In mid-July 2026 the First-tier Tribunal released B&M Retail Limited v HMRC [2026] UKFTT 1062 (TC) and quashed an excise wrongdoing penalty of roughly £1.17 million. After years of litigation, the reconstituted tribunal held that B&M had a reasonable excuse under paragraph 20 of Schedule 41 to the Finance Act 2008 for acquiring alcohol on which HMRC could not later verify duty payment.
If you run retail, wholesale, hospitality, PE-backed consumer platforms, or any high-volume goods chain where HMRC can reverse-engineer a “duty unpaid” story years later, this is not a curiosity about beer in 2010. It is a live control case on how far due diligence must go before a Schedule 41 penalty sticks — and how far HMRC’s “you should have walked away earlier” theory actually travels.
Practitioner notes are already out from Kennedys (who acted for B&M), Pump Court Tax Chambers, Academy of Tax Law, and Accountancy Daily. The Upper Tribunal remittal that made the fresh hearing possible is B&M Retail Ltd v HMRC [2024] UKUT 00409 (TCC). What follows is the CFO cut.
What the Dispute Was Really About
B&M is a national value retailer. For years it bought beer and wine through wholesale intermediaries, including a long-standing supplier, Ruby Trading. In 2010 and 2011 HMRC detained and seized consignments because it could not verify that UK excise duty had been paid further up the chain. Duty assessments followed. So did a Schedule 41 penalty of about £1,172,341 under paragraph 4 of Schedule 41 FA 2008 for acquiring possession of excise goods on which duty was said to be outstanding.
By the time the remitted FTT sat, the live issue was narrow and expensive: not a free-standing argument that duty had in fact been paid end-to-end, but whether B&M had a reasonable excuse so that no penalty should stand. That is paragraph 20 territory. The statutory architecture is in Schedule 41 to the Finance Act 2008.
Procedurally, the case is a warning about how long these files live. The first FTT dismissed B&M’s appeal in 2023. The Upper Tribunal set that decision aside in 2024 for procedural unfairness — applying the old rule in Browne v Dunn where the tribunal relied on additional due-diligence steps that had not been put to B&M’s witness in cross-examination — and remitted the matter to a differently constituted panel on preserved findings plus limited further onboarding evidence. Only then, in July 2026, did B&M win on the substance.
The Legal Test: Perrin, Not Perfection
Everyone agreed the reasonable-excuse framework is the objective approach in Christine Perrin v HMRC [2018] UKUT 156 (TCC). HMRC’s own manual still points officers there: CH160950.
In plain English, Perrin is a four-stage discipline: establish the facts the taxpayer says amount to an excuse; decide which are proved; ask whether, viewed objectively and taking account of this taxpayer’s experience and situation, those facts are a reasonable excuse and when that excuse ceased; then ask whether the failure was remedied without unreasonable delay once the excuse ended.
That is not “did the taxpayer do everything a forensic accountant with perfect hindsight would invent in 2026?” It is “did this trader’s conduct fall within the range of responses open to a reasonable trader in those circumstances?” The remitted FTT answered yes for B&M.
Why B&M Won
The tribunal’s commercial findings matter more than the case name:
- Structured diligence existed and was used. B&M ran supplier onboarding and transaction-level checks that were generally followed and aligned with HMRC guidance as it then stood. Assurances from the supplier were not treated as a free pass; they sat inside a wider commercial framework.
- Definitive upstream proof was not commercially realistic. In a multi-intermediary wholesale market, a retailer often cannot obtain a clean end-to-end duty audit trail. The tribunal accepted that limit as a market feature, not as B&M’s private negligence.
- HMRC could not complete the same proof either. Despite a significant investigation, HMRC could not conclusively establish whether duty had been paid or identify the precise break in the chain. That “missing trader” fog cut both ways when judging what a reasonable purchaser should have known.
- Seizure is not the same as proof of unpaid duty. Detentions showed HMRC could not verify duty status. They did not, by themselves, prove non-payment or compel immediate exit from a long-standing supplier, especially where goods were recovered commercially and HMRC had not directed a stop.
- Exit happened when the risk crystallised more clearly. After a more serious November 2011 intervention pointing to a wider issue with Ruby’s supplies, B&M stopped the account. The tribunal treated that as the point confidence properly collapsed, not as proof B&M had been reckless for months before.
The decisive framing is worth putting in CFO language: the question is not whether a different trader might have been more conservative earlier. It is whether B&M’s conduct fell outside the range of reasonable responses. HMRC’s theory edged toward a certainty standard the statute does not impose. The tribunal refused that slide.
What This Is Not
Do not misread the win as a licence to run thin files. Assurances alone are not enough. Grey-market alcohol is not low risk — it is exactly where Schedule 41 assessments thrive. Expect officers to distinguish weaker onboarding, ignored seizures, cash-heavy economics, or no documented stop triggers. The decision raises the value of proving the boring things: who approved the supplier, what was checked, what changed after each HMRC touchpoint, and who could kill the account.
Why CFOs Outside Alcohol Should Still Care
Schedule 41 is broader than beer. It is HMRC’s modern penalty code for a range of failures and wrongdoing, including excise acquisition and handling risks. The same fact pattern — complex supply chain, unverifiable upstream compliance, later allegation that you “held” the problem — appears in fuel, tobacco, and other high-duty goods.
Three wider lessons travel cleanly. First, due diligence is evidence, not vibes: if the only record is “we’ve used them for years,” you are litigating on memory. Second, HMRC investigation limits are relevant facts — where the department itself cannot locate the break in the chain, that weakens a narrative that any reasonable buyer would have seen the fraud in neon. Third, exit discipline is part of the control framework. The tribunal did not require premature self-sanction at every uncertainty. It did care that B&M stopped when the risk profile changed.
For PE portfolio companies in retail and wholesale, put this next to AWRS, warehouse approvals, and fraud-sensitive categories in the same risk register as VAT Kittel exposure. Different legal tests; same operating failure mode: weak counterparty governance under volume pressure.
CFO Actions This Month
- Inventory Schedule 41 / excise exposure. Alcohol, fuel, tobacco, bonded flows, grey-market parallel supply — any category where HMRC can argue you acquired or held non-compliant goods.
- Stress-test supplier files for the B&M questions. Can you show onboarding, ongoing checks, responses to HMRC interventions, and a clean stop decision? If not, rebuild before the next seizure letter.
- Define stop triggers in a one-page policy. Who can suspend a supplier in 24 hours? What combination of detention, price anomaly, ownership opacity, or failed verification forces exit?
- Map the real chain, not the invoice chain. Manufacturer, warehouse, wholesaler, haulier, invoice party, payee. Multi-hop structures need a one-page topology the FD can defend.
- Quantify penalty math, not just duty math. Assessments hurt. Schedule 41 penalties on top change the board conversation, even after disclosure reductions.
- Read HMRC’s published diligence floor. Start with Excise Notice 196 and the wider alcohol wholesale registration material around AWRS.
- For PE deals in retail/wholesale, diligence the diligence. Ask for sample onboarding packs, exception logs, HMRC touchpoint registers, and any historic seizures — not just a warranty that “all duty is paid.”
Bottom Line
B&M Retail [2026] UKFTT 1062 (TC) is a taxpayer win with a hard edge. The tribunal accepted that a sophisticated retailer operating in a messy wholesale market can have a reasonable excuse where it ran real checks, could not commercially obtain certainty HMRC itself lacked, and stopped trading when the risk crystallised. It is not a charter for thin files or endless optimism after red flags.
If your goods chains depend on intermediaries, your penalty defence will depend on paper, process, and exit discipline — not on the hope that HMRC never completes the upstream story. Build the file now, while the only tribunal you face is internal.
Mark Hendy is a PE-facing CFO and tax adviser at Tanous. This is general commentary, not advice on your facts. If you are facing an excise assessment, Schedule 41 penalty, or supply-chain intervention, take case-specific advice. Get in touch.