Deliver - Customs penalties

10 October 2019

HM Revenue and Customs actively check and investigate cargo and the associated paperwork to ensure that they correspond with each other.

It is currently the position that if you engage in the international trade of goods or you import or export goods privately, you will be subject to both the European Community rules as well as national legal requirements. Should HMRC discover a misdeclaration, you may face a Customs Civil Penalties Notice (CCPN).

Misdeclaration of cargo

The CCPN system is specifically designed to encourage accurate declarations of cargo to ensure appropriate VAT and duty is paid and, by extension, that compliance with the law has been met.

There are two types of CPP action which can be taken by HMRC:

  1. a warning letter; and
  2. a financial penalty - up to £2,500 per significant irregularity and up to £1,000 for less serious contraventions.

Clearly, there is the potential to be exposed to significant liability in respect of customs penalties; particularly for more serious contraventions. For example: where the shipping company fails to notify all offences and irregularities to the customs authorities.

However, this is an area where HMRC is keen to work with those who aim to comply with the rules and they will seek to educate them on best practice, rather than penalise.

HMRC will not charge a penalty unless it has issued a warning letter, for a broadly similar irregularity, within the last two years.

In addition, you will not face a penalty where you discover and voluntarily disclose a contravention.

If the issuing of a CPP is likely, there are defences and mitigating circumstances which will be considered by HMRC before any CPP is issued.

There is a second limb to the civil evasion penalty procedure – where HMRC considers whether there has been any dishonesty or an intention to evade duty; in this instance a Civil Evasion Penalty (CEP) may be imposed.

A penalty can be up to 100% of the evaded duty, but reductions are available for early and truthful explanations (40%) or by fully embracing and meeting responsibilities (40%). As such, there is the potential for a reduction of up to 80% of the original penalty.

It should be remembered that the Civil Penalties regime does not prevent HMRC from exercising additional powers which enable it to seize goods and/or launch a criminal investigation, particularly where a tax evasion offence has been committed.

Aside from ensuring the correct duty is paid, it is vital that cargo is declared accurately. If cargo is in anyway dangerous, it may lead to inappropriate handling and stowage which in turn may cause significant damage to the vessel and injury to the crew.

Illegal cargo

The Civil Penalties regime does not apply where there are active prohibitions and restrictions in place (i.e. licencing requirements) and where goods are smuggled into the UK (i.e. alcohol).

Any cargo which is imported illegally may be subject to criminal investigation and sanctions.

There is a complex regulatory regime in place in respect of customs declarations and penalties. If you require any advice please contact the Regulatory and Corporate Defence Team.

The content of this article is from the October 2019 edition of Deliver and is for general information only. To download the latest issue, please visit the newsletter section of our website. Law covered as at October 2019.