Tobacco Duty Evasion

21st Nov 2017

It’s been reported in the Tax Journal that following consultation earlier this year on possible new sanctions against the evasion of various excise duties, HMRC will carry out further work on a group of proposed sanctions for evasion of tobacco duty, with a view to confirming early next year how it intends to proceed.

HMRC and UK Border Force

The main conclusions were:

  • 100% penalty multiplier for lost revenue from repeat offences: a majority of respondents believed that an increase in the level of financial penalties would deter repeat offending, so further work will now be taken forward on these proposals
  • A new civil penalty for dealing in illicit tobacco: most respondents were in favour of introducing a new civil penalty and further work will be done with other enforcement agencies on design and administration of such a penalty;
  • Reducing the threshold for publishing details of deliberate defaulters to £15,000 in overall lost revenue where the excise wrongdoing was deliberate: responses to this proposal were very mixed and further work will be done, including consideration as to whether the existing sanction of publication of details is an effective and suitable deterrent
  • Imposing a statutory duty of care on landlords of retail properties where tobacco offences are committed: the majority of respondents were not in favour of this approach and HMRC will discuss it further with landlord and landowner representative bodies.

The government has decided not to introduce further controls on importers or exporters of tobacco products and will not, at this stage, seek to introduce a supply-chain licensing scheme aimed at tackling the illicit trade, following a separate consultation held early in 2016.

Legislation in the second Finance Bill 2017 will introduce mandatory licensing of tobacco manufacturing machinery in the UK from August 2018. HMRC is consulting until 5 December on the draft Tobacco Products Manufacturing Machinery (Licensing Scheme) Regulations 2017. Registration for the scheme is expected to begin in April 2018, with full implementation and enforcement powers coming into effect on 1 August 2018.

HMRC lose a substantial amount of money every year through loss of duty. They are obviously looking at ways that they can tighten up the procedures and put greater deterrents in place. There are examples though, where individuals and businesses have goods seized when they have done nothing wrong. Border Force may have little more than an unsupported suspicion that something is not right. A detention and seizure can cause a huge loss to a business and therefore it is imperative that businesses, importers and exporters act quickly when goods are detained and seized.

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