HM Revenue & Customs has confirmed it is holding an internal review of its approach to enforcement relating to firms involved in the excise supply chain.

The review, a report on which will be published next March, will “address stakeholder concerns that the application of current law relating to excise liability and wrongdoing can have a disproportionate effect on legitimate businesses,” HMRC confirmed in a statement.

The move follows criticism from the United Kingdom Warehousing Association (UKWA) over the ‘draconian’ sanctions imposed on firms in the excise supply chain who make honest mistakes when dealing with non-duty-paid goods like tobacco, alcohol or fuel, following the introduction of new rules back in 2010.

In June, UKWA advisor on excise matters Alan Powell warned that firms making honest mistakes in procedures or paperwork potentially faced sanctions equalling three times the duty payable on goods - including forfeiture of the goods themselves, 100% of the duty originally owed and a wrongdoing penalty of a further 100%.

Welcoming the review, Powell said: “As UK law currently stands, legitimate businesses are facing massive risk of unfair taxation for each and every minor genuine error during transactions, together with associated penalties.

“What we would like to see is a formal mechanism for HMRC to be able to remit duty in cases of irregularities caused by genuine error where the relevant products have been secured in a tax warehouse or there is proof of export.  Without such assurance, we believe UK law breaches the principle of proportionality and fundamental rights and, consequently, excise businesses face being taxed and penalised out of existence for genuine errors that involve no material revenue risk.”

HMRC declined to say how likely it was to actually change its approach as a result of the review, but did confirm it would be considering areas such as relevant legislation, the extent of discretion permitted, and reasonableness and proportionality.

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