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New powers awarded to the UK’s HM Revenue & Customs (HMRC) in 2010 to combat the huge amount of duty that goes unpaid in the UK on alcohol, tobacco and oil products could see legitimate transport and distribution companies put out of business.

Alan Powell, who advises the UK Warehousing Association on excise matters, told The Loadstar that a whole range of transport and logistics firms could inadvertently find themselves facing massive penalties over unpaid duty due to simple errors, and additionally claimed that the HMRC was applying fines that were unnecessary and “hugely disproportionate”.

Under the 2010 legislation, the “duty point” – the time at which duty has to be paid to HMRC – can now be triggered by small administrative errors, meaning that haulage companies, warehouse operators and other logistics businesses can suddenly be liable for unpaid duty even if they are operating in a bonded or duty-suspended environment.

Mr Powell said the duty suspension could be triggered by something as small as clerical error – “someone could literally tick the wrong box and a legitimate company can find itself facing a bill for millions of pounds”.

At the same time as the new legislation came into force, HMRC was given the ability to apply new levels of penalties, going up to 100% of the duty, as well as being mandated to confiscate the goods, sanctions which were hoped to serve as a disincentive to those who sought to avoid paying duty.

However, said Mr Powell, all it had actually resulted in was making legitimate firms that were unaware of the new legislation liable for hefty fines.

“It could be as simple as a haulier failing to register under a regime where they had not needed to register before – for example where there was no difference in the actual operations but a difference in paperwork – this would be defined as an irregularity, and if the company then notified HMRC it would find itself subject to some very severe penalties.

“And people are being hit with a triple whammy – the goods are being confiscated, they are hit by a fine for 100% of the duty and then being asked to pay duty on top of that on goods that have been confiscated from them.”

In one example, he cited a UK distiller which was finding that the duty suspension of its products was being breached if the transport routing of its exports was changed without its knowledge.

“If, say, goods are exported to outside the EU, and are expected to go via another EU country, but then it transpires that they left the UK directly, then that is the wrong procedure. The person who creates the movement has the primary liability, while someone else in the chain can do something that causes the suspension of duty to be breached, and yet the initial person remains liable. There needs to be an override in these cases,” he said.

As a result of these risks, he said, there were several companies that were preparing to pull out of the sector altogether, so high did they believe the risks had become.

“On the one hand there are some massive frauds and I am all for HMRC going after these guys, but I object to the same weapons being used against legitimate businesses which make a simple error.

“I have asked HMRC: what’s your philosophy of control? Blunderbuss or risk analysis? Of course they always say risk analysis, but all the evidence suggests it’s the blunderbuss. What is missing is the context of proportionality; the regulation simply isn’t fit for purpose,” he said.

In meetings with industry, such as through the Joint Alcohol and Tobacco Consultative Group, HMRC has said that it is constrained by the law and cannot change it, but Mr Powell disagreed.

“I think they are wrong. It could either be dealt with by a lead case that is taken to the European courts, or it could be changed through a judicial review,” he said.

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