A multi-site petrol dealer having access to "extended duty payment credit" from HMRC has implications for the warehousing sector in excise law - and gives rise to a need for vigilance.
Brobot Petroleum, a family-owned company in the Midlands with 23 filling stations, has successfully appealed via the First Tier Tax Tribunal against HM Revenue & Customs' (HMRC) imposition of unreasonable conditions to obtain an excise duty Deferment Account Number: Oil Products.
The case was prepared and presented by Alan Powell for Alan Powell Associates Ltd, a specialist excise duties consultancy and UKWA’s excise duties advisor. Powell explains that the subject matter is actually within the bailiwick of excise “holding and movement”, not just fuel and there are considerations for operators in the alcohol and tobacco businesses.
Powell explains: “The case confirms that petrol retailers are entitled to defer excise duty on fuel delivered to them from bonded terminals with nil security. Furthermore – and the crux of this matter - HMRC must grant such approval where the need to defer duty on fuel is demonstrated by the retailer.”
Powell says that deferring the duty on fuel provides a number of significant benefits, which include (in this case):
- Credit on the duty payable to HMRC extended to the full length (up to 31 days) for the retailer
- Elimination of charges held by suppliers against some of Brobot’s properties as a condition of a shorter period of credit
"The problem in this case – and reason for the appeal – was that Brobot had been given approval by HMRC to defer the duty without security under what is called the Excise Payment Security System (EPSS) but had been refused the final part of the requirement which is the Deferment Account Number (DAN),” continues Powell.
“HMRC had refused to issue the DAN unless (and until) Brobot had an agreement with a supplier to be supplied with fuel under the deferment scheme. Brobot pointed out that this requirement was unreasonable because they could not negotiate a supply deal without having a DAN – and were placed in a 'chicken and egg' situation.”
The judge found that Brobot was solid and credible and that the application was genuine. He said: We find that Brobot’s application for deferment approval was not speculative. We find that they had good reasons for wanting to be able to purchase fuel on a duty deferred basis. In this regard we find that the evidence as to the stock losses that they suffered, the credit terms of their suppliers (including the security that suppliers required over their assets) are all relevant.
Powell explains: “The judge decided that it is reasonable for HMRC not to approve applicants to defer duty unless there is a need for such deferment. However, where the appellant clearly had a need for the DAN and had already been approved for EPSS nil security, it would be unreasonable to withhold approval of the DAN.”
Powell concludes ominously: “We are concerned at how HMRC and the Treasury behaved with regard to the treatment of deferment for retailers. In preparing for the appeal, we found that HMRC had significantly altered its requirements for applications to defer duty only after petrol retailers had started to make applications for DANs.
"These changes were, we believe, at the behest of the Treasury and were not notified to the various excise industries in breach of protocol. In June, I met with HMRC Policy officials to set out my concerns that the 'sleight of hand' changes to the approval process affect alcohol and tobacco businesses as well as petrol retailers. We will have to remain vigilant.”