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	United Kingdom VAT & Duties Tribunals (Excise) Decisions
You are here: BAILII >> Databases >> United Kingdom VAT & Duties Tribunals Decisions >> United Kingdom VAT & Duties Tribunals (Excise) Decisions >> Fry (t/a Fry Transport) v Revenue & Customs [2009] UKVAT(Excise) E01164 (21 January 2009) URL: http://www.bailii.org/uk/cases/UKVAT/Excise/2009/E01164.html Cite as: [2009] UKVAT(Excise) E01164, [2009] UKVAT(Excise) E1164

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E01164

S13(1A) HODA 1979 – fuel misuse – assessment to best judgement – reasonableness of methodology – Appeal Dismissed

MANCHESTER RIBUNAL CENTRE MAN/08/8034

MR. SAMUEL FRY Appellant

T/A FRY TRANSPORT
- and -
THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: Ian Huddleston, Chairman

A.F. Hennessey FCA

Sitting in public in Belfast on 20th November 2008

The Appellant in person

Mr. James Puzey of Counsel for the Respondents

© CROWN COPYRIGHT 2008


 


DECISION

The Appeal

1. The Appeal is against the Commissioners' decision to uphold on review an assessment against the Appellant in the sum of £87,060 (Eight seven thousand and sixty pounds) levied pursuant to Section 13(1A) of the Hyrocarbon Oil Duties Act 1979 ("HODA") and Section 12A of the Finance Act 1994. The review decision letter was dated the 2^nd March 2007.

Facts

2. Mr. Samuel Fry, trading as Fry Transport ("the Appellant") was, at the relevant time, carrying on business as a road haulier from premises at Redlands Estate, Coastguard Road, Larne, County Antrim, BT40 1AX. The Appellant had been registered with effect from the 19^th September 2007 as a VAT trader under VAT registration number 256046563. The assessment arose out of an inspection of the Appellant's premises carried out on the 26^th June 2005. On that occasion, an officer of the Respondents saw fuel being removed from both running tanks of a lorry (vehicle registration FKZ3432) and it being decanted into a storage tank at premises belonging to Fry Transport. Approximately forty minutes later the same officer saw a second vehicle (vehicle registration HKZ8850) arrive at the yard and be fuelled from the same storage tank.
3. As a consequence of these events an inspection was carried out and the Appellant was called and agreed to give an interview under caution. During the course of that interview, the Appellant stated that:

(a) he had approximately 33 vehicles on the road. The vehicles worked in Great Britain, Northern Ireland and the Republic of Ireland and, where possible, would refuel in the Republic of Ireland because fuel was cheaper. During the course of the interview the Appellant stated that each vehicle had a fuel card and, when used, the date, quantity and registration number of the vehicle would appear on the fuel invoice;

(b) vehicle tanks held between 1,000 and 1,400 litres;

(c) bulk fuel was purchased by the Appellant at the rate of a couple of thousand gallons every two to three months;

(d) other than being used in the vehicle itself, the Appellant indicated that fuel sourced in the Republic of Ireland was only pumped into the storage tank on his premises when the vehicle itself needed repair. In addition, he confirmed that if a vehicle had returned from Great Britain with fuel, that that fuel was also pumped into the storage tank, leaving only enough fuel to travel to the border to purchase fuel in the Republic of Ireland (a requirement of approximately 50 litres).

4. Following the interview, the Respondents seized the two vehicles in question and the fuel in the storage tank. The lorries were restored on the payment of £500 (Five hundred pounds). The seizure prompted a fuel audit and, accordingly, the Respondents wrote to the Appellant on the 21^st July 2005 requesting production of his records for all vehicles and/or fuel purchase invoices.
5. As a consequence, the Appellant produced some purchase invoices for the period January to June 2005. There followed a letter from the Respondents to the Appellant on the 15^th September 2005 requesting the remainder of his records. On the 20^th October 2005, the Appellant produced purchase invoices for the period August 2002 to December 2004, together with a list of all vehicles in his possession. In his covering letter, the Appellant stated that the weekly mileage and miles per gallon were only estimates.
6. On the 17^th November 2005, the Respondents visited the Appellant to uplift further details of vehicles registered to the business.
7. On 10^th May 2006, the Respondents wrote to the Appellant to advise that the audit had been completed and that the Respondents had calculated that an assessment of £87,601 (Eight seven thousand, six hundred and one pounds) was due. The Respondents included within that letter a schedule which detailed their calculations.
8. The assessment was calculated using the excess fuel purchased by one particular vehicle (registration number P2WJC) ("the Vehicle") on the basis that the excess fuel was far greater than for any other vehicle and much greater than was required for the mileage that the Vehicle had travelled during the period of the audit.
9. In that letter, the Respondents invited the Appellant to produce any evidence to show that the assessment was incorrect by the 19^th May 2006, and indicated that if no such evidence was produced, that the assessment would be issued. No information was provided and, therefore, the Respondents issued their assessment in the sum of £87,060 (Eight seven thousand and sixty pounds) by letter and notices dated 19^th May 2006.
10. The Schedule upon which the assessment was based showed, in relation to the Vehicle, an excess of 185,196.51 litres of fuel purchased, when compared against the amount of fuel required to support the mileage of that Vehicle.

Relevant Legislation and the Assessment

11. Under Article 3(1) of the Travellers' Reliefs (Fuel and Lubricants) Order 1995, a person entering the United Kingdom is relieved from the payment of excess duty on the fuel contained in a commercial vehicle which he is driving if:

(a) that fuel is contained in the vehicle's standard tanks; and

(b) is being used or is intended for use only by that vehicle.

12. Pursuant to Section 12(1A) of the Finance Act 1994 (Assessments to Excise Duty), where it appears to the Commissioners that:

(a) "any person is a person from whom any amount has become due in respect of any duty of excise; and

(b) that the amount due can be ascertained by the Commissioners, the Commissioners may assess the amount of duty due from that person and notify that amount to the person or his representative."

13. In the present case, after carrying out the Fuel Audit, the Respondents were of the view that the Vehicle (Reg. No. P2WJC) was used to ferry fuel from the Republic of Ireland to the Appellant's depot, where it would be stored in the storage tank and then used to fuel other vehicles. This clearly would have breached the Travellers' Relief (Fuel and Lubricants) Order 1995 and, therefore, based their assessment on Section 12 of the Finance Act 1994. The assessment covered the maximum three year period prior to the date of issue, and related only to the excess mileage over corroborated purchases for that vehicle in respect of that period. The assessment was carried out by Mr. Colin Tunnah, and it was his detailed schedule upon which the assessment was based.
14. Mr. Tunnah gave evidence to the Tribunal as to the methodology by which he had arrived at his conclusions:

(a) he had scheduled fuel receipts for each of the 44 vehicles owned by the Appellant during the assessment period, detailing each on a separate work sheet, showing for each a total amount of fuel purchased during the period of the audit;

(b) he established weekly mileages for each vehicle using tacograph information and/or odometer readings;

(c) having collated that information he calculated a total fuel requirement for each vehicle during the period of the audit, and compared that to the declared fuel purchases for each of those vehicles.

15. The resultant schedule, based on the collated information, showed for most of the vehicles a fuel deficit, but in relation to the Vehicle (Reg. No. P2 WJC) the calculation showed a considerable surplus of approximately 160,630 litres.
16. In relation to this specific vehicle, Mr. Tunnah then sought to verify the miles per gallon figure. The Appellant, when submitting the information he had, had given the Respondents a figure of 5.5 miles per gallon for the Vehicle. Mr. Tunnah sought to check this directly with a sales engineer from DAF Trucks (the manufacturer of the Vehicle) and a service manager of TBF Thompson DAF Trucks in Mallusk, Newtownabbey. Based on their responses to his enquiries, Mr. Tunnah took an average mpg of 7 mpg, which increased the fuel surplus for the Vehicle to 185,196.51 litres.
17. It was clear from both Mr. Tunnah's evidence before the Tribunal, and the witness statement which he had furnished, that there had been considerable dialogue between the Respondents and the Appellant in an effort to elicit all of the requisite information upon which Mr. Tunnah's calculations were based. Prior to issuing the assessment, the Appellant was given the opportunity to adduce evidence to explain the discrepancy in the fuel usage of the Vehicle over the miles travelled, which he failed to do.
18. After issue of the assessment, the Appellant, through his then instructed advisers, sought a review. Angela Cook, a Higher Officer, based in the Review and Appeals Team in Edinburgh undertook that review following a request of the 21^st June 2006. There then followed correspondence between Ms. Cook and the Appellant's representatives, the forensic accountants, ASM Horwath and Messrs. McAllister Keenan & Co., his solicitors. Again, the Appellant was asked to provide additional information, but all that was furnished for the purposes of the review was a report by the forensic accountants, Messrs. ASM Horwath. Ms. Cook, both in her witness statement and in her evidence to the Tribunal, indicated that she felt that neither the report produced nor the correspondence with the Appellant provided sufficient evidence to support any reduction to the assessment and therefore upheld it. Pursuant to Section 15(2) of the Finance Act 1994, the original decision was, therefore, deemed to be upheld. It is that review decision that is the subject of this Appeal.

The Appellant's Case

19. The Appellant appeared in person, but previously had been represented by both ASM Horwath and McAllister Keenan. In the Notice of Appeal, the Appellant indicated that the grounds of his Appeal were:

(a) the correctness (or otherwise) of the assessment of fuel purchased; and

(b) the assessment of the appropriate mileage per gallon achieved by the Vehicle.

20. In the replies given to the Notice for Further and Better Particulars, the Appellant's then representatives developed these arguments on the following basis:

(a) that the fuel card assigned to the Vehicle (registration P2WJH) was used by other drivers to re-fuel other vehicles;

(b) that the mileage per gallon figure which the Appellant had provided to the Respondents (ie. the 5.5 miles per gallon) was consistent with the mpg figures of other vehicles within its fleet and that the Respondent's counter assessment (ie 7 miles per gallon) was excessive;

(c) that the actual miles per gallon achieved by the Vehicle which were monitored over a period of months were closer to the 5 / 5.5 miles per gallon figure than that attributed by the manufacturer / the Respondents;

(d) that the age of the Vehicle, type of load being drawn and type of roads travelled all affected the achievable mpg.

21. In essence, therefore, the Appellant's appeal was based on two grounds:

(a) that the fuel purchased (and ascribed to the Vehicle) was unrepresentative in that it disguised fuel legitimately purchased for other vehicles;

(b) that even if all of the fuel was ascribed to the Vehicle, that the calculation was incorrect because the miles per gallon used was too high.

The First Ground – The Fuel Purchased

22. The Appellant gave evidence in support of his primary contention, namely that the Respondents had misconstrued the purchases which were ascribed to the Vehicle (Reg No. P2 WJC). He gave evidence that his drivers used two independent fuel cards, the first was a Fuelwise card which most drivers appeared to have and which allowed them to fill up anywhere in the UK or in the Republic of Ireland. The Appellant, however, said that his preference was that his drivers, when filling up, would firstly fill up in the Republic of Ireland (where fuel was cheaper) and, secondly, fill up there using Stat Oil – essentially because it was considerably cheaper again when compared to other competitors. The particular card in question (to which the excess fuel was attributed) was such a Stat Oil card and was registered to a Mr. Fleck, one of the Appellant's drivers, and the otherwise daily limit which was imposed on cards such as this had been uplifted to 1,400 litres per day, because Mr. Fleck was regarded as one of the more trustworthy employees. Mr. Fry gave evidence to the effect that Stat Oil would allow the Appellant's drivers to fill up at one of their filling stations using a card other than the one ascribed to them. In short, to give an example, a driver who operated primarily in England could, if travelling through the Republic of Ireland, call in at a Stat Oil Station and, subject to the Appellant / Mr. Fleck authorising the transaction, fill up, making use of Mr. Fleck's card. In support of that contention, the Appellant referred the Tribunal to a letter dated the 3^rd May 2007 from Stat Oil, which did indeed confirm:

"There have been occasions where we have been requested by your company to authorise fuel for a vehicle where a driver has arrived on site with no fuel card in his possession. In this instance, these transactions will be allocated to an alternative card number provided, or to another fuel card when available to the site as agreed with yourselves."

23. In the absence of corroboration, however, and faced with the Stat Oil letter which seemed to indicate more of an occasional instance when this might occur, the Tribunal did not feel that it could place sufficient reliance on the Appellant's suggestion to explain the very considerable excess in fuel which was ascribed to the Vehicle and/or Mr. Fleck's operation of it – and on which the assessment had been based. The Tribunal took the view that, given that the basis upon which the assessment had originally been made had been quite clear to the Appellant at a very early stage, and that he had been given more than ample opportunity to disprove it or explain the discrepancy either at that point or during the fuel audit process (either by the information which he himself held or through the services of his forensic accountant), that the Tribunal did not find that it could rely solely on the Appellant's uncorroborated oral evidence on this particular ground.

Ground Two – Mileage Per Gallon

24. In Mr. Tunnah's evidence, and in the preparation of the Schedule upon which the Assessment was based, he had, in the main, relied on the mpg figures provided by the Appellant. The only time which he varied from that principle was in relation to the Vehicle. As indicated at paragraph 14 above, Mr. Tunnah had independently corroborated that figure in relation to the Subject Vehicle, namely:

(a) by approaching a Sales Engineer for DAF directly – who gave a figure of 8mpg for equivalent vehicles of the same make /model;

(b) by speaking to a Services Engineer at TBF Thompson DAF at Mallusk – who gave an indicative figure of 7mpg.

25. Based on those discussions, Mr. Tunnah had ascribed an mpg of 7mpg to the Vehicle, which had resulted in the excess fuel figure of 185,196.51 litres, upon which the assessment was based. The Appellant's case had always indicated that he felt the mpg attributed to the calculation was too high, and that a mpg of 5 to 5.5mpg was more accurate. In support of that argument, the Appellant produced two letters to the Tribunal, one from Mr. James Caldwell, the original owner of the vehicle in question, and the second from a competitor haulage company, both of whom suggested an mpg in the range of 5.5 to 6, with 7mpg only being obtained on mainland motorways. The excess mileage calculated at the rate of 5.5mpg equates to a figure of 160,630 litres. On this point, the Tribunal was more persuaded that the lower figure was more accurate given the fact that the Vehicle operated on Northern Irish roads, and that therefore the manufacturers suggested mpg figure was unlikely to be achieved. Accordingly, the Tribunal was minded to accept the Appellant's lower figure and accordingly direct that the assessment be re-calculated on the basis of a mileage per gallon of 5.5

Assessment of Weekly Mileage

26. For the sake of completeness, it should be recorded that there was a discrepancy as to how the weekly mileage of each of the vehicles in the Appellant's fleet was calculated. The Appellant put forward that the weekly mileage should be calculated based on his own internal service records. The Respondents, in contrast, had used the tacograph readings of the individual vehicles upon which to work out the weekly mileage. It appeared to the Tribunal that on this point the tacograph readings were to be preferred as being more objective and, therefore, supports the conclusions of the Respondents.

Conclusion

27. In a case such as this where an assessment has been raised, the onus clearly falls upon the Appellant to disprove the basis upon which that assessment has been reached. In the present case, the Appellant had been given more than adequate opportunity to do so in the pre-trial stages, but either information was not forthcoming or, where it was forthcoming, the quality of it was such that it did not advance the Appellant's case. At the hearing of the case, it was equally open to the Appellant to produce cogent evidence in support of his case. In the material aspect of establishing a cogent reason as to why the Vehicle appeared to have fuel purchases well in excess of the fuel which was required to cover the actual mileage covered, the Tribunal was not satisfied that any clear evidence had been produced to adequately explain that discrepancy.
28. Having established that there was a discrepancy, the next question arose as to the extent of the discrepancy. One of the key factors in that calculation was the mpg to be ascribed to the Vehicle. The Respondents based their case essentially on the information provided by the manufacturers and attributed an mpg of 7mpg whereas for all other vehicles they had accepted the Appellant's mileage assessments. On this point the Tribunal felt that there was a greater margin of error and was minded to accept the Appellant's evidence that a lower mpg figure of 5.5 was appropriate. That lower figure resulted in a fuel excess of 160,630 litres which might necessitate the Respondents undertaking a minor corrective assessment by way of reduction of that which had already issued.
29. Subject only to that minor correction, the Tribunal finds for the Respondents in all respects and dismisses the Appeal.
30. No order as to costs.
Ian Huddleston Chairman 21 January 2009