Rupert Baldry KC and Sadiya Choudhury KC examine how the customs and excise duty regime is operating post-Brexit. This includes a brief overview of the pre-Brexit regime, the main legislative changes since Brexit, the relationship between the old and new regimes, some recent cases and future developments in this area.

1:15 History of customs and excise duties 

3:31 Tariffs - what are they? Why do we have them? Who pays them? Any restrictions on them?

6:45 Role of World Trade Organisation in harmonising tariffs. Role of Free Trade Agreements (FTAs) and customs unions.

8:25 Framework of customs law pre Brexit - a customs union in which the EU negotiated FTAs and there was no need for a domestic UK customs code except in relation to remedies and enforcement.

11:23 Excise duty regime pre Brexit.

12:55 Pre Brexit, dualistic interpretation to legislation ie look at Act then underlying directive it sought to implement.

15:13 Legislative changes to customs post Brexit principally (a) Taxation Cross-border Trade Act 2018 (TCTA) and (b) new FTAs.

16:21 TCTA brings in a new customs duty known as import duty. How this operates is set out in O'Neill Wet Suits. The TCTA recognises and allows for FTAs to be agreed.

20:07 3 types of FTA now (a) Continuity Agreements (b) new FTAs (c) Trade & Cooperation Agreement 2020 with EU.

22:40 Status of FTAs in UK law. Interaction of article 5 TCTA and s29 European Union Future Relations Act 2020 + Lipton v BA City Flyer.

29:39 Current regime for customs - FTAs but no customs unions. If there is no FTA/relief/tariff suspension (eg Developing Countries Trading Scheme) then UK global tariff applies.

31:17 Practical consequences of new customs regime for all parts of UK other than Northern Ireland. Less drastic consequences for excise duties.

32:44 Explanation of the rules of origin.

35:20 The relationship between the new domestic customs regime and EU law. How are accrued EU law rights treated? And what of events after 31.12.20? What is the status of previous case law?  

49:43 Excise duty - legislative interpretation now has a carve out like VAT (s28 Finance Act 2024) and will refer back to the old law. How are the courts going to view previous case law e.g. in relation to “holding” goods?

 55:07 How do the new rules tie in with the appeal framework? Very few changes other than that the courts no longer have to apply EU principles. Changes from the previous rules are causing complications eg the interaction of appeals and remission applications. 

1:01:42 New regime is made up of a very short Act and a lot of secondary legislation which allows HMRC to publish notices. This makes it difficult to see an overarching policy or find the policy that applies to a particular case.

1:03:44 Discussion of some recent cases.

1:06:36 What of the future? New case law will take time to build up, there are developments in the EU which will affect the UK and the carbon cross-border adjustment mechanism is to be introduced in 2027.

Citations and legislation

UK legislation 

• Section 2, European Communities Act 1972
• Customs and Excise Management Act 1979
• Alcoholic Liquor Duties Act 1979
• Hydrocarbon Oil Duties Act 1979
• Tobacco Products Duty Act 1979
• Chapter II, Finance Act 1994
• The Excise Goods (Holding, Movement and REDS) Regulations 1992 (SI 1992/3135)
• The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (SI 2010/593)
• Taxation (Cross-border Trade) Act 2018
• European Union (Withdrawal) Act 2018
• Sections 52 and 56(4), The Customs (Import Duty) (EU Exit) Regulations 2018
• The Customs Tariff (Preferential Trade Arrangements) (EU Exit) Regulations 2020
• Section 29, European Union (Future Relationship) Act 2020
• Part 2, Finance (No 2) Act 2023
• The Finance Act 2016, Section 126 (Appointed Day), the Taxation (Cross-border Trade) Act 2018 (Appointed Day No. 8, Transition and Saving Provisions) and the Taxation (Post-transition Period) Act 2020 (Appointed Day No. 1) (EU Exit) Regulations 2020 (SI 2020/1642)
• Retained EU Law (Revocation and Reform) Act 2023
• Section 28, Finance Act 2024

EU Legislation

• Treaty on European Union / Maastricht Treaty
• Treaty on the Functioning of the European Union
• Council Regulation (EEC) No 2913/92 (the Community Customs Code)
• Commission Regulation (EEC) No 2454/93
• Council Directive 1992/12/EEC
• Council Directive 2008/118/EC
• Regulation (EU) No 952/2013 (the Union Customs Code)
• Commission Delegated Regulation (EU) 2015/2446
• Commission Implementing Regulation (EU) 2015/2447

EU/UK agreements

• The EU-UK Withdrawal Agreement
• The EU-UK Trade and Co-operation Agreement
• The Northern Ireland Protocol and Windsor Framework

Cases 

• Case C-279/19 HMRC v WR (reference fromHMRC v Perfect [2019] EWCA Civ 465)
• Lipton & Anor v BA City Flyer Ltd [2021] EWCA Civ 454, [2021] WLR 2545
• HMRC v Perfect (No 2) [2022] EWCA Civ 330, [2022] 1 WLR 3180
• Dawson’s (Wales) Ltd v HMRC [2023] EWCA Civ 332, [2023] 4 WLR 35
• Hartleb T/A Hartleb Transport v HMRC [2024] UKUT 34 (TCC)
• Cozy Pet Ltd v HMRC [2024] UKUT 96 (TCC)
• Kent Couriers Ltd v HMRC [2024] UKFTT 145 (TC)
• Bunting v HMRC [2024] UKFTT 431 (TC)
• Electric Mobility Euro Ltd v HMRC [2024] UKFTT 590 (TC)
• Lipton & Anor v BA Cityflyer Ltd [2024] UKSC 24, [2024] 3 WLR 474
• O’Neill Wetsuits Ltd v HMRC [2024] UKFTT 1071 (TC)

Other materials 

• Practice Statement (Judicial Precedent) [1966] 1 WLR 1234
• WTO rules: https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm1_e.htm
• Lancaster House speech: https://www.gov.uk/government/speeches/the-governments-negotiating-objectives-for-exiting-the-eu-pm-speech
• Free Trade Agreements: https://www.gov.uk/government/collections/the-uks-trade-agreements
• UK Global Tariff: https://www.gov.uk/trade-tariffand https://data.api.trade.gov.uk/v1/datasets/uk-tariff-2021-01-01/versions/v4.0.956/metadata?format=html
• EU customs reform: https://taxation-customs.ec.europa.eu/customs-4/eu-customs-reform_en
• Introduction of a UK Carbon Border Adjustment Mechanism from January 2027:https://www.gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam/factsheet-carbon-border-adjustment-mechanism
• Tax Journal article by Joshua Stevens:https://www.taxjournal.com/articles/the-cbam-trilemma

Welcome to pump court tax check podcast series brought to you by the barristers at pump court tax chambers. We are the largest UK tax set and our podcasts aim to give you insight into recent developments in tax law and procedure. Across the series, we'll look at a range of topics covering issues that arise both in disputes and in advising clients more generally.

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Welcome to pump court tax chat. My name is Sadiya Choudhury

and I'm Rupert Baldry. We are going to talk today about customs duties and excise duties.

Rupert 1:12

These are one of the most ancient forms of taxes in existence long before income tax, but still producing news today as we sit here. We think that the president of the United States is considering additional tariffs on goods from the EU and possibly the UK. I seem to remember in my history lessons, tonnage and poundage causing the Civil War and the Corn Laws causing great disputes in the Victorian times. They come up every century and cause ructions.

One of the most recent ructions that have been caused was Brexit because customs duties assumed a huge political significance during the Brexit negotiations. And the result of our leaving the European Union was that we ended up with a completely new customs duty regime. We had a new act, a new tax, and that new tax was brought in in the context of a raft of other significant changes to the law from the Withdrawal Act, from the new trading relationship with the EU and with the wider relationship that the UK has under the World Trade Organisation rules.

So perhaps today is a good time to just try and draw the threads together and see how all these new bits of legislation relate to each other.

We're also going to be covering excise duties, which are also quite ancient. As anyone who's read historical novels about smugglers along the English coast will know, they haven't had as much of a seismic change as customs duties, but nevertheless the rules are very different from what they were pre-Brexit.

And so today our main themes in summary are going to be customs and excise law as it was pre-Brexit, the legislative changes that have taken place since then, the regime we now have as a result of those changes and its relationship with the old regime. We may also talk about some of the recent cases, which highlight some of the issues we'll have discussed as we go along, as well as future developments. But it may well be worth starting with some preliminary observations, as we are going to be discussing customs law in some detail.

So a good place to do so would be to start with tariffs.

What exactly are tariffs and why do they exist?

It's a strange word, tariff, because the tariff is actually the list of items that every single country keeps. There's a great schedule itemising every single type of good that they've got and ascribing some form of rate to it.

And so tariff has its ordinary word of just the list, but that word is fed into the duty that is now actually charged. So a tariff, as it's commonly called, is a duty charged on the import of goods from foreign countries. And historically, tariffs were used as a sort of revenue raiser for the king, whose custom it was to demand money from traders taking their goods to markets.

Now they have more of a protection mechanism behind them. The idea is that they have this dual purpose of raising a bit of money, but also they’re used to protect domestic industries from foreign competition. And they do this by effectively increasing the price of imported goods so as to protect consumers and to allow consumers to purchase domestic products instead.

Right. So who pays the tariff then on imported goods?

Pretty much in all systems, it's the importer who pays the tariff and they're administered and collected by the National Customs Authority of the country whose goods they're brought into. So exporters don't normally pay tariffs as such, but the tariff makes their product more expensive and so makes their goods less competitive.

So that explains why countries which have had tariffs imposed on their goods were told that they will be imposed by the US in recent weeks. Why they're so concerned about tariffs. But how exactly is a tariff then charged on the goods?

Well, almost all tariffs are set as a percentage of the value of the goods in question. So the current UK tariff on cars is 10% and that's set out in the schedule that the UK now has as its general tariff. Some agricultural tariffs are based on the weight of the product rather than the value.

So we keep hearing again in the news that tariffs imposed by one country may result in that country then imposing tariffs in response. So are there any restrictions on what countries can do when it comes to tariffs?

Yeah, tariffs are unusual in that they have a direct effect on the exporter who carries out their business in another country. So that gives rise to disputes and protectionism and trade wars and also gives rise to the potential for mass confusion if all countries took different approaches to how they classified goods. So there's a higher supernatural national body which has existed called the World Trade Organisation, which exists to harmonise at a higher level the various rules and the way that trading nations codify their tariffs.

The rules under the WTO have got two particular overarching principles is that first, WTO members are required to charge all other members the same tariff unless they have a free trade agreement, FTA, with them. And that's known as the most favoured nation obligation. And the second overarching rule is that WTO members mustn't exceed the tariff rates they've committed themselves to in their schedules.

And the WTO accepts, however, that countries can choose to enter into FTAs. And these are bilateral agreements between countries which can provide for preferential rates in trading between those two countries. Countries can also enter customs unions.

And in general, there aren't any tariffs on the movement of goods between members of a customs union. And a common tariff is placed on the import of goods from outside of that union.

Yes, we did hear quite a bit about WTO rules during the Brexit negotiations, because at one point it seemed that that is what the basis would be of the UK and EU's trading relationship.

So perhaps if we could go back to that sunny day in June to see what did the regime look like then?

Well, on the 23rd of June 2016, we were in a customs union. It was a fundamental part of the single market with its four freedoms, which included the free movement of goods first introduced by the Maastricht Treaty back in January 1993. And as of 2016, the UK was subject to EU legislation.

The free movement of goods was enshrined in the Treaty on the Functioning of the European Union. The customs union applied to all member states, applied harmonised customs rules both for trade within the EU and for trade with third countries. So as a member state, the UK benefited from all the FTAs, the preferential tariff arrangements, which the EU had negotiated with other countries.

And within that customs union, goods could enter the EU in any member state and the same customs duty would be charged in accordance with a common customs tariff. And at that point, the goods became union goods and then they could travel freely within the customs union. There was a UK tariff, but it would follow the EU tariff if the UK was importing goods from other third countries.

And that was all in accordance with the EU's general approach of leaving remedies to the national courts subject to complying with principles of effectiveness and equivalence. But that's customs. The regime for excise duties was slightly different, wasn't it?

Yes, it was. So excise duties have had a long history. They're also examples of sin taxes because they apply to products which are deemed to be harmful to society and individuals, such as the most common example, tobacco and alcohol. But even after becoming a member of the EEC in 1973, a lot of the UK legislation was actually at domestic level, with the main provisions relating to excise duties applicable to alcohol, tobacco and hydrocarbon oils introduced in 1979.

So we have these two slightly different regimes, which are either totally or heavily based on EU legislation. So how was legislation interpreted under those regimes?

It took a while for the English courts to get used to this concept of there being two sets of laws. And I remember when I started in chambers, we'd been in the EU for decades, but it was becoming a bit of a novelty to start looking at the underlying European directives when interpreting English acts of parliament.

So I suspect that it'll take some time to go the other way for the next few decades. But what we became used to was reading two sets of legislation. You would read the English Act of Parliament and try and work out what it meant.

And then you would cross-check it by looking at the underlying European directive or regulation, which it was supposedly trying to implement. So that became a standard, dualistic way of looking at the legislation. You were trying to see whether the UK statute was compatible with EU law or whether you had to apply some technique known as sort of Marleasing, by which you read and construed the English statute so that it complied with EU law.

And sometimes you read the UK statutory instrument, like I remember reading the excise duty holding movement and duty point regulations at one time, and you couldn't actually make head nor tail of it. They were drafted in a frankly unintelligible fashion. But you had the advantage that you could then look at the relevant EU regulation and see if you could interpret the UK unintelligible statutory instrument so that it made sense.

And it would make sense if you interpreted in accordance with the EU regulation. So that was an interpretive technique, which I'm afraid is now gone.

And as we'll see, the number of decisions under the 2010 holding movement and duty point regulations, which is still grappling with the meaning of the word holding, would be probably an entire podcast in itself. We may touch on them briefly later on.

But now we move on to a big topic, which is the legislative changes which have been made as a result of Brexit. So where do we begin?

We begin with Theresa May's speech outside Lancaster House, where she announced the decision to leave the EU Customs Union. That political decision required a complete legislative reset in relation to customs, both for our EU trade and for our trade with the rest of the world, because, as we've just said, we didn't have a domestic customs regime at all. And so it was against the backdrop of the UK having to leave the customs union as a result of that choice at the end of the transitional period, whenever that was going to be, that the new domestic regime was created.

There are two main features of the regime which did not exist before, which are the Taxation Cross-Border Trade Act 2018 and then the UK's free trade agreements.

So if we could start with the TCTA, as we're going to snappily call it.

Yeah. So this was put in place, it was enacted by Parliament on the 13th of September 2018.

And if one thinks back to what was going on at that time, it was at quite an early stage of all the negotiations that were taking place. We'd made the decision to leave the European Union. We'd had the political decision to leave the customs union, but we hadn't agreed a withdrawal agreement at that stage.

We certainly hadn't agreed any trading relationship, but we needed to have something in place to avoid the cliff edge of us having no customs law at the moment we left the European Union. So hence, Parliament put in place this new domestic regime and part one of the TCTA introduced a new regime for a domestic duty of customs to be known as import duty.

But if we look at the TCTA, it is very short.

It is a pretty slender code for such a massive subject. If one compares what was there before, the Union Customs Code and the main implementing regulations alone contain well over 600 articles and there were many other directly effective regulations which went to make up the whole regime. Part one of the TCTA has 40 sections.

We've got this very short code and how does the custom scheme work under it or how was it more precisely intended to work under it when the Act first came in?

So the basic scheme of the TCTA is simple, but very rudimentary. There is a basic charge on importation by reference to a harmonised tariff. There is a basic requirement imposed on the importer to make a customs declaration and there are the various special customs procedures which suspend the charge, such as inward processing relief.

And those are all features of the Union Customs Code and basically for any customs code that complies with WTO rules that is carried through into the new regime. And that regime was then put in place and it was potentially could apply both to imports from the EU if no deal was agreed and to imports from third countries again if no deal was agreed. And a useful summary of that new classification regime has been set out in a case decided by the FTT last year called the O'Neill wetsuits case.

So that was the bare bones that was put in place and it didn't say much more than that. What the TCTA did do, however, was to recognise that the United Kingdom might come to preferential agreements with other countries for tariff free trade. And so it gave the power to the Treasury to give arrangements by force by statutory instrument.

So yes, we have heard again post the referendum, we heard that the UK will now have to enter into free trade agreements, which was something it hadn't done for many, many years beforehand. So how did the UK's free trade agreements then fit into this new regime?

There was a busy spell of negotiation. If you think about it, at the time we decided to leave the EU, we would then lose the benefit of all the preferential trade agreements that we had enjoyed as a member state.

And we also lose the benefit of the customs union. So a huge amount of negotiation had to be done both with the EU and with all the other countries. We ended up with three types of agreement.

First, we had sort of rollover agreements where the EU had agreed a preferential trade arrangement with another country that the UK had enjoyed, but there wasn't enough time to renegotiate that agreement with the other country. The UK went around agreeing with these various other third countries that they could just carry on the agreement that was in place. They were called continuity agreements and they just have kept things going.

But it's a free trade agreement and it is not a form of customs union.

All of that's had quite a lot of attention, and in particular, the free trade agreements, the government's quite proud of them. The UK has 39 trade agreements with 73 partners. The difference in the numbers is because you can have one agreement which covers several countries in the same region. So you have the Cariforum agreement, which covers 14 Caribbean nations. So all of this is relatively familiar from the newspapers and TV shows which discussed the various negotiations which would have to take place with the EU and the rest of the world. But what hasn't received a lot of attention is the status of the trade and cooperation agreement, or indeed the free trade agreements in UK law. So what can we say what their status is? As in, are they similar to other foreign treaties? Are they similar to the UK's previous relationship with the EU?

Certainly the TCA is a very unusual agreement. You can look it up in the official journal of the EU and it looks very much like the sort of treaty that the UK had entered into with the EU. But it's absolutely not.

The basic mechanism that the UK used for giving legislative effect to the UK's FTAs and the trade and cooperation agreement with the EU is the same. That's section nine of the TCTA, which is the one that gives the Treasury powers to make regulations giving effect to such arrangements.

It's agreed under these new international trade arrangements and the regulations apply to all goods that are imported from a country or territory where there is such an arrangement and where the importer makes a claim for the preferential rate of import duty. Those regulations apply both to our FTAs with third countries. But they also apply to the TCA.

The TCA is one of the arrangements that's now listed in the regulations. The TCA is certainly unusual because it goes much, much further than a typical free trade arrangement. It covers all manner of trading between the UK and the EU.

But as a matter of customs duties, it seems that it's still part of the same category as the other free trade agreements. And it's given effect through the statutory instrument. What's unusual about the TCA is that although it gives all these rights which are set out in great detail as to how the UK and the EU should operate their customs procedures and it has detailed rules about rules of origin set out in the agreement itself.

It also expressly provides that the agreement doesn't confer any rights or impose any obligations on persons other than the parties. And it provides expressly that the agreement cannot be directly invoked in the domestic legal system of the parties. That's Article 5. So we were talking earlier about statutory construction and whether you could interpret the UK's domestic law in accordance with some other document or treaty.

Well, it seems that that's not the approach taken by the TCA. You can't look at the TCTA in domestic terms and say, well, that doesn't comply with the trade and cooperation agreement. So we'll ask the tribunal to amend this part of the legislation or to read it down.

On one reading, this is a very drastic section which gives priority to the TCA over ordinary domestic legislation. And the Court of Appeal took that view in its decision in Lipton against BA Cityflyer, which we'll talk about later. But basically on that drastic view, domestic law means what the TCA says it means.

But if that were right, you'd have to refer to the TCA when interpreting the UK's customs legislation. The Supreme Court in Lipton rejected that extreme view, but didn't actually fully address the question and left open the possibility that you might have a case where you could rely on the on the TCA to modify a UK statute. That seems to me to be a bit of a stretch.

Whatever Section 29 of the future relationship says, it doesn't use the language of reading and construing. It doesn't use the language of the Human Rights Act. It doesn't use the language of Marleasing.

So it doesn't appear that this section is intending to give effect to the provisions of the TCA in a way that requires you to interpret, say, the TCTA. Our tentative conclusion would be that at least for customs duty purposes, what gives the relevant instrument that gives effect to the TCA and all the other preferential tariff agreements that the UK has entered into are the preferential tariff regulations. And it's those regulations which you have to look at to work out what the law is on what tariffs to apply.

And Lipton and BA Cityflyer is an interesting case because it's got absolutely nothing to do with tax at all. It was two individuals who have brought a claim against BA Cityflyer after their flight was delayed. But it did require the Supreme Court and before that, the Court of Appeal and the courts below to grapple with precisely what the TCA meant and what it had done to our domestic law.

So if we then move on to what the current regime is, having seen how it's been brought in by the various bits of primary and secondary legislation, what is the nature of the current regime in a nutshell, in terms of customs?

Well, we're not in a customs union with anyone. We do have free trade agreements with a

number of other territories now, including the European Union. And so that means that we do have our own UK global tariff, which applies to all countries with which we don't have a free trade agreement, or where some other exception applies, such as a relief or tariff suspension, or goods coming from developing countries. And that's covered by the developing countries trading scheme.

So the rates in the global tariff broadly follow the EU's tariffs, with some exceptions for goods where the UK doesn't have any domestic production. The FTAs, the UK's concluded since leaving the EU with countries such as Australia and New Zealand, have removed tariffs, most tariffs on bilateral trade. So in practical terms, the main changes vis-a-vis the EU are that traders now need to file customs declarations, maybe safety and security data when importing or exporting any goods to and from Great Britain. What does it mean in practical terms, then, that we aren't in this customs union?

Probably the biggest change for traders is they now need to file customs

declarations, sometimes accompanied by safety and security data, when importing or

So that's the practicalities. But one other important feature we haven't yet considered concerns the rules of origin, which help determine whether goods can be imported tariff free. So how do those rules work?

The basic operation of a bilateral free trade agreement is to allow goods originating in one territory to be imported free of customs duty into the other territory. So that requires a detailed set of rules of origin to determine which product can be considered as originating and thus eligible for zero tariffs.

Broadly, those rules are that a product can be considered as originating in the other territory, if it's been exclusively obtained in the territory or produced in the territory exclusively from materials originating in that territory, or if it's been produced in the territory incorporating some non-originating materials, but in which case it has to meet some very detailed product specific rules. So this has obviously caused perhaps the most turbulence for the UK manufacturers, because they are now having to consider applying these detailed rules where they are manufacturing cars or buses in the UK, when they're using products that come either from the EU or from third countries.

That's not new in the sense that the UK has always had to consider such rules of origin when importing matters from countries outside the customs union. But the fact that the UK over so many years has built up trading relationships with countries or sister companies in the EU means that these rules of origin are having to be applied to a much, much greater set of commercial circumstances.

That may be something which the government will be considering, especially if it means businesses moving away from the UK.

Just to remind you, this is the Pump Court Tax Chat. I'm Rupert Baldry.

And I'm Sadiya Chowdhury.

And at this point, we're going to move on to consider the relationship between the new domestic regime with EU law.

How does the new UK domestic regime interact with EU law, which of course still applies to the European Union, which is the UK's biggest trading partner?

Again, there is a difference between the changes that happen with customs laws and the changes for excise laws. Now, the changes to the UK's customs regime were absolute. The break was clean and the change more profound than for any other tax that the UK has had.

We went in one day when we left the EU from a regime that was entirely a creature of EU law to a regime which was entirely a creature of domestic law with no real transition. And the important point here is that the customs duty laws stand apart from the entire edifice of

1972 took effect, so that the Union Customs Code lost its legislative effect through that route.

The fourth thing that happened was that a complete package of secondary legislation, such as the preferential trade arrangements also came into force.

Fifthly, the TCTA expressly said in Schedule 7, that the Union Customs Code immediately ceased to have effect for customs duty purposes. So the TCTA and the entire regime of UK customs duties came into force on implementation day. And that deliberate choice meant that the entire UK customs regime is not assimilated law, it is exclusively domestic law, except of course, for Northern Ireland, because the effect of the protocol under the withdrawal agreement is that Northern Ireland occupies a totally different space.

In Northern Ireland, EU customs laws continue uniquely to have full direct effect. But leaving

So when that was all happening, I considered that all those accrued rights that people had,

would continue to be enforced as such, just in line with the ordinary rule under the

Interpretation Act, that you don't lose your accrued rights when an Act of Parliament is

repealed. But the Supreme Court has considered this in the Lipton and Cityflyer case that we were talking about earlier, and said that that interpretation act analysis was wrong. They basically reason that the regime for retained law introduced by the Withdrawal Act was meant to be a comprehensive code of how you deal with all EU law rights that were being carried forward from implementation day onwards. And so the analysis was that if you have an EU law based cause of action, which accrued before the implementation day, then that cause of action just falls into the category of retained EU law.

And so it's carried forward under Section 3 of the EU Withdrawal Act.

It's interesting for a podcast focussing on customs and excise law, we're spending quite a lot of time talking about the Supreme Court case, which has nothing to do with tax, but it is very important. In particular, what would you consider are the consequences of the complete code analysis the Supreme Court applied in Cityflyer, when looking at EU law rights which had accrued pre-Brexit?

One important consequence of these accrued rights being categorised as EU retained law is that the interpretation of those rights is governed by Section 6 of the Withdrawal Act, headed Interpretation of Retained EU Law.

That has three main practical consequences for claims based on EU law rights, in that an English court is not bound by any decision of the Court of Justice of the CGEU made after IP

completion date, but it may have regard to that decision. That's all in Section 6 of the

But in any event, EU based claims against HMRC are now expressed subject to the express

limitations of the Withdrawal Act, which we now have to read together with the Retained EU

not EU law at all. It's not retained EU law. But the legislation is still based on a whole number of concepts, which have been taken over from the Union Customs Code. And it applies a similar tariff, which has similar codes which overlap with the code set out in the Union's Harmonise tariff. And we've got a vast body of case law now from the domestic courts and the European Court on the meaning of all the various phrases in the European Customs Code and the concepts which have now sort of travelled across into our domestic legislation.

And that sort of gives rise to the question of what status does this previous case law have going forward?

Well, the answer is none of it's binding. We have a completely new domestic regime. And the starting point for construing the provisions of the TCTA and all the secondary legislation given their ordinary meaning is to just look at the domestic rules. And we will go on to look at some of the cases later. And it's quite clear that the tribunal in particular is still looking at the EU concepts. But nevertheless, Parliament was very clear that we were to break away from the Customs Union and establish our own domestic code. And it may be as time goes on that the previous case law won't be as useful as it was pre-2020 in explaining the purpose of any provisions.

Yeah, I think it's going to depend on the type of case that you're looking at. The starting point is that none of the old case law is binding. But there'll be some areas where the old case law will be particularly relevant and persuasive. And there'll be other areas where the courts will be quite reluctant to look at the old case law and say, well, because the Union custom code interpret this concept in this way, that's how it should be interpreted in our domestic legislation. And we mentioned classification cases, but they seem to be the type of case where if there is a decision from the FTT, or from the European Court of Justice, on the classification of a particular type of goods, that is going to be a highly relevant, persuasive decision on a classification issue on the similar type of goods going forward. Just because the classification takes place as part of a harmonised system, and our new UK tariff is still based on the harmonised system.

And the harmonised system has its own general rules of interpretation that are filtered down from the WCO, the World Customs Organisation. And so those general rules are to be applied now in the same way as they were when we were in the EU. So that's an example of an area where the old case law will be highly relevant. There'll be other areas where it is much less relevant, and we'll just have to start again.

We have an example of that in the case we've already mentioned, the O'Neill wetsuits case decided by the FTT last year. And in particular, HMRC were arguing that a commission regulation which concerned the classification of a similar product was persuasive, even if no longer binding on the UK.

Now the tribunal did take into account all the facts before it, the particular qualities of the

wetsuit it had to classify, the explanatory notes in the harmonised system, as well as the

regulation, and came to the conclusion it didn't have to follow the commission's reasoning as set out in the regulation, and came to a different conclusion regarding the classification of the product, making the observation that HMRC's case seemed to start and end with the

regulation.

We may well see more of that as we find classification disputes going to the tribunal.

That's all so far, the approach that's been taken on customs duty, where we do have

this incredibly significant break with the past that took place on implementation day.

What about excise duties?

Excise duty came almost as slightly as a surprise, is that it is subject to a carve-out similar to VAT. And this is under section 28 of the Finance Act 2024, which provides that excise legislation continues to be interpreted in the same way as it was before 1st January 2024, which is when the retained EU law revocation and reform act 2023 came into force. So what that means is that excise legislation will still be subject to the same rules of interpretation as those which applied pre-Brexit. So unlike customs, we don't have a new excise duty code or new self-contained regulations. We're still going to be referring back to the old law. And the reason for this, according to the explanatory note, was that the government was keen to mitigate the risk of having to relitigate settled interpretations of UK law, which were based on long-standing EU law principles.

There is one change, which is it is no longer possible to rely on the direct effect of EU law. And you argue that, say, particular UK domestic regulation is incompatible with EU law and

therefore ought to be quashed or disapplied. And the test for when courts can depart from

So it might be helpful to consider how excise duty applies post-Brexit by reference to an example. Now, there have been several cases in the past 10 years or so regarding whether a person can be said to be holding goods which are liable to excise duty, but on which the has not been paid, as a result of which that person is liable.

And in particular, there have been quite a few cases where the individual in question had no

knowledge of the goods. So, for example, lorry drivers who were unaware of what they were

actually transporting because, say, someone had falsified the paperwork or someone had managed to put something into their lorry without their knowledge. And this culminated in a case called Martin Perfect, which ended up being referred to the Court of Justice on the

question of whether or not an innocent agent could be said to be holding goods and thus liable for the excise duty due on them, even if they had no knowledge of them.

And the answer which came back was the person who had physical possession of the goods

was holding them. And it didn't matter that they had no actual or constructive knowledge of

this. So in effect, that's strict liability.

So these include a case called Hartleb before the upper tribunal, where it was held that de facto and or legal control of goods without physical possession of them was sufficient. That was a case involving an employer where the goods had actually been in physical possession of the employee.

So it does almost look as if Perfect and Dawson's (Wales) have made it much harder for an

individual who has possession of goods to say that they ought not to be liable to the excise

duty, especially as it is pretty much a strict liability test. But taxpayers have nevertheless been successful in some appeals in this area, if they're able to show they have no physical

possession, or little or no legal control over the goods in question. So one example is a case

called Kent Couriers, where the FTT allowed the appeal of a courier company, which was able to establish both the absence of physical and legal control on the facts.

Another more recent case is Bunting, in which the landlord of a storage unit was held not to be jointly and severally liable for the duty on the goods found in the unit with the person who'd rented it, because they had no legal control over them. So these are all examples of the tribunals applying the decision imperfect. But it's quite easy to think of a situation where

Perfect does not cover the facts in a particular case. But then neither tribunal nor the Court of Appeal would be able to refer that case to the Court of Justice for clarification. Nor is it clear what would happen if, say, the Court of Justice does issue a later decision, which then cast doubt on some of the reasoning imperfect, because we do know that that decision would be non-binding, after all, notwithstanding the carve-out. For now, we're just going to have to carry on dealing with cases involving holding goods based on the two Court of Appeal decisions in Perfect and Dawson's (Wales).

That also raises another question about how do all these new rules tie in with the existing

appeal framework?

That is quite interesting, because although we've had this massive change in the underlying legislation, there's been a pretty minimal set of changes to the appeals procedure.

Although this simple point is that there hasn't been a whole scale changes to the appeals

procedure and that the new decisions are supposed to plug into the existing appeals

procedure, it does get a lot more complicated than that. Some of the recent cases that you've been involved with, Sadiya, illustrate that.

None of these have gone to tribunal, but I've recently had a couple of cases where it's become clear that the new rules don't work in quite the same way as the old rules. A particular example of this is in relation to claims for repayment or remission of duty on the

basis of equity. This is a long-standing provision most recently found in Article 120 of the Union Customs Code. And what it does is it allows an amount of import or export duty to be repaid or remitted in the interest of equity where a debt has been incurred under special circumstances and there is no deception or obvious negligence by the debtor.

And the special circumstances generally mean that that particular importer or exporter is in an exceptional situation compared with other people in the same business. So an example of

where you may make such a claim for remission, say, is where the importers followed the rules, but they had an agent which had failed to complete the correct customs declarations and they give rise to a customs debt. But if the declarations had been completed correctly, no debt would have arisen.

That is a very broad brush example. But suppose you've got your agent who hasn't done what they were supposed to do, but on top of that HMRC are saying, well, actually you've claimed a relief to which you're not entitled to at all. And so they raise a duty demand. So the importer would want to appeal the demand on the basis that HMRC are wrong to say the relief was not available and may also want to apply for remission on the grounds of equity that if the tribunal finds HMRC were right for whatever reason, it nevertheless considers grants for remitting the duty are made out.

Now under the Union Customs Code, it was possible to both appeal the demand and apply for remission before the appeal was determined. There was a provision which extended the time limit for making an application for remission while an appeal was ongoing, but you could nevertheless have both things proceeding at the same time. And it may well be that before your appeal got before the tribunal, HMRC made a decision on the remission application. And if it did not go in the importer's favour, that decision could be appealed at the same time as well. There are plenty of cases decided by the FTT where it will be

deciding both the actual appeal against the demand as well as the refusal of the remission application.

But there is one crucial change, which is it is no longer possible to make an application if an appeal has been made in respect to the demand and has not yet been determined. And there isn't a clear explanation for why there is now this difference and why you can't have both your appeal and your remission application proceeding at the same time. I haven't found anything in the explanatory notes. If anyone listening to this has found an explanation, I'd be very interested in hearing it.

It may well be it was considered to be inefficient to have to deal with both the appeal and the application at the same time. But not being able to do so does mean there is a risk that disputes may be prolonged because suppose the importer appeals the decision, loses and then starts all over again with a remission application.

Alternatively, it may be that some importers will decide not to bother appealing and just proceed with the remission application. So that is one rather strange change, which has arisen under the new rules and hasn't had much attention so far. But it may well be that disputes on that point will start coming before the tribunal soon enough.

Yes. And I think that illustrates a wider problem in that the new statutory code, as we've said, is very short. It was put in as an emergency measure. There are 40 sections. But within those 40 sections, there are powers given to the treasury and to ministers to make statutory instruments.

Basically, the regime has been created by the exercise of those powers. And so we have a short act and a vast morass of secondary legislation, which has been put into place by different teams at the treasury. And in turn, those regulations give powers to HMRC to publish notices.

But the overall effect of that is that it is much more difficult to discern any particular policy in seeing how these instruments all interact. We've moved from a code all set out in primary legislation, which was the product of many, many years of thought, to this new regime, where much of the legislation, including really important provisions as to when someone has to pay the duty, is all set out in these statutory instruments. And it is therefore much more difficult to find the policy to answer the sort of questions that you raised in your case. And that's just a feature of the way it's been done.

The act served its purpose. It avoided the cliff edge. But if you're thinking, is this a customs regime that a big modern trading nation should have going forward? Well, the jury's out on that one.

Let's finish off by just considering what other recent cases that there have been recently.

Electric Mobility Euro Limited, which concerns mobility scooters. Mobility scooters seem to crop up quite a lot in classification cases. And most of the imports in that case took place again before the 31st of January 2020. So the old law applied and the tribunal acknowledged this meant it wouldn't be able to make a reference to the court of justice. The appeal actually did succeed just on the basis of application of normal classification principles.

But the one point which would have been of particular interest and isn't dealt with by the FTT was an argument regarding whether a regulation on classification about mobility scooters could be regarded as invalid post Brexit. It's just mentioned almost by the way by the tribunal, but we don't really know why the taxpayer was arguing that it was invalid. The case has been appealed to the upper tribunal. So it is possible we see that argument get an airing there.

And on appeal, HMRC did not dispute that. But it said it was enough that the products were similar, as it allowed the goods to be classified by analogy, and the upper tribunal agreed with HMRC. But the point is now going to go on, on appeal to the Court of Appeal, where we will find out whether it is enough for a product to be similar to one which has been classified according to a regulation, and for the court to then classify it by analogy, or whether it has to be the same.

And that may well have implications for our new rules as well, bearing in mind that the classification categories are pretty much the same as they were under the Customs Code, and indeed, under the WTO tariff.

Well, those cases seem to set the scene for future development, because I was interested in the argument that was raised in the electrical mobility scooters case, where this old regulation has simply ceased to have any effect, and so couldn't be relied on. And that's the sort of transitional point, which is going to take some time for all those kind of points to be resolved, and for the FTT and the higher courts to really see how this legislation is settling down.

I think the point to get over here is that what has happened, there's been a profoundly important change to our customs rules, and it will require a completely different analytical approach from what we've been used to. So, the idea that an EU regulation can simply disappear and cease to have any retrospective effect is something that could be raised in the FTT now, but the FTT at that point probably didn't have the decision of the Supreme Court in Lipton, which for the first time has really explained in great detail what the effect of the Withdrawal Act was, what the effect of retained law is. And so, those fundamental points are going to have to be sort of grappled with by the FTT going forward.

So, we are entering into a phase where gradually a new set of case law is going to have to be built up, and it'll take some time for that to happen. And that's taking place in the context of a legal regime, which on any view is much more complicated than the former regime, because there are many more things that have to be done, many more declarations have to be made, many more requirements have to be fulfilled. So, that's going to keep us busy for many years.

What other points do you see that's coming up?

So, in addition to all those issues which are going to keep the tribunals and higher courts busy over the next few years, there are a couple of other issues which may well give rise to further uncertainty. The first is the introduction of the Trusted Traders Regime by the EU, which is a digital system under which the current system of customs declarations will be replaced with a system where traders release goods on behalf of customs authority. There's going to be a new EU customs data hub controlled by a new EU customs authority.

And so, the EU will have a huge amount of data available to it in relation to customs, and it is proposed that that data will be accessible by third country tax authorities if it's relevant to them. But it isn't entirely clear on what terms the UK will have access to this data. Now, to be clear, while that is related to customs, it may well be something which keeps data lawyers busy going forward.

It also means that the UK and EU systems will diverge more and more, because, as we've seen, there is some talk about whether or not the UK should rejoin the customs union. But in order to do so, we'd have to adopt a much more complicated computerised process, which isn't something we see featuring in the debate at all. And finally, there has been an announcement in the budget about a brand new excise duty, which is the Cross-Border Adjustment Mechanism, or CBAM.

And like the EU version, it covers aluminium, cement, fertiliser, hydrogen, and iron and steel. But unlike the EU version, it does not cover electricity, and it will be calculated by applying a tax rate per tonne of embedded emissions attributed to the products being imported. It is a brand new tax.

So I think we can say that there will be an inevitable increase in disputes with HMRC in this area. The regimes become more complex. The rules of origin disputes, for example, are bound to increase. And the vast majority of the UK's customs regime was introduced at breakneck speed by secondary legislation, which hasn't had the normal parliamentary scrutiny and past experience shows that this is a recipe for litigation.

The UK courts must have been influenced in some way by 50 years of jurisprudence from Luxembourg. So it will be interesting to see in the future, whether cases emerge where as a matter of interpretation, principles of legal certainty, say, have a role to play. But for the time being, parliamentary sovereignty is supreme.

There is plenty more we could cover in relation to both customs and excise. We've hardly covered any of the cases which have made their way through the courts in the past year or so. But that is all we've got time for today. So thank you very much for listening to this episode of Pump Court Tax Chat. I'm Sadiya Chowdhury.

And I'm Rupert Baldry. Thank you very much.

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