UK plans to beef up sanctions for illicit tobacco

The UK tax authority has unveiled plans to tighten up the penalties that can be imposed on individuals involved in street level distribution of illegal tobacco, which are now out for comment.

HMRC notes that the sanctions are linked to the track and trace system (TTS) for tobacco products in the UK, and focus on small-scale, regular offenders who play a key role in the illicit trade, and will be based on referrals from Trading Standards officers.

The legal powers to impose new sanction were introduced in the Finance Act of 2022, and the draft regulations will enact them, if adopted, said the authority. The draft legislation is available to download here, and comments will be accepted until May 23.

The new sanctions include a new penalty of up to £10,000 for holding or possessing products that do not comply with TTS requirements, the power to seize TTS compliant products found alongside those that are non-compliant, and de-registration of retailers that are found with products that do not comply with the requirements.

Since 2000, the government’s anti-illicit tobacco strategies have successfully reduced the tobacco tax gap from 22 per cent to 9 per cent in 2018-2019, while revenue losses were cut from an estimated £3.4bn to £1.9bn per year over the same period.

Tobacco fraud remains a problem however, with HMRC estimating that 2.5 billion illicit cigarettes and 3,500 tonnes of illicit hand-rolling tobacco are consumed in the UK each year. These illicit sales damage legitimate business, undermine public health and facilitate the supply of tobacco to young people.

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