HMRC has continued to tackle the UK’s most notorious hotspots for the sale and supply of illicit tobacco as part of its overall remit to tackle tax fraud. This has resulted in the seizure of more than 27 million illicit cigarettes and 7,500kg of hand-rolling tobacco.

These seizures have taken place under Operation CeCe in its first two years of action. Operation CeCe is a joint HMRC-National Trading Standards operation which has been working to seize illicit tobacco since January 2021.

New legislation has also come into effect from 20 July, which could see penalties of up to £10,000 for any businesses and individuals who sell illicit tobacco products. The sanctions will bolster the government’s efforts to tackle the illicit tobacco market and reduce tobacco duty fraud.

Illicit tobacco is defined as any tobacco product that is sold in the UK without the payment of excise duty.

HMRC’s Deputy Director for Excise and Environmental Taxes, said:

'Trade in illicit tobacco costs the Exchequer more than £2 billion in lost tax revenue each year. It also damages legitimate businesses, undermines public health and facilitates the supply of tobacco to young people.

These sanctions build on HMRC’s enforcement of illicit tobacco controls, will strengthen our response against those involved in street level distribution, and act as a deterrent to anyone thinking that they can make a quick and easy sale and undercut their competition.'

Changes in the way alcohol is taxed will come into effect from 1 August 2023. The new system of calculating alcohol duty for all alcoholic drinks will be made using standardised tax bands based on alcohol by volume (ABV). This will replace the current alcohol duty system, which consists of four separate taxes covering beer, cider, spirits, wine and made-wine.

These changes are expected to make the system fairer and encourage more new products to enter the market. The new system will create six standardised alcohol duty bands across all types of alcoholic products and apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.

There will also be more help for the hospitality industry with an increase in the draught relief duty differential. This will reduce alcohol duty on qualifying beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants. These changes will also take effect from 1 August 2023 and mean that individuals who drink draught products in on-trade venues (such as pubs) will pay less tax than on the equivalent non-draught product in off-trade venues (such as supermarkets).

To support wine producers and importers in moving to the new method of calculating duty on their products, temporary arrangements will be in place for eighteen months from 1 August 2023 until 1 February 2025.

There are special procedures for importing goods into the UK. Following the end of the Brexit transition period on 31 December 2020, the process for importing goods from the EU effectively mirrors the process for all other international destinations.

A number of easements to help ensure a smooth transition for goods coming from the EU after Brexit, ended on 31 December 2021. This means that since 1 January 2022, businesses are no longer able to delay making import customs declarations under the Staged Customs Controls rules that applied during 2021.

The changes that came into force on 1 January 2022 include:

• A requirement for full customs import declarations for all goods at the time businesses or their courier/freight forwarder bring them into Great Britain, except if they are non-controlled goods imported from Ireland to Great Britain
• customs controls at all ports and other border locations
• requirement for a suppliers’ declaration proving the origin of goods (either UK or EU) if they are using the zero tariffs agreed in the UK’s trade deal with the EU
• commodity codes, which are used to classify goods for customs declarations, are changing

There are different rules in place for the movement of goods into, out of or through Northern Ireland.

Affected businesses should ensure that they consider as a matter of urgency how they are going to submit customs declarations and pay any duties that are due. Businesses can appoint an intermediary, such as a customs agent, to deal with their declarations or can submit them directly although this can be complex for businesses unused to the process.

There is a ‘Simplified Declarations’ authorisation from HMRC that allows some goods to be released directly to a specified customs procedure without having to provide a full customs declaration at the point of release. However, this needs specific authorisation from HMRC and there are also other requirements that must be met.

There are special procedures for importing goods into the UK. Following the end of the Brexit transition period on 31 December 2020, the process for importing goods from the EU effectively mirrors the process for all other international destinations.

On 14 September 2021, a revised timetable for the introduction of full import controls was published by government. 

A number of easements had been put in place to help ensure a smooth transition for goods coming from the EU. This included a delay in the requirement for full customs declarations and controls until 1 January 2022. The timetable for this change remains as previously set out. However, safety and security declarations will now not be required until 1 July 2022.

Under the revised timetable:

• The requirements for pre-notification of Sanitary and Phytosanitary (SPS) goods, which were due to be introduced on 1 October 2021, will now be introduced on 1 January 2022.
• The new requirements for Export Health Certificates, which were due to be introduced on 1 October 2021, will now be introduced on 1 July 2022.
• Phytosanitary Certificates and physical checks on SPS goods at Border Control Posts, due to be introduced on 1 January 2022, will now be introduced on 1 July 2022.
• Safety and Security declarations on imports will be required as of 1 July 2022 as opposed to 1 January 2022. Full customs declarations and controls will be introduced on 1 January 2022 as previously announced.

It is hoped that this revised timetable will give businesses, especially those in the agri-food sector, more time to adjust for issues caused by Brexit and the global pandemic. 

Following the end of the Brexit transition period, new rules on tax and duty now apply on goods sent to the UK from overseas. These changes are meant to ensure that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT free imports. 

For goods sold directly to customers in the UK from overseas with a value of £135 or less (which aligns with the threshold for customs duty liability) the point at which VAT is collected has moved from the point of importation to the point of sale. 

Online marketplaces that are involved in facilitating the sale, are responsible for collecting and accounting for the VAT. Business to business sales not exceeding £135 in value will also be subject to the new rules but VAT can be accounted for by way of the reverse charge.

In addition, the low value consignment relief (LVCR), which was an import VAT exemption for goods valued at £15 or less, has been removed in:

• Great Britain for goods imported from outside the UK
• Northern Ireland for goods ordered remotely that are imported from outside the UK and EU

Normal VAT and customs rules on consignments valued at more than £135 will apply on the importation of goods into Great Britain from outside the UK or into Northern Ireland from outside the UK and EU.

There are different rules on the sale of goods into Northern Ireland from the EU and on the movement of goods between Northern Ireland and the EU.

The government has published the new rules for duty free and tax free shopping that will come into effect from 1 January 2021. The changes are wide ranging.

For anyone who smokes or drinks there will be no duty charged on alcohol or tobacco products from January 2021. This will apply irrespective of whether you are travelling to an EU or non-EU country. The new rules will apply to British ports, airports, international rail stations and sales on ships, trains and planes. 

There will also be new increased personal limits on what you can bring home. This means that passengers coming to Britain will be able to bring back, for example, three crates of beer, two case of still wine and one case of sparkling wine or 4 litres of spirits to GB without paying UK duties.

The government has also announced the ending of all tax free sales from January 2021. This will apply to relevant sales of tax-free transactions in airports of goods in sectors such as: electronics, fashion and beauty products and will apply to passengers travelling to non-EU countries.

It has also been announced that the VAT Retail Export Scheme is to be scrapped from 1 January 2021. This means that VAT refunds for overseas visitors in British shops will be removed. The only exception will be when an item is shipped directly from the seller to the home address of the foreign customer.

The changes will apply in England, Wales and Scotland. The rules in Northern Ireland are still under discussion.

Here is a reminder of your duty and tax free allowances if travelling abroad this Christmas.

Travelling to an EU country

Where tobacco or alcohol is brought in from another EU country, no duties or tax will be payable as long as you can demonstrate that the goods are for your own use and that you paid the relevant taxes and duties on the purchase.

However, HMRC provide the following guidelines as to an acceptable maximum for personal use. If you exceed these limits, you are more likely to be subject to further questioning.

• 800 cigarettes
• 200 cigars
• 400 cigarillos
• 1kg of tobacco
• 110 litres of beer
• 90 litres of wine
• 10 litres of spirits
• 20 litres of fortified wine (for example port or sherry)

If you are travelling outside the EU you are allowed to bring the following back to the UK for your own use without any UK tax or duty liabilities.

• 200 cigarettes or 100 cigarillos or 50 cigars or 250g of tobacco
• 4 litres of still table wine
• 16 litres of beer
• 1 litre of spirits or strong liqueurs over 22 per cent volume; or 2 litres of fortified wine (such as port or sherry), sparkling wine or other alcoholic beverages of less than 22 per cent volume.
• £390 limit for of all other goods including perfume and souvenirs. If you are lucky enough to be arriving by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270 tax free.

It remains to be seen if any changes will be made to the EU limits after the Brexit transition period ends.

Here is a reminder for our readers of their duty and tax free allowances if travelling abroad this summer.

Travelling to an EU country

Where tobacco or alcohol is brought in from another EU country no duties or tax will be payable as long as you can demonstrate that the goods are for your own use and that you paid the relevant taxes and duties on the purchase.

However, HMRC provide the following guidelines as to an acceptable maximum for personal use. If you exceed these limits, you are more likely to be subject to further questioning.

• 800 cigarettes
• 200 cigars
• 400 cigarillos
• 1kg of tobacco
• 110 litres of beer
• 90 litres of wine
• 10 litres of spirits
• 20 litres of fortified wine (for example port or sherry)

Travelling to a non-EU country

If you are travelling outside the EU you are allowed to bring the following back to the UK for your own use without any UK tax or duty liabilities.

• 200 cigarettes or 100 cigarillos or 50 cigars or 250g of tobacco
• 4 litres of still table wine
• 16 litres of beer
• 1 litre of spirits or strong liqueurs over 22 per cent volume; or 2 litres of fortified wine (such as port or sherry), sparkling wine or other alcoholic beverages of less than 22 per cent volume.
• £390 limit for of all other goods including perfume and souvenirs. If you are lucky enough to be arriving by private plane or boat for pleasure purposes, you can bring in goods up to the value of £270 tax free.

The Annual Tax on Enveloped Dwellings (ATED) came into effect from 1 April 2013. The tax applies to certain Non-Natural Persons (NNPs) that own interests in dwellings valued at more than £500,000. These provisions affect most companies, partnerships with company members and collective investment schemes. There is no ATED or ATED-related Capital Gains Tax payable if an individual owns a property directly, rather than through a company.

The main ATED reliefs are broadly where the property is:

• in use for the purposes of a property rental business run commercially with a view to profit (subject to certain exceptions);
• held as trading stock of a property development or trading business (again, subject to exceptions);
• open to the public for at least 28 days a year as part of a trade carried on commercially with a view to profit;
• repossessed by a mortgage lender;
• a farmhouse, subject to meeting various conditions;
• held by a charity for its charitable purposes, subject to meeting various conditions;
• held by a registered social housing provider for qualifying purposes.

Dwellings are revalued for ATED purposes every 5 years. The definition of the ‘dwelling’ includes the garden or grounds that go with the dwelling. There are also special rules where an NNP holds an interest in more than one dwelling such as a block of flats or where they own a dwelling and non-residential land.

For the period 1 April 2019 to 31 March 2020, ATED is chargeable on property valued at:

• More than £500,000 but not more than £1 million – £3,650
• More than £1 million but not more than £2 million – £7,400
• More than £2 million but not more than £5 million – £24,800
• More than £5 million but not more than £10 million – £57,900
• More than £10 million but not more than £20 million – £116,100
• More than £20 million – £232,350.

Air Passenger Duty (APD) is a departure tax levied on most air travel. Each geographical band has two rates of Air Passenger Duty, one for standard class and the second for ‘other’ higher classes of travel (usually premium economy / business / first class).

The band A (short-haul) rate ranges from £13 for a standard class journey and £26 for an ‘other’ class of travel, remain unchanged from 1 April 2019. The Band B (long-haul) rates for journeys over 2,000 miles range from £78 to £172, a small increase over the 2018-19 rates.

Passengers using certain classes of private jets face even higher charges. The short-haul band remains frozen at £78 but the long-haul rates have increased to £515 (from £468).

Children under 16 are exempt from APD when travelling in standard economy class. There are also exemptions from APD for flights from airports in the Scottish Highlands and Islands as well as an exemption for direct long-haul flights departing from Northern Ireland.