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Contact: michael.firth@taxbar.com
Procedure.Tax
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G12: Import/customs duties demands
IMPORT DUTY (POST BREXIT)​
Liability must be notified to be enforced
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"A liability of a person to pay import duty may not be enforced unless the person has been notified of the liability in accordance with the provision made by or under this Schedule." (Taxation (Cross-border Trade) Act 2018, Sch 6, para 1)
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"(1) If HMRC consider that a person is liable to pay import duty, they must notify the person of that fact specifying—
(a) the amount of the duty,
(b) the circumstances giving rise to the liability, and
(c) the date on or before which the duty must be paid.
(2) The notification may be given in such form and manner as HMRC consider appropriate." (Taxation (Cross-border Trade) Act 2018, Sch 6, para 2)
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Time limit (3 or 20 years)​
"(1) The general rule is that a notification under paragraph 2 of a liability to pay import duty must be given before the end of the period of 3 years beginning with the day on which the liability was incurred.
(2) If the liability is incurred in circumstances where, in the opinion of an HMRC officer, an offence has been committed (whether or not the offence relates in any way to import duty), the period of 3 years for notifying is extended to a period of 20 years." (Taxation (Cross-border Trade) Act 2018, Sch 6, para 1)
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Recoverable as debt due to the crown
"(1) Any amount due by way of import duty is recoverable as a debt due to the Crown.
(2) If—
(a) goods in respect of which a liability to import duty is incurred are condemned as forfeited, and
(b) the goods are not subsequently restored under section 152(b) of CEMA 1979 or sold by HMRC Commissioners,
the amount due by way of import duty ceases to be recoverable as a debt due to the Crown.
(3) If the goods are sold by HMRC Commissioners, the purchaser is liable to pay the debt due to the Crown (in addition to anyone else who is liable apart from this sub-paragraph).
(4) This paragraph does not restrict any other way in which import duty may be recovered, whether as a result of CEMA 1979 or any other enactment." (Taxation (Cross-border Trade) Act 2018, Sch 6, para 12)
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CUSTOMS DUTIES (EU LAW)​
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Basic position
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“The Customs Code proceeds on the basis that the person responsible for importing goods ("the declarant") will make a customs declaration which will specify the goods and their value and also the customs duty payable on import by reference to the nature or purpose of the import and the categorisation of the goods by reference to which the relevant rate of duty is specified. On making the declaration the duty is payable by the declarant. There is provision for such declarations to be made electronically.” (World Cargo Logistics Ltd v. HMRC [2014] UKFTT 295 (TC), §16, Judge Sadler).
Identity of declarant based purely on the declaration in fact made​
"[41] As explained above, the Declarant is the person making the Customs declaration in his own name or the person in whose name a Customs declaration is made.
[42] Once it is accepted (as it has been in this case) that the identity of the Declarant must be determined based purely on the declaration that was in fact made, there can be no doubt that BMW was, in this case, the Declarant. It has made the Customs declaration in its own name.
...
[48] I appreciate that HMRC’s review officer considered Ms Jianxing to be the Declarant. However this comment was made in the context of a discussion as to whether BMW was entitled to claim OSR and not whether it was liable for the import VAT. In any event, for the reasons set out above, I agree with Mr Watkinson that the review officer was simply incorrect in the conclusion which he came to on this aspect.
[49] I reach this conclusion with no great enthusiasm. As Mr Gibbon has pointed out, in reality, HMRC will be receiving a windfall profit given that it seems relatively clear from the evidence that the goods were indeed forwarded to VAT registered customers in continental Europe. There were therefore mechanisms available to ensure that no import VAT would be paid in the UK. Instead, HMRC have become entitled to receive a large amount of tax from a small business which may well be unable to afford to pay it, which had no interest in the goods and which only received by way of remuneration the modest fees charged for its freight forwarding services." (BMW Shipping Agents Ltd v. HMRC [2022] UKFTT 335 (TC), Judge Vos)
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Post-clearance demands
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“Article 220 of the Customs Code is essentially the provision under which post-clearance demands may be made. Where an amount of duty lower than that which is legally owed has been entered in the accounts, a subsequent entry can be made.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §42, Judge Berner).
- No requirement to be to best judgment
"[69] We agree with Miss Vicary that there is no requirement for HMRC to establish that the C18 was made to best judgement. The relevant articles of the Community Customs Code (particularly Articles 217 to 221) and the Union Customs Code (particularly Articles 101 to 107) make no reference to a requirement for best judgement and instead require HMRC to recalculate in the light of the new information at their disposal when they discover an error in the tariff classification of goods. This is to be contrasted with for, example, excise duty where best judgment is expressly provided for (see section 12(1) of the Finance Act 1994). Further, there is no wider duty upon HMRC when assessing for customs duty, as explained as follows by the Court of Appeal in and Cooneen Watts & Stone v HMRC, supra, per Laws LJ at [38] and [39]..." (Laurence Supply Co (Leather Goods) Limited v. HMRC [2024] UKFTT 124 (TC), Judge Chapman KC)
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Debt must be communicated within 3 years (unless there is criminal conduct)
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"1. No customs debt shall be notified to the debtor after the expiry of a period of three years from the date on which the customs debt was incurred.
2. Where the customs debt is incurred as the result of an act which, at the time it was committed, was liable to give rise to criminal court proceedings, the three-year period laid down in paragraph 1 shall be extended to a period of a minimum of five years and a maximum of 10 years in accordance with national law." (UCC Article 103)
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Formerly CCC Art 221.
- Time limit suspended where right to be heard letter sent​
"3. The periods laid down in paragraphs 1 and 2 shall be suspended where:
(a) an appeal is lodged in accordance with Article 44; such suspension shall apply from the date on which the appeal is lodged and shall last for the duration of the appeal proceedings; or
(b) the customs authorities communicate to the debtor, in accordance with Article 22(6), the grounds on which they intend to notify the customs debt; such suspension shall apply from the date of that communication until the end of the period within which the debtor is given the opportunity to express his or her point of view." (UCC Article 103)
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Debt must be communicated within a reasonable period of time if it resulted from criminal conduct
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"[46] It follows that there is no need or requirement to disapply section 37(2)(a) of the Limitation Act 1980 to remedy an inconsistency with EU law. If, as I conclude, EU law has its own way of dealing with the need to avoid communication of the debt being delayed to an extent which undermines the principle of legal certainty, by the imposition of the requirement that it be made within a reasonable time, then there is no inconsistency in the Limitation Act 1980 regime being made unavailable, by section 37(2)(a), for that purpose.
...
[48] HMRC made the relevant communication within four months of the outcome of the related appeal to the FtT concerning the post January 2004 imports, which raised similar issues about their provenance. It has not been suggested by FMX that this was outside a reasonable time for such a communication and, in my view, it clearly was not. It was reasonable for HMRC to delay issuing a communication under article 221 in relation to the pre-January 2004 imports while the closely related litigation about the later imports remained on foot." (FMX Food Merchants v. HMRC [2020] UKSC 1)
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Communication must be sufficient to enable the debtor to defend his rights
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“The operation of Article 221(1) was considered by the Court of Justice in Belgische Staat v Molenbergnatie NV Case C-201/04. It was held that a Member State is not, in general, required to adopt specific procedural rules as to the manner in which a communication is to be made for the purposes of Article 221. In particular, a Member State is not so required where the general procedural rules of the Member State can be applied to that communication and those general rules ensure that the debtor receives adequate information so as to enable him, with full knowledge of the facts, to defend his rights. These statements of principle were repeated by the Court of Justice in Belgische Staat v Direct Parcel Distribution Belgium NV Case C-264/08.” (HMRC v. AG Villodre SL [2016] UKUT 166 (TCC), §35).
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"[93] In our view, the Appellant received "adequate information and which enable [it], with full knowledge of the facts, to defend [its] rights". As already indicated, the 5 November 2020 letter contained information about the Appellant's right to request a review and to appeal." (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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Interpretation Act does not apply to the CCC
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“Section 7 of the 1978 Act does not apply to a communication under Article 221 because the Code is not “an Act”: see the definition of “an Act” in sections 21 and 22 of, and schedule 1 to, the 1978 Act.” (HMRC v. AG Villodre SL [2016] UKUT 166 (TCC), §35).
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Not impractical for HMRC to contradict assertion that communication not received
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“It was argued that it would be difficult for HMRC to contradict evidence from an importer that it had not received a particular communication. I do not regard the result of the FtT’s decision as impractical. It is often thecase in many different legal contexts that there is an issue of fact which has to be tried as to whether a person received a particular document. Even where that person denies receipt of the document, there may be circumstantial evidence which points to a contrary conclusion or the evidence of non-receipt, when it is tested, by cross-examination of witnesses if appropriate, is found to be unreliable. Ultimately, the tribunal of fact has to decide the issue on the balance of probabilities.” (HMRC v. AG Villodre SL [2016] UKUT 166 (TCC), §43).
- No particular form of notification required
"[89] First, We accept Ms Vicary's submission that no particular form of notification is prescribed by the legislation - a point that was noted by the Upper Tribunal in HMRC v Sharya UK Ltd [2019] UKUT 143 (TCC):
"[58] A striking feature of the UCC and CCC [2] is that neither sets out expressly how the debt must be notified, or where HMRC must send documents relating to customs duty."" (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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- Notification of an amount due sufficient even if to be followed by demand for payment
"[90] [Counsel for the taxpayer], however, contends that neither the 5 November 2020 letter nor the C18 demand constituted a valid notification for the purposes of the UCC. He argued that the 5 November 2020 letter was not a notification of a debt but, rather, merely contained the provision of updated calculations. The provision of updated calculations could not constitute a notification that.
[91] We have no hesitation in rejecting this argument. In our view, the 5 November 2020 letter clearly notified the Appellant of an "Amount due" in the sum of £4,681,762.03. The fact that the letter stated that the amount was not payable until the demand was sent does not alter the fact that the Appellant was notified that it had a liability in the stated amount. The debt had accrued and would be due once the C18 was received. The purpose of the notification obligation in Article 102 UCC is to make the Appellant aware of the liability. In our view, the 5 November 2020 letter fulfilled this requirement.
...
[94] In the light of our conclusion that the 5 November 2020 letter constituted an adequate notification of the alleged customs debt, it is not necessary for us to express a view as to whether the C18 also constituted a notification of a debt. In our view, however, it was also a valid notification and we see no merit in Mr Lyons' submission that a demand for payment cannot be a notification of the debt." (Canadian Solar EMEA GmbH v. HMRC [2024] UKFTT 85 (TC), Judge Brannan)
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Waiver due to HMRC error
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“As already noted, Article 220(2)(b) lays down four conditions, all of which must be satisfied:
(1) HMRC must have made an error;
(2) the error could not have been reasonably detected;
(3) the appellant acted in good faith; and
(4) the appellant complied with all the provisions laid down by the legislation in force as regards the customs declaration…It was common ground that the burden of proof to establish that the conditions of Article 220(2)(b) were satisfied lay upon the appellant.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §111).
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“There are a number of elements of Article 220(2)(b) that fall to be considered:
(1) Was there an error?
(2) Was the error made by the “customs authorities”?
(3) Was the failure to enter in the accounts the amount of duty legally owed a result of the error?
(4) If (1), (2) and (3) are established,
(a) Is it the case that the error could not reasonably have been detected by the person liable for the payment?
(b) Did that person act in good faith?
(c) Did that person comply with all the provisions laid down by the legislation in force as regards the customs declaration?” (Beko plc v HMRC [2014] UKFTT 60 (TC), §43, Judge Berner).
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See UCC Article 119
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Error by a competent authority
“… it follows from the wording of [Article 220(2)(b)] itself that the legitimate expectations of the person liable attract the protection provided for in that article only if it was the competent authorities ‘themselves’ which created the basis for those expectations. Thus, only errors attributable to acts of the competent authorities confer entitlement to the waiver of post-clearance recovery of customs duties …” (R v Customs and Excise Commissioners ex p Faroe Seafood Co Ltd C-153/94, §91).
Includes any authority competent to furnish information relevant to recovery of customs debts
“In this context, the question of the definition of “customs authorities” or “competent authorities” has been considered by the ECJ, the case law of which includes within this description not only the authorities competent for taking action for recovery but any authority which, acting within the scope of its powers, furnishes information relevant to the recovery of customs duties and which may cause the person liable to entertain legitimate expectations. This would therefore include both the Turkish central customs authorities and the Turkish customs authorities which issued the A.TR.1 certificates (Ilumitrónica – Iluminação e Electrónica Ldª v Chef da Divisão de Procedimentos Aduaneiros e Fiscais and others, Case C-251/00, ECJ, 14 November 2002. at [40] – [41]).” (Beko plc v HMRC [2014] UKFTT 60 (TC), §51, Judge Berner).
Authority must assume responsibility in relation to erroneous statement
“The letter from the Turkish authorities of 1 November 2002 made quite clear that the certificate was concerned only with free circulation of goods, and that the customs officials did not take declarations of origin into account when endorsing a certificate.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §54, Judge Berner).
Error by HMRC: telephone advice not sufficient where visual inspection required
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“The latter code depends on a visual examination of the goods. HMRC could not, therefore, confirm that the goods fell outside this code in a telephone conversation in absence of a visual examination.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §116).
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Error by non-EU customs officials
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“…it is clear from Article 220(2)(b) that the issue of a certificate from a third country can only amount to an official error where there is a system of administrative cooperation in place between that country and the EU which is not the position in the present case.” (Cyproveg Ltd v. HMRC [2018] UKFTT 538 (TC), §134, Judge Brooks).
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Does not apply where authorities misled
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“The Court went on to find [in Faroe Seafood Co Ltd] that this condition could not be regarded as fulfilled where the competent authorities have been misled, in particular as to the origin of the goods, by incorrect declarations on the part of the exporter whose validity they do not have to check or assess.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §50, Judge Berner).
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But not sufficient that exporter made incorrect declaration
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“We do not consider the fact that Beko AS itself made the incorrect declaration of origin is decisive of the question whether the customs authority made an error. We accept that, according to Article 199 of the Implementing Regulation, it is for the declarant to ensure that its declarations are correct, and that on the basis of Faroe Seafood at [94] the mere certification of declarations of origin by the competent authorities is not sufficient for there to be an error on the part of those authorities, but it is equally the case (Ilumitrónica, at [45]) that it is not sufficient to rely on an incorrect declaration by the exporter in order to exclude any possibility of an error by the competent authorities.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §56, Judge Berner).
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Error must cause non-collection of duty
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“It is not sufficient that there be an error on the part of the customs authorities. It is necessary that the non-collection of the duty legally due should have been due to that error. It is only when it is the error of the customs authority that has the causative effect that the proper duty is not collected that Article 220(2)(b) can have effect.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §57, Judge Berner).
Error not reasonably detectable:
Depends on complexity
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“As regards the precise nature of the error, the question to be determined each time is whether the rules concerned are complex or simple enough for an examination of the facts to make an error easily detectable. It should be stated that, in a case such as this, where the trader twice received confirmation that the erroneous view upon which the customs treatment was based was correct, the repetition of the error by the customs authority is evidence that the problem to be resolved was a complex one.” (Deutsche Fernsprecher C-64/89, §20)
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“…we consider that the one passive error and one active error made by HMRC could reasonably have been detected by the appellant. In our view, the naked eye test required to be performed was a simple test. Both HMRC and the appellant accepted that it was a simple test designed for speedy customs clearance.” (Euro Packaging Ltd v. HMRC [2017] UKFTT 160 (TC), §138).
Looks to knowledge and experience of particular taxpayer
“we are not persuaded that Rokit could not reasonably have detected the error. As explained in Beko, this requirement looks to the knowledge and experience of the particular taxpayer. Rokit gave evidence that, prior to the apportionment agreement it had imported all of its clothing under heading 6309. We agree with HMRC that this suggests that Rokit had the experience and knowledge to independently assess tariff classification. As an experienced importer over a considerable period, Rokit could have taken positive steps to confirm the apportionment by reference to the Official Journal, or by asking HMRC specifically to reconfirm the apportionment in writing.” (Rokit Ltd v. HMRC [2017] UKFTT 447 (TC), §101, Judge Thomas Scott).
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“In our view the Beko group, and Beko UK, ought reasonably to have detected that the origin statement on the A.TR.1 certificates was incorrect. Any exporter and importer of goods must take care to understand the origin of the goods in which it is trading. The rules for the origin of the particular goods in question were clearly spelled out in Annex 11 of the Implementing Regulation. It cannot, in our view, be argued that it is unreasonable to expect an exporter and importer of goods specified in Community legislation to have in place processes to identify the origin of goods by reference to the criteria set out in those regulations.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §65, Judge Berner).
Lack of expertise counts against taxpayer
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“In our view, the argument that Beko AS did not have the relevant expertise is a powerful one, not in favour of Beko UK’s position, but against it. It was in our view not reasonable for a company such as Beko, engaged as it was in regulated interenational trade, and in the knowledge that questions of origin had been raised in the context of anti-dumping duties, not to have put in place the appropriate infrastructure to enable it to detect errors in the origin classification of its goods.” (Beko plc v HMRC [2014] UKFTT 60 (TC), §69, Judge Berner).
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FTT does have jurisdiction over waiver of customs debt
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“We do not agree, because:
(1) it is clear from Mecanarte that HMRC has “a non-discretionary power” under Article 220(2)(b) to waive a customs debt as part and parcel of their decision to make an assessment;
(2) under FA94 s 16 Citipost has the right to appeal against any relevant decision made by HMRC, including a decision (our emphasis) as to “whether or not, and at what time, anything is charged in any case with any such duty…”; and
(3) the Tribunal has jurisdiction to decide any matter within that right of appeal, see Noor at [31].” (Citipost Mail Ltd v. HMRC [2016] UKFTT 283 (TC), §293).
No customs debt arising from error which has no significant effect​
"[84] Thirdly, while there is no dispute that the requirements of the IP procedure must be strictly construed, it follows from both Terex and Limagrain that this does not preclude the correction of minor errors where necessary. In particular, while emphasising that when compliance with the obligation to keep stock records is an "essential obligation" under the CCC (Limagrain §33), the CJEU in Limagrain confirmed that discrepancies or minor omissions in stock records could be resolved by reference to additional documents. There is no principled reason why the same should not apply to a BoD. Moreover, given that Article 496(j) of the Implementing Regulation explicitly envisages that the customs authorities may have recourse to the records retained pursuant to Articles 515 and 516 for the general purposes of supervising and controlling the customs arrangements, it would in our judgment be very odd to suggest that reference to those documents could not be made for the purposes of verifying the accuracy of a BoD." (Thyssenkrupp Materials (UK) Limited v. HMRC [2024] UKUT 79 (TCC), Bacon J and Judge Sinfield)
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Right to be heard (EU law)
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“…the right of every person to be heard before the adoption of an adverse individual measure must be interpreted as meaning that, where the addressee of a demand for payment adopted in a procedure for the post-clearance recovery of customs duties on imports, under the Customs Code, has not been heard by the authorities before the adoption of the decision, his rights of defence are infringed even though he can express his views during a subsequent administrative objection stage, if national legislation does not allow the addressees of such demands, in the absence of a prior hearing, to obtain suspension of their implementation until their possible amendment.” (Kamino International Logistics BV C-129/13, §73).
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Suspension need not be contained in national legislation
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“As [HMRC] submitted, the CJEU recognised in Kamino at [71] that a suspension granted pursuant to a ministerial circular (as was the case there) may be effective as a suspension measure but it is for the national court to determine that question. It is not the case, therefore, that suspension is regarded as effective for this purpose only if enshrined in legislation. It may well be effective where the suspension is made as a result of a decision of the court, such as in this case, in judicial review proceedings. On that basis CW’s right to be heard may be effective as a result of the right to make representations in these appeal proceedings, in which case any failure by HMRC to give CW an effective right to be heard before the decision was made is not relevant.” (Corbelli v. HMRC [2017] UKFTT 615 (TC), §328, Judge Morgan).