10/10/11: The Difficulties in Challenging a HMRC Seizure
HM Revenue and Customs (‘HMRC’) have broad seizure powers to assist them in their key roles of safeguarding the revenues and preventing the importation of prohibited or restricted items. Under section 139(1) of the Customs and Excise Management Act 1979, any Officer may seize or detain anything which is liable to forfeiture under the customs and excise legislation.
How, then, may a disputed HMRC seizure be challenged?
There are two options, as follows:
(i) To challenge the legality of the seizure by way of a Notice of Claim that anything seized as liable to forfeiture is not so liable, submitted within one month of the date of the HMRC Notice of Seizure, within an action termed ‘condemnation proceedings’; and
(ii) To request that HMRC restore the goods to the owner.
It is possible for a claimant to almost inadvertently stumble into condemnation proceedings and thereby to potentially become liable for the attendant costs. We are aware of a recent case where at the outset, a claimant merely indicated an intention to contest the case but HMRC were thereby obliged to institute condemnation proceedings, with the result that having heard nothing further for several months, the claimant then received a summons advising him of a Court hearing within a very few weeks and threatening him with costs.
HMRC threatened costs of not less than £1,800 against the claimant should he fail to indicate whether he intended to continue to contest the case; and costs of not less than £7,500 should a full hearing be required.
The second option in contesting a HMRC seizure involves the owner of the goods proceeding by way of a restoration request, ie. a request to HMRC that they restore the goods to him. This HMRC may do on payment of a fee (a ‘restoration penalty’) or of the relevant excise duty, depending on the circumstances of the seizure.
It should be noted, however, that the seizure of goods and their subsequent forfeiture to the Crown is not within the jurisdiction of the independent Tax Tribunal, which is confined by the legislative authority within the Finance Act 1994 to matters relating to the non-restoration of goods or the restoration of goods with conditions, under option (ii) above. The Court of Appeal recently held within a judgment reported on 18th July 2011 in the case of HMRC Commissioners v. Jones that where seized goods and a vehicle were deemed to have been duly condemned as forfeited under Schedule 3 para. 5 of the Customs and Excise Management Act 1979, the appellate jurisdiction of the First-tier Tribunal is limited to the correctness or otherwise of HMRC’s discretionary review decision not to restore the seized goods and vehicle; the Tribunal had no jurisdiction to re-open the question of whether the seized goods had been legally imported for personal use.
The case of Jones has therefore confirmed the two separate routes to challenging a HMRC seizure: either through the Courts on the issue of the legality of the seizure and/or through the Tribunal on the application of the principles of judicial review – such as reasonableness and proportionality – to the review decision not to restore the goods to the owner.
Given the many potential pitfalls involved in either route to challenging a HMRC seizure, we strongly recommend that the owner of the seized goods or vehicle should first seek the assistance of an independent specialist adviser.
Please contact us if you consider that we can be of assistance to you in any issue arising with HMRC.
