Due Diligence in Focus: Lessons from Roseline Logistics v HMRC [2025]

Customs Law Insights:

The recent case of Roseline Logistics Limited v HMRC [2025] UKFTT 427 (TC) [Roseline] [1] highlights the critical importance of due diligence in customs and tax compliance.

In Roseline, the First Tier Tax Tribunal (FTT) dismissed an appeal against a post-clearance demand note for £1,126,249.64 import VAT presented to the appellant for unpaid import VAT related to customs declarations that it had made on behalf of QP Trading Ltd (QPTL).

The Tribunal held that Roseline had not been appointed as customs agent by QPTL and therefore did not have liability in accordance with sections 6(3)(b) and 21(6)(c) of the Taxation (Cross-border Trade) Act 2018 (TCTA).

It was held that Roseline was jointly and severally liable with Roseline for the unpaid import VAT with QPTL for the import VAT under TCTA section 6(3)(d) in accordance with section 6(4)(d) because the customs agent ought to have known that QPTL was not entitled to use postponed accounting for import VAT (PVA). Moreover, the outcome was not found to have infringed Roseline’s rights under Article 1 of Protocol 1 (“A1P1”) to the European Convention on Human Rights.

Background to the case

Prior to COVID in 2020, Roseline was predominantly involved in the transport of equipment for exhibitions and live events across Europe. As a result of the United Kingdom’s exit from the European Union, Roseline participated in customs training courses organised by HMRC and third-party training providers and performed customs agent services.

Following instructions received from haulage company Craig Isaac Transport (CIT), during the period between 7 January 2022 to 11 May 2022, Roseline submitted 32 declarations for QPTL using the CHIEF system and the postponed accounting for import VAT procedure. OPTL’s VAT authorisation had been withdrawn from the company on 21 October 2021. Therefore, a significant liability of unpaid import VAT accrued.

Whilst Roseline had acted as direct agent under the instructions of importers, Roseline also identified that a significant proportion of the company’s work was sub-contracted to them by hauliers moving goods between the European Union and Great Britain. Roseline explained that the company had previous dealings with Craig Isaac Transport (CIT) who had been referred to Roseline by one of the company’s long-standing clients, and CIT were the company that Roseline received the clearing instructions for QPTL for. A typical clearance instruction from CIT would read as:

“Hi Eliza

please see new details for clearing today

Truck B841OHP Trailer T02

VAT by PVA

Transport cost £1800

Eurotunnel Calais – Folkestone ref 59217976

Thanks Craig”

Mr Aherne identified that he believed that CIT were contracted by QPTL for the carriage of the loads and outlined that he had no reason to believe that CIT were not authorised by QPTL. This was on the basis that emails received from CIT were accompanied by commercial invoice, export documents, and a CMR waybill. Mr Aherne also outlined that whilst he was aware that primary legislation outlined that there was a requirement for declaration of an importer’s VAT number when claiming postponed accounting for import VAT, CHIEF did not permit the entry of a VAT number, it was only possible to enter an EORI number. When questioned by HMRC, Craig Isaac outlined that he was asked verbally by a director of OPTL to submit customs declarations, and as a haulier he had no knowledge of the requirements of postponed accounting for import VAT.[2]

The CHIEF system was previously used within the United Kingdom for submitting C88 declarations prior to the transition to HMRC’s customs declaration service (CDS) for import declarations on 30 September 2022. Mr Aherne accepted that he had not undertaken due diligence to check the EORI number and VAT number of QPTL. It was identified that on the previous CHIEF system, if a VAT registration number was cancelled, the EORI number would remain active.

Applicable customs legislation

Section 1 (1) ( c) Value Added Tax Act 1994 (VATA) provides that VAT is chargeable on the importation of goods into the United Kingdom, and s 1 (4) VATA provides that import VAT shall be charged and payable as if it were import duty.

Section 5 of the TCTA provides that chargeable goods imported into the UK must be presented to HMRC and declared for a customs procedure by making a customs declaration.

Section 6 of the TCTA outlines that the person who is in possession or control of the goods is   liable to import duty in respect of the goods, and outlines additional persons that may be subject to liability.

Section 4 and 5 TCTA set out the circumstances in which a breach of a relevant Customs obligation may occur and a third party may be held liable.

Section 21 TCTA deals with the appointment of customs agents, outlining that a person may appoint another person to act as customs agent in the name of the principal (direct) or the name of the agent (indirect) basis, and that the appointment must be disclosed to HMRC.

Regulation 82 of the Customs (Import Duty) (EU Exit) Regulations 2018 provides that the agent making a customs declaration must be disclosed to HMRC.

The Value Added Tax (Accounting Procedures for Import VAT for VAT Registered Persons and Amendment) (EU Exit) Regulations 2019 (“the Regulations”) provide for a system of postponed VAT accounting (“PVA”) on the importation of goods.

Analysis of liability under section 6(3)(b) and section 21(6)(c)

HMRC stated that section 21 (6) (c) was met, on the basis that Roseline had not evidenced that it was authorised by QPTL to make customs declarations on behalf of the company.[3] HMRC also stated that on the basis of section 6 (3) (d) amplified by section 6 (4) (a) Roseline was the party that made the customs declarations, and declared that QPTL was eligible for PVA when it was not, and on this basis participation in a breach of the relevant customs obligation occurred. The phrase “ought to have known”[4] was referred to, with reference to Matrix-SCM Ltd v London Borough of Newham[5] concerning that reasonable enquiries, such as checking the UK government’s “check a VAT number” should have occurred.

The Tribunal concluded Roseline was not liable under section 6(3)(b) and section 21(6)(c) reasoning that on the basis of the facts, Roseline must have been appointed under section 21 TCTA as QPTL’s agent to be held liable, concluding that QPTL was not appointed to act as customs agent.

Analysis of liability under section 6(3)(d) read with section 6(4)(b)

Liability would arise if the person sought to be made liable (“A”) acted on behalf of the party who breached the relevant customs obligation and ought to have known of the breach. It was considered whether Roseline was authorised to claim PVA. On a secondary basis, whether Roseline was appointed as a customs agent. It was outlined that as Roseline had not been directly appointed by Roseline as a customs agent and an unexpected point of statutory interpretation was referred to. The Tribunal outlined that in accordance with section 21 (6)(c) Roseline had not been appointed as QPTL’s agent and was not authorised to make PVA claims, and on that basis it did not actually do so and is therefore not liable under this head.

Analysis of liability under section 6(3)(d) read with section 6(4)(c)

Liability will arise here if “Roseline “participated in, or was otherwise involved in, a breach

of a relevant Customs obligation and knew, or ought reasonably to have known, of the breach.”[6] Section 6(6) refers to circumstances that give rise to import duty and VAT. Therefore, three questions were presented:

(1) Was there a breach of a Customs obligation?

(2) Did Roseline participate in the breach or was it “otherwise involved in” it?

(3) Did Roseline know (or should it reasonably have known) of the circumstances that

resulted in the liability to VAT?

The first question was answered in the affirmative, as is the second question that Roseline participated in the breach, by making a false claim, albeit not knowing that it was false. In answer to the third query, the Tribunal referred to Matrix-SCM Limited v London Borough of Newham.[7] During the judgement, the judge observed that: “[W]here it cannot be said that a claimant knew of facts that apparently clearly indicated an infringement, the question will become whether the claimant should have known of such facts. A claimant will have constructive knowledge if, upon reasonable enquiries, it should have discovered the alleged infringement.”[8]

The Tribunal also concluded that despite the very significant consequences for Roseline, the plea did not have merit. The appeal against the post clearance demand note was dismissed on the basis that Roseline participated in a breach of the relevant customs obligation and ought to have known or reasonably known of the breach. Therefore, Roseline met all conditions for liability under section 6(3)(d) read with 6(4)(d) TCTA.

A1P1 Rights

Article 1 of Protocol 1 (A1P1) of the European Convention on Human Rights (ECHR) protects the right to peaceful enjoyment of possessions and property, identifying that no one should be deprived of their possessions except in the public interest and subject to conditions provided for by law. 

Roseline’s barrister, Mr Edwards, positioned to the Tribunal Judge Mark Baldwin and Mr Michael Bell, “The question in this case is whether liability for the whole tax loss must be borne by an innocent appellant, where care was taken by it.”[9]

HMRC expressed that States are entitled to enforce such laws as they deem necessary to secure the payment of taxes and other contributions, and the rights conferred by A1P1 are not absolute. HMRC submitted that on the basis of 4 elements of justification in Bank Mellat v HM Treasury[10] (1) the general interest of the community is avoidance of the loss of tax (2) the provision is rationally connected to the objective (3) the liability is directly linked to the loss of the state (4) a fair balance is struck – it is not disproportionate to require customs agent to take reasonable steps to review whether a trader is VAT registered.[11]

Conclusion – the imperative of due diligence when making Customs Declarations

The Tribunal decision may be considered as persuasive within a future parallel context, but would not be considered a binding precedent (state decisis) as within common law, as it was not presented to the Upper Tribunal.  The First Tier Tribunal (FTT) decision outlined that a right to apply for permission to appeal pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 is available.

In closing, Judge Mark Baldwin commented that “Just as it is possible for innocent people to be caught up in the kinds of VAT fraud that bring the Kittel doctrine into play, so it is possible for entirely innocent people to participate in or be involved in a breach of a Customs obligation.” [12] 

Due diligence obligations are emphasised within the wider international framework of the Revised Kyoto Convention 2006 Standard 8.1, addressing “Persons concerned shall have the choice of transacting business with the Customs either directly or by designating a third party to act on their behalf.”[13] A onboarding compliance framework must be established as follows:

• Written appointment of a customs agent as a direct representative on the basis of the Taxation (Cross Border Trade) Act 2018, Clause 21.1(a), or
• Written appoint of a customs agent as an indirect representative on the basis of the Taxation (Cross Border Trade) Act 2018, Clause 21.1(b).
• Written authorisation for the customs agent to use postponed accounting for import VAT.

When appointing a sub-agent to act on behalf of the principal, for example where a logistics company appoints a third-party customs agent to act on behalf of their client, the logistics company should obtain permission to appoint a sub-agent to act as direct representative for their client on their behalf, and both the declarant and the sub-agent should be disclosed to HMRC on the import declaration. The Roseline case represents a robust deterrent to non-compliance with fulfilling ‘HMRC’s published due diligence for customs agents.’[14]

[1] UKFTT 427 (TC)

[2] Roseline (n 1) 63-64.

[3] Ibid 85.

[4] Ibid 88.

[5] [2011] EWHC 2414 (Ch) at [13]

[6] Ibid 26.

[7] [2011] EWHC 2414 (Ch).

[8] Matrix-SCM Limited v London Borough of Newham, [2011] EWHC 2414 (Ch) [13]

[9] Roseline (n 1) 83.

[10] [2014] AC 700 [20].

[11] Roseline (n 1) 95.

[12] Roseline (n 1) 130.

[13] World Custom Organization, Revised Kyoto Convention: International Convention on the Simplification and Harmonization of Customs Procedures (adopted 26 June 1999, entered into force 3 February 2006, entered into force for the UK 1 July 2006) ch 8, Standard 8.1.

[14] HMRC, ‘Due Diligence When Making Customs Declarations’ (GOV.UK) <https://www.gov.uk/guidance/due-diligence-when-making-customs-declarations> accessed 21 July 2025.