Tougher penalties as taxman steps up the fight against tobacco smuggling

Hard-core tobacco smugglers and people who repeatedly smuggle, distribute and sell illicit tobacco could be hit by a fourfold increase in fines together with tough new civil penalties, as part of plans to crackdown on the smuggling of illicit tobacco.

New proposals, published in a consultation by HMRC today, range from penalties of up to 400% of the duty evaded for repeat offenders, to civil penalties for handling goods not for sale in the UK market and a reduction in the threshold to publicly name those handling the goods.

The proposals being put forward in today’s consultation include:

• an increase in financial penalties of up to 400% of duty evaded
• a new civil penalty for those involved in flouting fiscal marks
• a lower threshold for publicly naming the organised crime gangs and businesses who evade tobacco duty
• a new duty of care on landowners and landlords to prevent their properties being repeatedly used for tobacco fraud – for example, to store, produce or sell illicit tobacco.

HMRC is also asking for views on the proposed sanctions being used to tackle other duty evasion.

Working with other enforcement agencies, the government has seized more than 3.5 billion illicit cigarettes, and around 600 tonnes of hand-rolling tobacco over the last two years alone.

It has successfully reduced the illicit market for cigarettes from 22% in 2000-01 to 13% in 2015-16 and for hand-rolling tobacco from 61% to 32% of the whole tobacco market over the same period.

The amount of tax lost to the illicit market has been driven down from £3.4 billion a year to £2.4 billion a year over the lifetime of the strategy.

Although this is a significant achievement tobacco fraud remains a serious problem with HMRC estimating that in 2015-16, five billion illicit cigarettes and 3,200 tonnes of illicit hand-rolling tobacco were consumed in the UK.

The fraud is dominated globally by organised criminals and the illicit trade damages legitimate business, undermines public health and facilitates the supply of tobacco to young people.

Financial Secretary to the Treasury, Jane Ellison MP, welcomed the consultation:

“HMRC has made great progress in combatting fraud in the tobacco market, and protecting both public money and public health.

“However, there’s always more we can do and that’s why we are consulting on new sanctions to further tackle this illegal trade by really hitting the criminal gangs who run it.”  

1. The consultation documents is available here: https://www.gov.uk/government/consultations/sanctions-to-tackle-tobacco-duty-evasion-and-other-excise-duty-evasion
2. Follow HMRC’s Press Office on Twitter @HMRCpressoffice
3. HMRC’s Flickr channel www.flickr.com/hmrcgovuk