E01073
EXCISE DUTIES — beer produced by Appellant prior to registration as a brewer — registration later effected and backdated by Commissioners to a date before production began — assessment for duty on beer — whether beer liable to excise duty at small brewery rate or at full rate — liable at small brewery rate — Alcoholic Liquor Duties Act 1979, ss 36, 36A, 36D, 47 — appeal allowed
MANCHESTER TRIBUNAL CENTRE
THE GREAT GABLE BREWING COMPANY LIMITED Appellant
- and -
THE COMMISSIONERS FOR HER MAJESTY'S REVENUE AND CUSTOMS Respondents
Tribunal: Colin Bishopp (Chairman)
Warren Snowdon
Sitting in public in North Shields on 9 October 2007
Howard Christie, director, for the Appellant
James Puzey, counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents
© CROWN COPYRIGHT 2007
DECISION
- The Appellant, as its name indicates, is a brewer. Its brewery is adjacent to the Wasdale Head Inn, an enterprise owned by an associated company, in Cumbria. The Appellant supplies beer to the Inn, and we understand it has no other customers. Howard Christie, one of its directors, who represented it at the hearing, told us that the Appellant had never made a profit, and was able to survive only because it supplied beer to the Inn. Brewing was, in reality, a hobby of his. Nevertheless, the brewery was professionally run, being managed by the retired head brewer of a local commercial brewery.
- Brewing operations began in early 2002. As the Commissioners accept, Mr Christie made some enquiries about the Appellant's registration as a producer of beer (a requirement of section 47 of the Alcoholic Liquor Duties Act 1979) at the time, but the enquiries were not pursued and registration was not effected. Regardless of the Appellant's failure to register, duty was due on the beer it produced, but the Appellant did not account for that duty. Eventually the Appellant's activities came to the notice of officers who dealt with excise duties, and a visit was undertaken on 17 November 2004. That visit ultimately led to the making of the assessment under appeal, in the sum (as varied on review) of £56,423, and the imposition on the Appellant of two penalties: one, in the sum of £250, imposed pursuant to section 47(4) of the 1979 Act, for late registration as a brewer and the other, imposed pursuant to section 47(5) of the 1979 Act and section 9(2)(a) of the Finance Act 1994, for the Appellant's failure to account for the relevant duty. The Commissioners also registered the Appellant as a brewer on 27 June 2005, backdating the registration to 23 February 2002—the date from which, it was agreed, the Appellant should have registered.
- The latter penalty, in the sum of £2,821.15, was withdrawn on review. The Appellant does not challenge the remaining penalty, and it does not argue that it should not be required to account for some duty. Its case is that it should account for duty at the small brewers' rate which, by the operation of sections 36 and 36D of the 1979 Act, is fixed at half the standard rate. The Commissioners' case is that, as the relevant beer was produced at a time when the Appellant was not registered, it is not entitled to benefit from the concessionary small brewers' rate of duty since, by virtue of section 36A(2) of the 1979 Act,
"Beer is not small brewery beer if it is produced by a person on any premises in circumstances in which he is required to be, but is not, registered under section 47 … in respect of those premises."
The amount of duty assessed is, therefore, that due at the full rate. The arithmetic of the assessment is not challenged.
- Mr Christie told us that at the relevant time he was under considerable pressure because of the outbreak of foot and mouth disease which, as is common knowledge, had a severe adverse effect on many rural businesses, and because his wife was suffering from a serious illness. He accepted that he should have done more to ensure that the brewery was registered, but said that he and the brewery manager each thought the other had dealt with the matter. He accepted too that, irrespective of its lack of registration, the Appellant should have accounted for duty but, he said, the financial difficulties which it faced at the time meant that even if it had sent in the appropriate returns, it could not have paid the duty. It similarly could not pay its VAT liabilities, and had agreed with the Commissioners on payment by instalments.
- We accept that Mr Christie did not intentionally evade his, or the Appellant's, responsibilities, that he was under great pressure at the time, and that he did not attempt to conceal the Appellant's activities—there is evidence, in the Commissioners' own documents, that VAT officers were aware of the brewing activities from at least as early as August 2002. We accept too that Mr Christie thought an application for registration had been submitted in 2002, but if it was he plainly did not ensure that the registration had been effected. Some criticism can, obviously, legitimately be made of him. Nevertheless, the issue before us is not whether Mr Christie is blameworthy or the Appellant should be penalised, but whether it should pay duty at the lower or the full rate.
- Section 47 of the 1979 Act, so far as relevant, is as follows:
"(1) A person who produces beer on any premises in the United Kingdom must be registered with the Commissioners under this section in respect of those premises; and in this Act 'registered brewer' means a person registered under this section in respect of any premises …
(3) An application for registration under this section of any person required to be so registered in respect of any premises—
(a) shall be made at least fourteen days before the day on which he begins production of beer on those premises; and
(b) shall be in such form and manner as the Commissioners may by or under regulations prescribe.
(4) If any person fails to apply for registration under this section in circumstances where he is required by subsection (3)(a) above to do so, his failure shall attract a penalty …"
- The Appellant's eventual application for registration, which appears to have been in the prescribed form, was completed during the course of a second visit by an officer to the brewery, on 4 May 2005. Mr Christie filled in the application himself, and included in it a request that the registration be backdated to 23 February 2002. The visiting officer, as his visit report shows, was anxious to ensure that the Appellant was registered without delay, and it appears he took the application away with him. The registration was effected as we have recorded.
- The Commissioners' case, as it was put by James Puzey, counsel who represented them at the hearing, was that the backdating of the registration did not have the effect of retrospectively validating what the Appellant had done. Thus, because it was not registered at the time the beer was produced, the essential condition for the charging of duty at the lower rate, namely that its producer be registered, was not satisfied, and the beer must necessarily be charged at the full rate. Section 36A(2) was in clear terms, and a backdated registration could not overcome its requirements; the condition that the brewer be registered must be satisfied at the time of production. Mr Christie argued that the Appellant had applied for registration in or about February 2002, was in fact a small brewer, and should be charged, as Parliament intended, with duty at the reduced rate.
- Mr Christie's arguments have to be dismissed since the condition which must be satisfied requires the brewer to have procured registration, and not simply to have made an application for registration; and while Parliament may have intended that small brewers pay duty at a reduced rate, it is clear that it expected the condition of registration to be satisfied. As we have indicated, Mr Christie should have followed up the application he told us he made in 2002. Rejection of Mr Christie's argument does not, however, mean that Mr Puzey's is necessarily correct.
- It is apparent from its wording that section 47 is aimed at securing anticipatory applications for registration: an application must be made before brewing starts. Correspondingly, neither the section nor regulations 5 and 6 of the Beer Regulations 1993 (SI 1993/1228), the regulations authorised by subsection (3)(b), say anything about retrospective registration, which does not appear to have been within the draftsman's contemplation. It is certainly arguable that there is no power to backdate a registration, at least to a date earlier than that of the application, but the section does not expressly prohibit it and it is noteworthy that subsection (4) penalises a brewer who has failed to apply for, rather than secure, registration before he begins brewing. That provision suggests that registration from the commencement of brewing is possible whether or not a certificate has actually been issued at that date, provided the application has been submitted in time.
- Nevertheless, and whether correctly or not, the Commissioners, who are of course charged with the duty of effecting registrations, have backdated the Appellant's registration, not merely to the date of the application, for a period in excess of three years. The certificate issued to the Appellant clearly states that its operative date is 23 February 2002, and there is nothing within it which indicates, or might be taken to indicate, that it does not mean what it says. Mr Puzey's argument implies that the backdating has no effect at all. He did not, however, argue that the certificate was a nullity and that issue was not before us. Regardless of our doubts about the Commissioners' power to backdate a registration (an issue, we should make clear, we do not decide), it seems to us that, for the purposes of this appeal, we must take the certificate, issued as it was by the Commissioners, at face value. We therefore reject Mr Puzey's argument. It would be extraordinary if the Commissioners were permitted to contend that action they had themselves taken should be set aside to the detriment of a trader. In our view the effect of the certificate is to deem the Appellant to have been registered from 23 February 2002 and to validate that which has already occurred. The Appellant is, therefore, to be treated as if it were registered throughout the relevant period, and the consequence is that it is entitled to take advantage of the concessionary rate of duty.
- The appeal is, therefore, allowed in that the assessment must be adjusted so as to charge only the reduced rate. We leave such arithmetic as there may be to the parties. There will be no direction in respect of costs.
COLIN BISHOPP
CHAIRMAN
Release Date: 8 November 2007
MAN/06/8048
