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...

Jeremy Woolf and Barbara Belgrano look at how Brexit affects the UK tax position and consider some of the issues which will be ongoing, at least in the near future.

(3:08) Where we are today: you have to consider which period your case falls within. There are three periods to consider: (1) 2018 up to IP Completion Day being 31st December 2020 (2) 1 January 2021 - 31st December 2023 (3) 1st January 2024 onwards.

The first period: up to IP Completion Day on 31st December 2020

• (4:42) The UK still a member of the EU but subject to the 2018 Act which purport to have retroactive effect. Article 89 of the Withdrawal Agreement (endorsed by HMRC v Perfect) make ECJ decisions relating to litigation commenced before Brexit or during the first period binding. ECJ decisions post Brexit only persuasive. See Lipton and The Umbrella Interchange.
• (7:04) Effect of section 2 2018 Act - saves EU-derived domestic law before IP Completion Day subject to Section 5 (supremacy) and Schedule 1 (Francovich damages).
• (8:56) Schedules 1 and 8 2018 Act - transitional provisions. To what extent, post Brexit, can you rely on general principles of EU law? Allianz Global v Barclays.
• (12:01) Section 3 of the 2018 Act (incorporation of direct EU legislation) which is subject to Section 5 and Schedule 1.
• (13:06) Section 4 of the 2018 Act (the saving of rights under section 2 ECA). Wide rule important in direct tax field (eg transfer of assets code). Effect in tax law of The Freedom of Establishment and Free Movement of Services EU Exit Regulations 2019. Effect of EU Directives and CG Fry & Son Ltd. Purposive interpretation dealt with in section 6. Harris v Environment Agency.

The second period: 1st January 2021 - 31st December 2023

• (19:49) Section 6 of the 2018 Act (extent to which UK courts bound by ECJ judgments). HMRC v Perfect, Lipton and The Umbrella Interchange cases.

The third period: post 1st January 2024

• (22:18) RULA now takes effect. It is not retrospective and only covers disputes that relate to the period post January 2024.
• (23:53) Section 2 of RULA repeals section 4 of the 2018 Act. Section 3 of RULA abolishes the supremacy of EU law. Will therefore be very difficult to rely on EU law in the direct tax arena (even in Transfer of Assets Code) post 1st January 2024.
• (25:54) VAT and excise duties in a different position due to section 28 Finance Act.
• (27:10) Section 6 of RULA is not yet in force. Amended test as regards looking at earlier cases. VAT most likely to be affected.

EU law remains very relevant up to 1st January 2024, despite Brexit. And EU law remains relevant going forward in the VAT context. After 1st January 2024 EU law may still have an impact on the construction of UK law.

Citations

Legislation

• Retained EU Law Revocation & Reform Act 2023 ("RULA")
• European Union (Withdrawal) Act 2018 (the "2018 Act")
• Article 89 Withdrawal Agreement
• The European Communities Act 1972
• The Freedom of Establishment and Free Movement of Services EU Exit Regulations 2019
• Section 28 Finance Act 2024

Transfer of Assets Code

Cases

• HMRC v Perfect [2022] EWCA Civ 330
• Lipton v BA Cityflyer Ltd [2024] UKSC 24, 3 WLR...

David Milne KC, Richard Vallat KC and Calypso Blaj discuss the implications of Hargreaves, in particular:

1. What we can say about what is meant by "beneficial entitlement"?
2. How is it different to "beneficial ownership"?
3. And indeed to the trust law concept of both?
4. Is there a different international fiscal meaning of beneficial entitlement?

The panel look at where these issues may come up in practice. How definitive is the Hargreaves case? They also take a look at Altrad Services and the loss of beneficial ownership.

Discussion of Hargreaves

2:38 Whether interest payments made to a UK resident company fell within an exception to the obligation to withhold tax on payments of interest under ITA. This depends on whether the recipient is beneficially entitled to the income. The CA reviewed the case law (para 49ff of the judgment). It then applied the principles to the facts (para 61ff).

8:10 It is important that the provisions put in place were specifically to obtain a tax advantage (which was admitted). The question was whether the tax planning worked. The recipient of the interest payments was under a contractual obligation to pay on the money it received so was it the beneficial owner therefore? The judgment gives guidance as to the domestic meaning of beneficial entitlement.

11:39 What of the rival definition of "beneficially entitled", also known as the international or fiscal meaning? Should this be adopted in a withholding tax situation? Discussion of Indofood and the ECJ cases in 2019. The international, fiscal meaning has to take into account the objects and purposes of the Convention including avoiding double taxation. This differs from the domestic law requirements per Ramsay of whether the concept fits within the statutory purpose and context of the provisions.

17:05 Conduit arrangements (insertion of a company) caught under either definition. However, theoretically there may be other cases where you are treated as being beneficially entitled under say the international, fiscal meaning but not under the domestic meaning.

18:35 The domestic meaning should not be dependent on finding a tax avoidance motive.

Losing beneficial ownership

20:00 Altrad Services/Wiseman. Turned on "ceasing to own" in s61 Capital Allowance Act. Marketed tax avoidance scheme. Application of Ramsay purposive principle. See Tax Journal article on Altrad in July 2024. Case quite an extreme example so there might be other cases which are less clear cut.

28:07 NB there does not have to be someone who has beneficial ownership.

Areas where beneficial ownership comes up

28:47 Withholding tax on interest payments, double tax treaties (dividends and royalties), domestic group relief provisions (eg CGT, substantial shareholding exemption, SDLT).

Other comments

30:52 What if the conduit company in Hargreaves had actually used some/all of the money even for a short period? Or had another reason for existing other than being a conduit?

31:54 What if in Altrad, the complex arrangements designed to take advantage of capital allowances had actually been subject to a contract...