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C11: Customs duty, import VAT and excise duty claims
IMPORT DUTY
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Remission of import duty
"(1) Paragraph (2) applies in relation to a liability to import duty in respect of which no payment has been made.
(2) An application may be made to HMRC to remit the liability (in whole or part) by virtue that a reduced duty case applies, other than the reduced duty case described in regulation 53.
(3) An application described in paragraph (2) is an application for remission of duty.
(4) Where a determination to grant an application has effect under regulation 64(3), the liability is remitted to the extent stated in the determination.
(5) Paragraph (4) is subject to regulation 69." (SI 2018/1248, r.54)
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Repayment of import duty
"(1) Paragraph (2) applies in relation to a liability to import duty in respect of which a payment has been made.
(2) An application may be made to HMRC to repay (in whole or part) the payment by virtue that a reduced duty case applies.
(3) An application described in paragraph (2) is an application for repayment of duty.
(4) A determination to grant an application for repayment of duty which has effect under regulation 64(3) is subject to regulation 69." (SI 2018/1248, r.55)
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Identity of applicant
"(1) An application for remission of duty may be made by a person who is liable to pay the import duty.
(2) An application for repayment of duty may be made by a person who has paid some or all of the payment to which the application relates." (SI 2018/1248, r.57)
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Form of application
"(1) An application must state—
(a) the goods to which the application relates;
(b) the reduced duty case which applies;
(c) whether it is an application for remission or repayment of duty, or both;
(d) the amount of the liability to import duty;
(e) the amount which the applicant claims should be remitted or repaid;
(f) where payment has been made in respect of the liability, the amount paid and the person who paid it; and
(g) the location of the goods.
(2) An application must—
(a) include such details identifying each person making the application;
(b) be made to the place;
(c) be made in the form and manner, including electronic; and
(d) be accompanied by such information,
as specified in a notice published by HMRC.
(3) HMRC must publish a notice specifying the matters referred to in paragraph (2)." (SI 2018/1248, r.58)
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Time limit
"(1) Subject to paragraphs (2) to (4), an application for remission or repayment of duty must be made by no later than the end of the following periods beginning with the day after the date of the notification of liability to pay import duty in respect of the goods—
(a) except where sub-paragraph (b) applies, three years;
(b) where the application concerns the reduced duty case described in regulation 51, one year." (SI 2018/1248, r.59)
Disregard of appeal period
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"(2) Where an appeal was made in respect of the amount of import duty to which the application relates and the appeal has been determined, the period between the commencement and determination of the appeal is to be disregarded for the purposes of determining the periods in paragraph (1)." (SI 2018/1248, r.59)
Certain reduced duty cases
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"(3) Where the application concerns the reduced duty case described in regulation 53, the application must be made by no later than the date required to notify the withdrawal of the Customs declaration as provided by public notice made under paragraph 16(a) of Schedule 1 to the Act." (SI 2018/1248, r.59)
Extension: force majeure/unforeseeable circumstances
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(4) Where by virtue of force majeure or unforeseeable circumstances it would be unreasonable to expect a person to make an application in time, HMRC may, on written request by the person which gives reasons for the request, allow the person to make the application out of time." (SI 2018/1248, r.59)
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Acceptance or rejection that application in correct form within 30 days
"(1) By no later than 30 days after the date on which an application is received by HMRC, HMRC must notify the applicant that the application—
(a) has been made in accordance with chapter 3 and is accepted; or
(b) is rejected for the reasons set out in the notification.
(2) If an acceptance or rejection is not made as required by paragraph (1), the application is deemed to be rejected." (SI 2018/1248, r.59)
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Remission of import duty in case of relevant breach or failure
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- No attempt to avoid duty involved
"(1) Paragraph (2) applies where—
(a) a relevant breach or failure occurs;
(b) a liability to import duty in respect of chargeable goods is incurred in consequence;
(c) for a case to which regulation 73 applies, the relevant breach or failure has no significant effect on a Customs procedure or an outward processing procedure, as applicable to the breach or failure;
(d) none of the persons who caused the relevant breach or failure to occur did so for the purposes of avoiding any or all of the liability; and
(e) a person liable to the import duty—
(i) notifies HMRC of the relevant breach or failure as soon as practicable after it occurred;
(ii) takes all steps which can reasonably be taken to rectify the consequences of the breach or failure; and
(iii) is not in breach of, as the case may be, a Customs procedure or an outward processing procedure in relation to the goods, other than in respect of the relevant breach or failure.
(2) HMRC must remit the liability to import duty incurred in consequence of the relevant breach or failure in respect of each person liable to pay the duty." (SI 2018/1248, r.75)
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No significant effect on procedures
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"(1) This regulation provides for the purposes of regulation 75(1)(c) for cases where the occurrence of a relevant breach or failure has no significant effect on a Customs procedure or an outward processing procedure, as the case may be.
(2) There is no significant effect on the procedure where—
(a) the relevant breach or failure concerns a person exceeding by a period (“the exceeded period”) the time limit within which the person is required to comply with a requirement in relation to the procedure; and
(b) had an application to extend the time limit been made, HMRC would have been likely to grant an extension of time for compliance by a period no shorter than the exceeded period.
(3) There is no significant effect on the procedure where subsequent to the relevant breach—
(a) the goods are declared for the free-circulation procedure; and
(b) accepted for that procedure.
(4) There is no significant effect on the procedure where—
(a) the relevant breach consists of a movement of goods other than as agreed by an HMRC officer; but
(b) subsequent to the breach, HMRC agrees to the location of the goods.
(5) Paragraph (6) applies where—
(a) the relevant breach consists of making a Customs declaration containing an error;
(b) the goods have been released to a special Customs procedure, except a transit procedure [or a free zone procedure], or are held in a temporary storage facility; and
(c) the error was unknown to HMRC when the declaration was accepted.
(6) There is no significant effect on a Customs procedure if, had the error been known to HMRC before the acceptance, HMRC would have been likely not to have delayed or prevented the acceptance.
(7) There is no significant effect on the Customs procedure if the person who causes the relevant breach or failure to occur notifies full details of the breach to HMRC before—
(a) a person is notified of a liability to import duty in respect of the goods; or
(b) HMRC takes any steps in relation to the goods which would likely lead HMRC to discover that the relevant breach or failure has occurred." (SI 2018/1248, r.73)
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- Goods have permanently left the UK
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"(1) Paragraph (2) applies where—
(a) a relevant breach or failure occurs;
(b) a liability to import duty in respect of chargeable goods is incurred in consequence; and
(c) a person liable to the import duty—
(i) notifies HMRC of the relevant breach or failure as soon as practicable after it occurs and before HMRC discovers it; and
(ii) provides to HMRC sufficient evidence to show that the goods were not used or consumed in the United Kingdom and have permanently left the United Kingdom.
(2) Subject to paragraph (3), HMRC must remit the liability to import duty incurred in consequence of the relevant breach or failure in respect of each person liable to pay the duty.
(3) No remission may be made in respect of a person who, whether alone or with another person, caused the relevant breach or failure to occur for the purposes of avoiding any or all of the liability." (SI 2018/1248, r.76)
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- Assistance provided to HMRC to identify breach by person liable
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"(1) Paragraph (2) applies where—
(a) a relevant breach or failure occurs;
(b) a liability to import duty in respect of chargeable goods is incurred in consequence;
(c) any of the persons responsible for causing the relevant breach or failure to occur did so for the purposes of avoiding any or all of the liability; and
(d) a person (“P”) who did not cause, alone or with another person, the relevant breach or failure to occur provides assistance to HMRC which enables HMRC to identify the relevant breach or failure.
(2) HMRC must remit the liability of P to the import duty incurred in consequence of the relevant breach or failure." (SI 2018/1248, r.77)
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- Minimal liability (£9) to import duty
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"(1) Paragraph (3) applies where—
(a) a liability to import duty is incurred;
(b) no notification of the liability is made further to paragraph 2 of Schedule 6 to the Act (notification of liability to pay import duty); and
(c) the amount of the liability does not exceed £9.
(2) For the purposes of paragraph (1)(b), a notification of liability includes cases where notification is presumed, taken as met by some specified act or not required further to regulations made under paragraph 3 of Schedule 6 to the Act.
(3) HMRC must remit the liability to import duty in respect of each person liable to pay the duty." (SI 2018/1248, r.78)
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- Meaning of relevant breach or failure
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"(1) “A relevant breach or failure” means any relevant breach or failure described in this regulation.
(2) A relevant breach is where a person—
(a) makes a Customs declaration for a special procedure but the person has no entitlement to make it; or
(b) breaches any requirement relating to the procedure.
(3) A relevant breach is where a person—
(a) breaches the terms of the declaration for an outward processing procedure;
(b) breaches any other requirement in relation to the procedure; or
(c) in the case of goods being processed for any other purpose except for their repair without charge, imports the goods not in accordance with the procedure.
(4) A relevant breach is where a person is in breach of—
(a) section 5(1)(b) of the Act (presentation of goods to Customs on import where required); or
(b) section 35(2) of the Act (export of goods in accordance with the applicable export provisions).
(5) A relevant failure occurs where any of the following apply—
(a) paragraph 1(5) of Schedule 1 to the Act (Customs declaration not made within the 90 day period);
(b) paragraph 3(4) of Schedule 1 to the Act (Customs declaration not made before goods are imported); or
(c) regulation 11(2) (goods treated as not presented and to which section 5(1) of the Act applies)." (SI 2018/1248, r.72)
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- No application to be made
"No application for remission of duty is to be made in respect of the cases described in regulations 75 to 78." (SI 2018/1248, r.72)
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- Time limit
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"(1) This regulation has effect for the purposes of regulations 75 to 78.
(2) Except where paragraph (4) applies, any remission must be made as soon as practicable and in any event before the expiry of the period of three years beginning with the date on which the liability to import duty was incurred.
(3) Paragraph (4) applies where—
(a) an HMRC officer considers that a criminal offence may have been committed in relation to the relevant breach or failure; and
(b) the period required to determine that an offence has not been committed is longer than the period provided by paragraph (2).
(4) Any remission must be made on the earlier of—
(a) the determination that no such offence has been committed; and
(b) the expiry of the period of 20 years beginning with the date on which the liability to import duty was incurred." (SI 2018/1248, r.79)
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CUSTOMS DUTY (EU LAW)
Amendment of customs declaration
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“The legislative provisions relevant to this case are clear. If (as is accepted by HMRC in this case) a customs duty declaration on import has been wrongly made and as a result customs duty has been paid when on the facts relating to the import it should not have been paid, then the duty is to be repaid if and when the customs declaration is invalidated. That is provided by Article 237 of the Customs Code. However, Article 237 goes on to specify that in such a case repayment can be made only if the declarant applies for repayment within the periods specified for the submission by the declarant of the application for the customs declaration to be invalidated.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §55, Judge Sadler).
Repayment
“Import duties or export duties shall be repaid where a customs declaration is invalidated and the duties have been paid. Repayment shall be granted upon submission of an application by the person concerned within the periods laid down for submission of the application for invalidation of the customs declaration.” (CCC Art 237).
Time limit
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“By way of derogation from Article 66 (2) of the Code, a customs declaration may be invalidated after the goods have been released, as provided below:
(1) where it is established that the goods have been declared in error for a customs procedure entailing the payment of import duties instead of being placed under another customs procedure, the customs authorities shall invalidate the declaration if a request to that effect is made within three months of the date of acceptance of the declaration provided that:
- any use of the goods has not contravened the conditions of the customs procedure under which they should have been placed,
- when the goods were declared, they were intended to be placed under another customs procedure, all the requirements of which they fulfilled, and
- the goods are immediately entered for the customs procedure for which they were actually intended.
The declaration placing the goods under the latter customs procedure shall take effect from the date of acceptance of the invalidated declaration.
The customs authorities may permit the three-month period to be exceeded in duly substantiated exceptional cases;
(1a) where it is established that the goods have been declared in error, instead of other goods, for a customs procedure entailing the obligation to pay import duties, the customs authorities shall invalidate the declaration if a request to that effect is made within three months of the date of acceptance of the declaration, provided that:
- the goods originally declared:
(i) have not been used other than as authorized in their original status; and
(ii) have been restored to their original status; and that
- the goods which ought to have been declared for the customs procedure originally intended:
(i) could, when the original declaration was lodged, have been presented to the same customs office: and
(ii) have been declared for the same customs procedure as that originally intended.
The customs authorities may allow the time limit referred to above to be exceeded in duly substantiated exceptional cases.” (IR Art 251).
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“In short (and so far as relevant to this case), a declaration may be invalidated if the goods in question have been declared for the "wrong" customs procedure (and as a result the "wrong" duty has been paid) and if certain conditions are satisfied; it is the customs authorities which invalidate the declaration upon the declarant's request; and such a request must be made within three months of the date the "wrong" declaration was accepted. That request may be made outside that period of three months, at the discretion of the customs authorities, only where there is a duly substantiated exceptional case.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §56, Judge Sadler).
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Application made when delivered
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“In the absence of special rules, an application must be regarded as made to a body when the applicant delivers it to that body - if it is not so delivered the intended recipient cannot act upon it. The date upon which an application is made is therefore the date on which it is actually delivered to that body. If for any reason it is not delivered it is not made. An application therefore is not made when the applicant posts it, nor is there any presumption that a document when posted is delivered, or can be regarded as delivered after a certain interval. However, it seems to be the practice of HMRC, as we understood it from Mr Pritchard's argument, that if a declarant provides formal proof of posting of an application then that application will, at least for the purposes of complying with any notice period, be treated as made (presumably on the day of posting, but this was not clear), and this practice is supported by the observations of this Tribunal in the Westland Geoprojects (Holdings) Limited case.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §68, Judge Sadler).
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Must include a copy of incorrect entry along with substitute entry
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“As is to be expected, the procedures of HMRC accord with these provisions: where a customs duty declaration has been incorrectly made they require the declarant to apply to them with a copy of the incorrect CHIEF entry together with a manual substitute entry, so that they may verify that the required conditions are satisfied, and then proceed to invalidate the original entry and replace it with the manual substitute entry.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §57, Judge Sadler).
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Exceptional case higher threshold than exceptional circumstances
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“ We note first that Article 251 of the Implementing Regulation requires the declarant to demonstrate an "exceptional case" and not just "circumstances" that warrant an extension of the notice period. It is a higher hurdle for the declarant to surmount… We make the further point that for a case to be exceptional, it must be one which the trader could not, by the taking of reasonable steps, avoid - it must arise from events or circumstances outside his control.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §§73…75, Judge Sadler).
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Not following correct procedure at first is not a duly substantiated exceptional case
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“The Appellant made its repayment application in July 2012. Its failure to make that application within the stipulated three month period was the result of its not following the correct procedures. It may well be rare for the Appellant or its agent to make mistakes of this kind, but on no basis can that be said to be an exceptional case such as is contemplated by Article 251 of the Implementing Regulation so as to permit it to be accepted out of time.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §64, Judge Sadler).
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Document lost in the post not an exceptional case
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“…a document lost in the post is not a circumstance which is particular to the Appellant and should not be regarded as "exceptional". It is a feature, or at least a risk, of using the post to send important documents and as such impacts on all traders who use that means of communication. That it is such a circumstance is apparent from the fact that Royal Mail offers a number of premium postal services (recorded delivery, insured post) which enable a person to eliminate that circumstance, or to be compensated if that eventuality occurs. [HMRC] contrasted that with the case where, say, the trader's premises are destroyed, or his records destroyed in flooding. That is a circumstance peculiar to that trader, and as such may fairly be regarded as "exceptional".” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §74, Judge Sadler).
Non-compliance with import regime having no significant effect
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“A customs debt on importation shall be incurred through … non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, … from the use of the customs procedure under which they are placed … unless it is established that those failures have no significant effect on the correct operation of the … customs procedure in question.” (Customs Code, Article 204(1))
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IR Article 859.
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Basic position: customs date for non-compliance not a penalty
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“Consequently, the incurrence of a customs debt does not, in circumstances such as those in the main proceedings, have the nature of a penalty, but must rather be regarded as the consequence of the finding that the conditions required to obtain the advantage derived from the application of the inward processing procedure in the form of a system of suspension have not been fulfilled. The procedure implies the granting of a conditional advantage, which cannot be granted if the applicable conditions are not respected, thereby making the suspension inapplicable and consequently justifying the imposition of customs duties.” (Döhler Neuenkirchen GmbH C-262/10, §43)
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If extension in fact granted, question is whether that deadline was met
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“The fact that in the current case at least one extension was granted means that the test is simply whether the new deadline was met. I have carefully reviewed the correspondence between the parties and, for the following reasons, I have concluded that HMRC did grant further extensions of time to file the outstanding IPR returns.” (Nu-Pro Ltd v. HMRC [2017] UKFTT 562 (TC), §117, Judge Kempster) upheld on appeal [2018] UKUT 302 (TCC), §28, Judges Berner and Powell).
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Article 859 is exhaustive
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“That art. 859 is an exhaustive definition of what constitutes failures with no significant economic impact can be seen from art. 860.” (Corporate Messengers Worldwide Ltd v. HMRC [2017] UKFTT 773 (TC), §115, Judge Richard Thomas).
Reclaim of import duties not legally owed
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“Import duties or export duties shall be repaid in so far as it is established that when they were paid the amount of such duties was not legally owed or that the amount has been entered in the accounts contrary to Article 220 (2).
Import duties or export duties shall be remitted in so far as it is established that when they were entered in the accounts the amount of such duties was not legally owed or that the amount has been entered in the accounts contrary to Article 220 (2).” (Article 236(1))
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No repayment if due to deliberate action
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“No repayment or remission shall be granted when the facts which led to the payment or entry in the accounts of an amount which was not legally owed are the result of deliberate action by the person concerned.” (Article 236(1)).
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Time limit: 3 years
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“Import duties or export duties shall be repaid or remitted upon submission of an application to the appropriate customs office within a period of three years from the date on which the amount of those duties was communicated to the debtor.” (Article 236(2)).
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10 month time limit for preferential tariffs
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“We therefore agree with the FTT that there is no contradiction between the three year time limit imposed by Article 236 of the Community Customs Code and Article 90(b) of the Implementing Regulations. Once it is realised that there are additional conditions to be satisfied if the taxpayer is to obtain the benefit of the preferential tariff through a repayment claim under Article 20 236, one of which is that the ten month time limit specified in Article 90(b) is complied with, it is clear that there is no conflict.” (Lane Fouracres Associates v. HMRC [2014] UKUT 67 (TCC), §38, Judges Herrington and Sadler)
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Force majeure extension
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“That period shall be extended if the person concerned provides evidence that he was prevented from submitting his application within the said period as a result of unforeseeable circumstances or force majeure.” (Article 236(2))
General equity clause (UCC Article 120)
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“1. Import duties or export duties may be repaid or remitted in situations other than those referred to in Articles 236, 237 and 238:
— to be determined in accordance with the procedure of the committee;
— resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned. The situations in which this provision may be applied and the procedures to be followed to that end shall be defined in accordance with the committee procedure. Repayment or remission may be made subject to special conditions.” (Article 239(1))
“(1) Where the decision-making customs authority establishes that an application for repayment or remission submitted to it under Article 239 (2) of the Code:
- is based on grounds corresponding to one of the circumstances referred to in Articles 900 to 903, and that these do not result from deception or obvious negligence on the part of the person concerned, it shall repay or remit the amount of import or export duties concerned,
- is based on grounds corresponding to one of the circumstances referred to in Article 904, it shall not repay or remit the amount of import or export duties concerned.
(2) In other cases, except those in which the dossier must be submitted to the Commission pursuant to Article 905, the decision-making customs authority shall itself decide to grant repayment or remission of import or export duties where there is a special situation resulting from circumstances in which no deception or obvious negligence may be attributed to the person concerned.” (Implementing Regulations, Article 899)
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“Part 2 of the Guidance states that Article 239 ‘constitutes a general equity clause.’ It goes on to say that ‘according to Community case law, if the person liable for payment can demonstrate both the existence of the special situation in the absence of deception and obvious negligence on his part, he is entitled to the repayment or remission of the amount of duty legally owed.’” (Grange Shipping Ltd v. HMRC [2017] UKFTT 142 (TC), §39, Judge Rupert Jones).
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Time limit: 12 months
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“Duties shall be repaid or remitted for the reasons set out in paragraph 1 upon submission of an application to the appropriate customs office within 12 months from the date on which the amount of the duties was communicated to the debtor.” (Former Article 239(2)).
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Exceptional circumstances
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“However, the customs authorities may permit this period to be exceeded in duly justified exceptional cases.” (Former Article 239(2))
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Person liable for payment
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“The Tribunal is of the view that the Implementing Regulations do not extend the substantive rights as to who may make an application under Article 239 so as to include those who paid the duties such as direct representatives in addition to those who were liable to pay the duties. Even if the Tribunal is wrong and Article 878 does extend the entitlement to make the application to the person who paid the duties, it does not extend the entitlement to receive the benefit of a successful application: ie to receive the remitted duties.” (Grange Shipping Ltd v. HMRC [2017] UKFTT 142 (TC), §75, Judge Rupert Jones).
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- No obvious negligence
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Burden on taxpayer
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"[101] The Appellant’s assertion that the burden rests on HMRC to demonstrate that there was “obvious negligence” has no basis in law: the usual principle applies that the burden on the party making the application (particularly for an exemption or other relief) and it was not for Officer Jones or for HMRC to prove that there was obvious negligence. Article 120 does not impose such a burden, merely setting a requirement for special circumstances to “exist”. The burden is on the taxpayer making the application for remission to prove they fall within the conditions of Article 120." (Caerdav Ltd v. HMRC [2023] UKUT 179 (TCC), Rajah J and Judge Ruper Jones)
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Not to be interpreted widely
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“Since a lack of "obvious negligence" is an essential condition of being able to claim repayment or remission of import or export duties, it follows that that term must be interpreted in such a way that the number of cases of repayment or remission remains limited.” (Firma Söhl & Söhlke C-48/98, §52).
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Complexity of legislation and experience of taxpayer relevant
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“…in order to determine whether or not there is "obvious negligence" within the meaning of the second indent of Article 239(1) of the Customs Code, account must be taken in particular of the complexity of the provisions non-compliance with which has resulted in the customs debt being incurred, and the professional experience of, and care taken by, the trader…As regards the professional experience of the trader, it is necessary to examine whether or not he is a trader whose business activities consist mainly in import and export transactions and whether he had already gained some experience in the conduct of such transactions…As regards the care taken by the trader, it must be noted that, where doubts exist as to the exact application of the provisions non-compliance with which may result in a customs debt being incurred, the onus is on the trader to make inquiries and seek all possible clarification to ensure that he does not infringe those provisions.” (Firma Söhl & Söhlke C-48/98, §§56 – 68).
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“In summary, I find that the contents of that Notice set out clearly and in terms comprehensible to the average businessperson the procedures to be followed in relation to IP, including the requirement to file returns and supply supporting documentation…In relation to the professional experience of the trader, Nu-Pro’s business activities routinely involve import and export transactions of high value aerospace components. Nu-Pro’s involvement with IP goes back at least to 2010 when Mrs Franks visited the factory – and I comment on that further below – thus it had already gained some experience in the conduct of such transactions (albeit in the simplified form of IPR) before the failures which gave rise to these proceedings…Nu-Pro had already faced an unexpected liability as a result of its failure to properly engage with IPR procedures…Nu-Pro made no attempt to take professional advice on its situation, until the C18 arrived…Taking all the above together, I consider that Nu-Pro’s failures demonstrate obvious negligence on its part.” (Nu-Pro Ltd v. HMRC [2017] UKFTT 562 (TC), §§124…125…128…129…130, Judge Kempster upheld on appeal [2018] UKUT 302 (TCC,) §32, Judges Berner and Powell).
Experienced trader failing to put in place infrastructure to check origin negligent
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“Beko UK was a distributor of products imported from its Turkish parent, and other operating companies. It had experience of those transactions. However, in common with Beko AS, it failed to put in place the necessary infrastructure to check the origin of the goods it imported. It was, particularly having regard to the prior anti-dumping investigations and regulation, careless of its responsibilities in this area. It failed at the material time to make necessary enquiries and seek relevant clarification, either as regards the origin of the goods, or of the Turkish authorities as to the procedure adopted by the Istanbul Chamber of Commerce in connection with the A.TR.1 certificates.” (Beko PLC v. HMRC [2014] UKFTT 60 (TC), §87, Judge Berner)
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- Special situation: exceptional vis-à-vis other traders (need not be unique)
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“The case-law indicates that the existence of a special situation is established where it is clear from the circumstances of the case that the person liable is in an exceptional situation as compared with other operators engaged in the same business (see Case C-86/97 Trans-Ex-Import [1999] ECR I-1041, paragraphs 21 and 22, and Case C-61/98 De Haan [1999] ECR I-5003, paragraphs 52 and 53) and that, in the absence of such circumstances, he would not have suffered the disadvantage caused by the error in the accounts a posteriori of customs duties (Case 58/86 Coopérative Agricole d’Approvisionnement des Avions [1987] ECR 1525, paragraph 22).” (Kaufring AG T-186/97, §218).
“'Special situation' is not defined in Article 239, but the Guidance describes the expression as follows: 'According to Community case-law, the existence of the special situation is established where it is clear from the circumstances of the case that the person liable for payment is in an exceptional situation as compared with other operators engaged in the same business, and that, in the absence of such circumstances, he would not have suffered disadvantage caused by the entry in the accounts of duties. In other cases, the payment of duties legally owed must be regarded as forming part of the normal commercial risk to be born by the operator [...] A prudent trader aware of the rules must assess the risks inherent in the market which is prospecting and accept them as normal trade risks'…This reflects the decided case-law to which we were referred. In Eyckeler & Malt AG v Commission of the European Communities (T42/96 - 19 February 1998) 30 [1998] ECR II-401, the Court of First Instance considered Article 13 of Council Regulation 1430/79, which was the immediate precursor of (and is in almost identical terms to) Article 239.” (Hughes v. HMRC [2015] UKFTT 688 (TC), §§11 – 12).
Need not be unique
“As regards the nature of a special situation, we accept the submission of Mr Lukoff that this does not require that the situation be unique to the particular trader.” (Beko PLC v. HMRC [2014] UKFTT 60 (TC), §78, Judge Berner).
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- Interpreted strictly
"[149] Remission of import duties is an exception to the normal import duty regime and should therefore be interpreted strictly. The point was made clearly by the CJEU in Heuschen Schrouff Oriental Foods Trading BV v Commission C-38/07, at [60] where the court said:
"It must be borne in mind at the outset that repayment or remission of import and export duties, which may be made only under certain conditions and in cases specifically provided for, constitutes an exception to the normal import and export procedure and, consequently, the provisions which provide for such repayment or remission must be interpreted strictly. Since a lack of 'obvious negligence' is an essential condition of being able to claim repayment or remission of import or export duties, it follows that that term must be interpreted in such a way that the number of cases of repayment or remission remains limited (Söhl & Söhlke, paragraph 52)."" (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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- Causal connection between circumstances giving rise to liability to duty and reason relied upon for repayment
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“Furthermore, in the Tribunal’s view, for a special situation to apply there has to be a causal connection between the reasons that the appellant is seeking to rely upon to be repaid and the circumstances giving rise to the liability to the duties ie. the Import VAT. In the appellant’s case the insolvency of the companies is not causally connected to the importation of the goods and liability to payment of Import VAT. The ‘special situation’ which the appellant seeks to rely upon was not pre-existing at the time of importation and liability to the payment of Import VAT. The insolvency of the companies occurred after the event. Thus a ‘special situation’ under article 239 is to be contrasted with an extra statutory concession as set out below.” (Grange Shipping Ltd v. HMRC [2017] UKFTT 142 (TC), §86, Judge Rupert Jones)
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- Balance interest in respect customs rules v. importer not suffering harm beyond normal commercial risk
"[151] We must consider all the relevant facts when considering the application of the general equity clause - Article 120 UCC - balancing, on the one hand, the interest in ensuring that the customs provisions are respected and, on the other, the interest of the importer acting in good faith not to suffer harm beyond normal commercial risk" (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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- Relief could have been available if formalities followed is relevant
"[154] In the present case, the Appellant would have been entitled to exemption if it had complied with the formalities in Article 1(2) of the Implementing Regulations - this is not a case where a trader is seeking to avail itself of a relief which it would not otherwise be entitled. This is a relevant, but not a major consideration, although it is one which is to be weighed in the overall evaluative exercise." (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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- Failure to satisfy conditions for relief: special circumstances must relate to that failure
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“The fire was peculiar to Nu-Pro. However, the fire was not the situation that caused the failure to file the returns – that failure had been continuing for three years before the fire. Further, Nu-Pro requested an extra extension of time to accommodate the upheaval caused by the fire and (I have already found) HMRC granted that time extension. Given that the conditions for remission must be interpreted strictly (per Firma Söhl & Söhlke at [52]) I do not consider that the fire, serious and unfortunate as it was, can constitute a special situation for these purposes.” (Nu-Pro Ltd v. HMRC [2017] UKFTT 562 (TC), §137, Judge Kempster upheld on appeal [2018] UKUT 302 (TCC, §34, Judges Berner and Powell).
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“If that failure is not capable of being or resulting from a special situation then in our view no combination of that failure with other circumstances would be a special situation. That is because it seems to us that for something to be a special situation it must in some way cause the failure to obtain relief or exemption from duty.” (HMRC v. Marco Trading Company Limited [2013] UKUT 450 (TCC), §62, Judges Herrington and Hellier)
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- Complexity of provisions relevant
"[153] It is also important to consider the complexity of the provisions in question. We accept that the phrase "consigned from Malaysia or Taiwan" used in the 2016 Implementing Regulations is less than wholly clear in circumstances where the cells are manufactured and originate in Taiwan but are then shipped to Vietnam where they are incorporated into modules before being imported into the EU. A detailed study of the legislative provisions, including the recitals and the legislative background, has led us to the conclusion that the phrase "consigned from Malaysia or Taiwan" includes cases, such as the present, where the cells are shipped to another jurisdiction before being imported into the EU. We have to acknowledge, however, that we reached that conclusion after we had the benefit of more than two days of skilled legal argument. The inherent ambiguity as to whether "consigned" means directly or indirectly "consigned", as far as was drawn to our attention, was not specifically or clearly addressed in HMRC's public guidance. We note also, that the Netherlands tax authorities and Mr Elsen of the Commission (and possibly the Amsterdam Court of Appeal) appear to have come to a different conclusion from that which we have reached. That, of itself, suggests that the conclusion reached by the Appellant was not obviously negligent." (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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- Incorrect advice from adviser significant
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"[155] It is important, in our view, that the Appellant sought the advice of counsel (Sidley Austin), experienced in import duty matters, when the 2016 Implementing Regulations were announced. The Appellant was advised that the 2016 Implementing Regulations did not apply to it. That advice, as it turns out, was incorrect. However, the effect of that advice was that the Appellant believed that it did not have to to comply with the formalities set out in Article 1(2) of the Implementing Regulations 2016, setting in train the events which eventually led to the decisions and assessments in this case.
[156] We have come to the conclusion, considering all the relevant facts and circumstances, that the effect of the incorrect advice, together with the other factors we have mentioned, is to put the Appellant in a special situation, viz in an exceptional situation as compared with other operators engaged in the same business and that the Appellant was not obviously negligent. The Appellant had sought to understand its legal obligations, seeking advice from an appropriate quarter. In this connection, to be clear, we do not consider that it was necessary for the Appellant also to approach HMRC for clarification. If the law cannot be understood without recourse to governmental authorities then it cannot be said to be clear and comprehensible to the ordinary citizen. In this case, the Appellant had taken appropriate and sufficient steps to understand its legal obligations and had acted in accordance with its understanding. In our view, this acquits the Appellant of any obvious negligence and the other factors which we have mentioned reinforce this conclusion. As we have said, there is no suggestion of deception in the present case." (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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- HMRC inspecting goods and giving wrong classification was exceptional
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“The appellant had repeatedly imported goods under heading 4202 929890 and the goods were cleared under Route 1 and Route 2 – the latter involving an inspection of the goods. No queries were raised about the alleged mis-classification of the bags. Secondly, Officer McKenna had carried out an audit of the bags in 2011. The evidence establishes that the bags were made available for Officer McKenna’s inspection. There was no reason for the appellant to believe, after that inspection, that HMRC were anything other than satisfied with the classification of the goods under CN heading 4202 929890. We consider that those two factors place the appellant in an exceptional situation compared with other traders…Accordingly, had it been necessary for us to do so, we would have decided that the appellant would have been entitled to remission of duty under Article 239 of the Code.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §§147…148)
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Bankruptcy or liquidation are not special circumstances
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“This is consistent with the purpose of Article 239 which is directed at situations other than those which can face other operators and traders in that business. Bankruptcy and liquidation are not exceptional circumstances in commercial relationships. The appellant should be expected to protect its own position in commercial relationships through contractual terms, insurance or any other means or alternatively accept the risk of non- reimbursement of duties paid.” (Grange Shipping Ltd v. HMRC [2017] UKFTT 142 (TC), §81, Judge Rupert Jones).
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- No special situation where incorrect statement of origin, but debt would still be due with correct origin
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“The irregularity which in this case has led to ADDs being imposed on Beko UK is not the false statement of origin in the A.TR.1 certificates, but the fact that the CTVs were of Korean origin in circumstances where a dumping margin arose and ADD was accordingly imposed. The declaration on the A.TR.1 certificates had no effect, and did not lead to the entry in the accounts; all the conditions necessary for such an entry were present before the origin declaration was made. The position is very different from that in Kaufringwhere, if the compensatory levy had been paid, the duty would not have become due.” (Beko PLC v. HMRC [2014] UKFTT 60 (TC), §79, Judge Berner).
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Terex principle: error in customs declaration resulting in duties being paid when not due
"[120] In Terex, customs agents acting on Terex’s behalf used the wrong procedure codes in export declarations of goods that had been imported under the inward processing procedure which resulted in the company paying customs duty which should not have been due. The company applied for the declarations to be revised to reflect the correct position and for remission of the customs debt due. The CJEU held at [62] to [64]:
“62 If the revision indicates that the provisions governing the customs procedure in question were applied on the basis of incorrect or incomplete information and that the objectives of the inward processing procedure are not threatened, in particular in that the goods covered by that customs procedure had actually been re-exported, the customs authorities must, in accordance with Article 78(3) of the Customs Code, take the measures necessary to regularise the situation, taking account of the new information available to them (see, to that effect, Overland Footwear, paragraph 52).
63 Where it is apparent, in the final analysis, that the import duties were not legally owed when they were entered in the accounts, the measure necessary to regularise the situation can consist only in remission of those duties (see, to that effect, Overland Footwear, paragraph 53).
64 That remission is to be made in accordance with Article 236 of the Customs Code if the conditions laid down by that provision are fulfilled, in particular that there has been no manipulation by the declarant and that the application for remission has been submitted within the time-limit, which is in principle three years (see, to that effect, Overland Footwear, paragraph 54). [Appellant’s emphasis added]”
[121] Terex was decided under the previous customs code, Regulation 2913/92. Article 78.3 of that code provided:
“3. Where revision of the declaration or post-clearance examination indicates that the provisions governing the customs procedure concerned have been applied on the basis of incorrect or incomplete information, the customs authorities shall, in accordance with any provisions laid down, take the measures necessary to regularize the situation, taking account of the new information available to them.”
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[145] The circumstances of Terex can clearly be distinguished from the present case. Terex was a case where an error in a customs declaration resulted in duties being paid which were not actually due. In these circumstances, the declaration can be corrected to reflect the correct position that no duty should have been paid and the overpaid amount must be remitted to the taxpayer. In the present case, the opposite applies. The declaration was incorrect because the codes used only applied where there was a valid EUA and the Appellant’s EUA had expired. The duty was therefore properly due and there is nothing to correct or remit." (Caerdav Limited v. HMRC [2022] UKFTT 105 (TC), Judge McKeever)
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Import VAT claims: query whether general equitable release applies
“It is not clear that Article 239 of the Customs Code does apply to VAT in addition to Customs Duty by virtue of section 16 of VATA so as to enable to taxpayers to reclaim Import VAT based upon a special situation. However, for the purpose of this appeal, HMRC did not seek to argue that Article 239 is not available on which to base a claim for Import VAT.” (Grange Shipping Ltd v. HMRC [2017] UKFTT 142 (TC), §45, Judge Rupert Jones).
“As we have noted, HMRC did not consider that Article 239 could apply for the purposes of excise duty. Mr Pritchard was more equivocal about the applicability of Article 239 to Import VAT (noting that s16 of VATA 1994 could be read as supporting the conclusion that Article 239 did apply) but his overall submission was that Article 239 did not apply to Import VAT…We will not make a decision on whether Article 239 was capable of applying to Import VAT or excise duty since it is clear to us that, even if it could apply, the conditions necessary for any debt to be waived under Article 239 are not satisfied.” (DNATA Ltd v. HMRC [2016] UKFTT 682 (TC), Judge Jonathan Richards).
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Declaration for transfer of residence relief from customs duty
Late declaration: exceptional circumstances required
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"[19] This leaves the question of exceptional circumstances or exceptional waiver. Here the Tribunal finds that [HMRC’s counsel’s] submission must be right. Various possibilities were open to Mr and Mrs Brooks following their decision to return to the United Kingdom in 2016 and sell their home in France, e.g., to place their goods into storage in the United Kingdom, to sell their goods in France and to rent furniture in France or any combination of those steps. All such choices would have required some outlay or another, but they are all ordinary concomitants of selling up and moving home. All such steps are potentially stressful, yet nothing which can properly be described as being beyond Mr and Mrs Brooks’s control or exceptional.
[20] The changes in the law following Brexit were not exceptional, indeed they were the direct and foreseeable consequence of the United Kingdom’s departure from the European Union and the ending of free movement. Mr and Mrs Brooks were well aware as they accepted that problems might lie ahead with Brexit pending after the referendum on 23 June 2016. The impact of the Covid-19 pandemic was not exceptional either, because almost everyone, everywhere was affected. In any event, as the Tribunal has found, Mr and Mrs Brooks had moved back to the United Kingdom long before the pandemic.
[21] Taking all of these matters into account, it follows that the appeal must be dismissed." (Brooks v HMRC [2021] UKFTT 449 (TC), Judge Manuell followed in Ball v. HMRC [2022] UKFTT 85 (TC), Judge Bailey)
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EXCISE DUTY
Overpaid excise duty
"(1) Where a person pays to the Commissioners an amount by way of excise duty which is not due to them, the Commissioners are liable to repay that amount.
(2) The Commissioners shall not be required to make any such repayment unless a claim is made to them in such form, and supported by such documentary evidence, as may be prescribed by regulations; and regulations under this subsection may make different provision for different cases.
(3) It is a defence to a claim for repayment that the repayment would unjustly enrich the claimant" (CEMA 1979 s.137A)
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“Any claim under section 137A of the Customs and Excise Management Act 1979 shall be made in writing to the Commissioners and shall, by reference to such documentary evidence as is in the possession of the claimant, state the amount of the claim and the method by which that amount was calculated.”" (The Revenue Traders (Accounts and Records) Regulations 1992, r.9)
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