transporting the materials exceeded the amount that Lifosa paid for the goods, the economic value of the goods exceeded the amount on Lifosa's customs declaration.

CJEU judgment 

The CJEU considered whether, under Article 29(1) and Article 32(1)(e)(i) of the Community Customs Code (CCC) and Article 70(1) and Article 71(1)(e)(i) of the Union Customs Code (UCC), the cost of transporting goods should be added to the sales value to calculate the customs value of imported goods.

Under both the UCC and the CCC, the "transaction value" of the imported goods forms the primary basis for determining their customs value, however, additions can be made to reflect the "real economic value" of the goods. Article 32(1)(e)(i), CCC, and 71(1)(e)(i), UCC, allow the cost of transport to be included in the customs value but only where transport costs have not already been included in the transaction price. Under a DAF Incoterms 2000 contract, transportation costs are included and so this provision could not apply. 

The CJEU ultimately decided that, while a company could not evade EU law through contractual obligations, the value of goods should not be determined "in abstract" and the specific circumstances of the contract should be taken into account when determining whether the customs value of the goods reflects their true economic value. Failing to take the conditions of sale into account when determining the customs value of the goods would be contrary to EU law. 

Therefore, the CJEU confirmed that costs incurred by the seller for transporting the goods to the Lithuanian border (at which point they entered the EU) should not be added to the customs value of the goods where the delivery terms place the obligation to pay for transport costs on the seller and not the buyer. This was the case even though the transport costs exceeded the price paid for the goods, provided that the price paid corresponds with the real value of the goods. 


This judgment confirms that Incomterms and other contractual terms are important when determining the customs value of goods imported in the EU. In this case, the CJEU had regard to the contractual terms notwithstanding that the contractual price did not reflect the true amount paid by the seller to transport the goods. If businesses do not need to fully cover actual transportation costs, they may be able to report lower customs values, which in turn will lead to duty savings.   

The judgment can be viewed here
Christopher – Tribunal considers test for dishonesty 
In Gabriel Christopher v HMRC [2021] UKFTT 0258 (TC), the FTT held that in considering whether to impose a penalty for evasion of tax or duty, the test for dishonesty is that expressed by the Supreme Court in Ivey v Genting Casinos t/a Crockfords [2017] UKSC 67.  


Mr Christopher arrived at London Heathrow Airport on 31 August 2018 on a flight from Nigeria. Customs officers were alerted by ground staff to a bag which had fallen off the luggage belt and come open. On inspection, the bag was found to contain a large quantity of cigarettes. Customs officers put it back on the belt, noting its position, and waited for it to be collected. Mr Christopher was noted leaving via the exit without a red 'something to declare' exit with three bags in his possession. Mr Christopher was stopped by a customs officer who asked whether he still had a bag to collect from baggage claim, Mr Christopher confirmed that he did – the bag that customs officers had noted as containing cigarettes - and that all of the bags contained cigarettes. Mr Christopher was cautioned by customs officials, who ascertained that he had in his luggage 67,600 Marlboro Gold cigarettes, which exceeded his personal tobacco allowance by 338 times.
Mr Christopher elected not to exercise his right to challenge the seizure and the cigarettes were deemed to be liable for forfeiture.
Nearly a year later, on 12 August 2019, HMRC wrote to Mr Christopher notifying him of HMRC's intention to investigate further to establish whether his conduct was dishonest and whether it was appropriate to issue a penalty.
On 17 September 2019, HMRC advised Mr Christopher that in its view his actions were dishonest and it issued a penalty in the sum of £12,056.00.
Mr Christopher appealed. 

FTT decision

The appeal was dismissed.
The issues for determination by the FTT were whether:
  1. HMRC had established conduct involving dishonesty;
  2. Mr Christopher had provided an innocent explanation to rebut HRMC's case; and
  3. if the case for a penalty had been made out, was sufficient discount applied to reflect Mr Christopher's mitigating circumstances.

The FTT adopted the two-stage test for dishonesty articulated by the Supreme Court in Ivey, under  which the finder of fact must firstly ascertain the actual state of the individual's knowledge and belief of the facts. This is a subjective test in which the reasonableness of the belief is a matter of evidence which goes to whether the belief is genuinely held, but the belief itself is not required to be reasonable. After the actual state of mind as to knowledge or belief of the facts has been established, the question of whether the individual's conduct was honest or not is to be determined by the fact-finder applying the objective standards of ordinary decent people. There is no requirement that the person concerned appreciated that what they did was, by those standards, dishonest.

Having set out the applicable test for dishonesty, the FTT found that Mr Christopher was dishonest and did not have an innocent explanation. In reaching this conclusion, the FTT relied on the following:

  • Mr Christopher's inconsistent account between the time of his initial interview and the time the penalty was issued;
  • the contemporaneous records indicated that Mr Christopher was not under duress at the time that he made his initial statements and the evidence from the Border Force Officer indicated that Mr Christopher did not appear to be experiencing any difficulties which would affect his ability to take part in an interview under caution;
  • Mr Christopher's actions in moving towards the exit without a red 'something to declare' channel were inconsistent with his initial statement that he intended to declare the cigarettes; and
  • Mr Christopher's evidence indicated that he was aware of the need to declare the cigarettes as he was an experienced traveller, aware of the quantity of cigarettes in his possession and  of the explanatory signage in the baggage reclaim hall which could assist him in determining whether he was required to declare the cigarettes.

On this basis, the FTT considered that the penalty had been properly imposed and upheld the penalty. 


This decision provides confirmation that the test for dishonesty to be applied when considering the appropriateness of a civil penalty for duty evasion is that set out by the Supreme Court in Ivey. The decision also provides helpful guidance on how the test is to be applied in cases concerning the imposition of civil penalties for duty evasion.  

The decision can be viewed here.

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