Excise Notice 203a: registered consignees

Question 1

1.  Introduction

Accepted Answer

1.1 What this notice is about

This notice sets out Northern Ireland’s requirements for the commercial movement of excise goods by a registered consignee.

It contains:

general conditions and requirements
registration procedures
receipt procedures
duty payment procedures

It also sets out your rights and obligations as a Registered Consignee.

This notice does not cover duty-paid movements or goods imported from outside of the EU.

1.2 What’s changed

This notice has been amended to show the UK rules and requirement for transitional movements.

1.3 Who should read this notice

You must read this if you are, or wish to become, a Registered Consignee. You should also read this notice if you wish to employ a Registered Consignee to import excise goods from the EU to a Northern Ireland address on your behalf. Under such arrangements HMRC will permit an authorised Registered Consignee to pay the excise duty either by using:

your duty deferment account where you have given the Registered Consignee permission to do so, or by
the Registered Consignee’s duty deferment account

1.4 Other notices you will need

You will need:

Title	Notice number
Revenue Traders’ Records	206
UK Duty Stamps Scheme	DS5
Tobacco Products Duty	476
Intrastat General Guide	60

1.5 Who to contact if you have a query

Unless you’re told otherwise, either in this notice or in writing, your first point of contact is the excise enquiries helpline. Details of other teams that you may need to contact are in section 15.

1.6 How long it takes to respond to your enquiry

HMRC will respond in line with its Charter standards.

Question 2

2.  Legal background

Accepted Answer

2.1 The law covering this notice

You will find the conditions which cover movements of excisable goods to and from other member states of the EU in UK law (our regulations) and notices.

You will find the primary legal provisions applicable to the contents of this notice in:

Full title	Abbreviation
The Customs and Excise Management Act 1979	CEMA
The Rehabilitation of Offenders Act 1974	ROA

You will find detailed requirements in:

Full title	Abbreviation
The Excise Duties (Deferred Payment) Regulations 1992 (SI 1992/3152)	EDDPR
The Revenue Traders (Accounts and Records) Regulations 1992 (SI 1992/3150)	RTAR
The Duty Stamps Regulations 2006 (SI 2006/202)	DSR
The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (SI 2010/593)	HMDP

2.2 How the law is referred to in this notice

When this notice refers directly to the law, the standard abbreviations as shown in paragraph 2.1 will be used.

2.3 If you fail to meet your legal obligations

If you do not meet your legal obligations, HMRC may impose financial penalties for breaches of the regulations or the conditions set out in this notice.

We may also:

cancel your approval
prosecute you

For information on how to appeal against any HMRC decision see section 14.

Question 3

3.  Overview of the scheme

Accepted Answer

3.1 What Registered Consignees are

Registered Consignees are revenue traders who are approved by and registered with HMRC to receive and account for the duty on duty-suspended excise goods from an EU member state. Registered Consignees must account for the duty when the goods are received in the Northern Ireland. Registered Consignees may not hold or dispatch goods under duty-suspension arrangements.

A Registered Consignee must be approved by HMRC before they are permitted to receive goods under duty-suspension arrangements (whether or not they own those goods at the time they receive them).

3.2 How to become a Registered Consignee

For further details please refer to section 4.

3.3 Who may consign goods to a Registered Consignee

Only tax warehouses and Registered Consignors approved in other member states may consign duty-suspended goods to Registered Consignees. Registered Consignees may not receive duty-suspended excise goods:

from Northern Ireland warehousekeepers
from Northern Ireland Registered Consignors
which are not in free circulation

3.4 As a Registered Consignee you cannot import goods that have been duty-paid in another EU member state

Your approval as a Registered Consignee only covers imports of duty-suspended goods. If you wish to receive duty-paid goods from EU countries you should follow the procedures set out in Commercial importers, certified traders and tax representatives — EU trade in duty paid excise goods (Excise Notice 204b).

3.5 Registered Consignee acting on behalf of third parties

HMRC may permit a Registered Consignee to import excise goods on behalf of others. They may use their own deferment account or their client’s deferment account to pay the duty (provided the account holder has given permission to do so) (see section 6). The prime liability for the duty however, will always lie with the Registered Consignee who must make sure that the duty is correctly accounted for.

3.6 How to account for VAT on Registered Consignee receipts

You will find more details about this in VAT on movements of goods between Northern Ireland and the EU.

3.7 Providing a financial security prior to approval

A Registered Consignee is normally required to hold a deferment account, for which a security is required (refer to section 6). For further information, see How to use your duty deferment account. Otherwise HMRC does not normally require an additional guarantee. However, we reserve the right to require a deposit or prepayment of duty for each or any accounting period. If this happens we will tell you what procedures you must follow.

Question 4

4.  Approval and registration

Accepted Answer

4.1 Important information

You should not assume that we will automatically approve you. In particular, you should not enter into any binding financial agreements on the assumption that HMRC will grant approval.

4.2 The conditions you must meet before your application is considered

Before HMRC considers your application you must meet the following conditions:

have a place of business based in the United Kingdom – this however, is on condition that movements on which you are accounting for duty are of goods being delivered to a Northern Ireland address – this is where you must receive the goods
if you are based in Great Britain and wish to become a registered consignee to move goods in excise duty-suspension to Northern Ireland from the EU, HMRC will allocate you with an XI excise ID as a part of your approval
demonstrate a business need to be approved as a Registered Consignee – for example, you should be able to provide our officers with a viable business plan for your proposed business, including details of who you intend buying goods from and details of your customer base
you (or if you’re a limited company the company’s key officials) must not have an unspent conviction under ROA (other than minor motoring offences)
you must tell us if you have accepted a compounded settlement during the previous 3 years or have been involved in serious non-compliance in the past 4 years
you must be registered in the UK for VAT
you must have your own duty deferment account in place or, if you intend to account for the duty using someone else’s account, be able to demonstrate that you will be authorised to use that account

In addition, to receive goods once your application to be a Registered Consignee has been approved, you must also register through ‘Government Gateway’ and enrol to use the Excise Movement and Control System (EMCS). Use of this system is mandatory (see section 8).

4.3 How to apply for approval as a Registered Consignee

You should complete the HM1 application form to register for the Registered Consignee Scheme.

You should read this notice and the notes on the reverse of form HM1 before you complete the application form. You can apply to register at any time once you have decided that you wish to trade as a Registered Consignee and are able to meet the conditions of approval. When you have decided on a date from which you wish to trade as a Registered Consignee it is in your own interests to apply as early as possible. This is because HMRC will need to carry out a number of verification checks in our approval process. Ideally you should allow at least 45 days.

Once the form is completed you should send this to the Excise Processing Teams (EPT).

4.4 If you provide false or misleading information

If you provide false or misleading information on your application form HMRC may:

fail to approve your application or revoke your approval
impose financial penalties
prosecute you

4.5 When HMRC refuses applications

We may refuse to approve you. In particular, we reserve the right not to approve or register anyone who, at the time of applying, has an ‘unspent’ conviction under ROA (other than for minor motoring offences), has accepted a compounded settlement during the preceding 3 years or has been involved in serious revenue non-compliance in the past 4 years. In the case of partnerships and limited companies, this also applies to all the partners or key officials of the company.

If your application is refused we will inform you in writing and give reasons for the rejection. If you disagree with the decision you have the right to appeal. For further information on how to appeal see section 14.

4.6 Conditions for your approval

There are standard conditions that must be complied with in order to remain approved as a Registered Consignee. You must:

continue to meet the Northern Ireland Registered Consignee requirements (see paragraph 4.2)
follow all the procedures set out in this notice, including the application of appropriate due diligence checks (see section 17)

4.7 Additional conditions for your registration

If HMRC considers it necessary to impose additional conditions we will inform you in writing. If you disagree with any of the additional conditions we impose you have the right to appeal. For further information on how to appeal see section 14.

4.8 How quickly we will deal with your application

HMRC aims to process applications within 45 working days of receipt at the EPT. This is to allow us to carry out necessary verification and pre-approval checks which will normally include a visit to your place of business.

4.9 If your application is accepted

If HMRC accepts your application, we will issue a certificate to you showing the following information:

your name
your address
your approval number
the type of excise goods which you may receive and account for duty on
whether or not you’re approved to operate direct delivery
any conditions that we have imposed

You should quote your registration number on any correspondence you have with HMRC about your Registered Consignee activities and have it available when you contact us.

4.10 What to do with your certificate

You should make sure that the detail on the certificate is correct and up to date. If you discover any errors, you should contact the EPT immediately (see section 15 for contact details).

You should keep your certificate in a safe place and make it available to HMRC officers if requested to do so. Your suppliers may also require a copy of this before dispatching goods to you under duty suspension arrangements.

4.11 If your approval details or business change

You must notify the EPT in writing as soon as you become aware of any change affecting your business.

Where HMRC varies the terms of your approval you will be issued with a revised certificate. Please note – EMCS will not allow the dispatch of categories of goods for which the Registered Consignee is not approved to receive.

It’s in your own interests to make sure that your consignors or suppliers are aware of any changes to your approval.

If the status of your business or the company changes (for example, a sole proprietor becomes a partnership) the new legal entity must apply to become a Registered Consignee in its own right. You cannot assume that we will automatically approve the new applicant. Where appropriate, cancellation of the previous approval should be notified to us.

4.12 What to do if you wish to vary the terms and conditions of your Registered Consignee approval

If you wish to change the terms and conditions of your approval to accommodate changes in your business model (for example, adding categories of goods to your approval or requesting to operate direct delivery arrangements) you should write to the EPT giving details (see section 15). You should provide these at least 10 working days before the start of the accounting period in which you wish HMRC to vary your approval. We reserve the right to refuse such requests where there is good reason to do so.

4.13 Cancelling your approval

If you wish to cancel your approval, you must write to the EPT at least 10 working days before the start of the accounting period in which you want the cancellation to take place.

HMRC will not normally agree to cancel your approval until we are satisfied that you have paid all the duty due on goods you have imported using your Registered Consignee approval.

HMRC will inform you in writing when your approval is cancelled.

Once deregistered you’re obliged to keep your business records for a period of 6 years. You must make these available to HMRC if requested to do so.

Note – even if you’re deregistered you will remain liable for any duty unpaid on goods for which you were correctly shown to be the Registered Consignee whilst registered.

4.14 Revoke or vary the terms of your approval

HMRC may revoke or vary the terms of your approval at any time for reasonable cause. For example, where appropriate due diligence checks are not being carried out (see section 17). If this happens we will inform you in writing and give reasons for the action.

Where we vary the terms of your approval you will be issued with a revised certificate. It’s in your own interests to make sure that the consignors who supply goods to you (or your customers through direct delivery arrangements) are aware of changes to your approval.

4.15 Supplier will need to check that you’re a Registered Consignee

The EMCS will not allow dispatch of goods where the consignee is not approved. Your details will be included on the System for the Exchange of Excise Data (SEED) database, which is linked to EMCS. EMCS will automatically verify approval detail against this SEED information when the consignor raises the electronic administrative document (eAD) in the member state of dispatch. It’s in your own interests to make sure that your suppliers are aware of your correct registration details.

Question 5

5.  Direct delivery

Accepted Answer

5.1 What direct delivery is

Normally excise goods may only be consigned to the Registered Consignee’s registered address. However, HMRC may permit a Registered Consignee to receive goods at other addresses. This is known as ‘direct delivery’. For example, if you’re acting on behalf of a third party, and wish goods to be delivered directly to that customer, you must be approved to operate direct delivery.

5.2 Apply to be authorised to receive goods under direct delivery arrangements

You must apply for approval to receive goods under direct delivery arrangements. This can be done at the same time as applying for approval as a Registered Consignee or, if your need to operate direct delivery occurs after this, by applying to the EPT in writing for a variation to your approval. If HMRC approves you to operate direct delivery then goods which are consigned to you as the legal consignee may be delivered to any UK business address including the address of your customer.

Note – approval to operate direct delivery is not automatic – we reserve the right to refuse applications where the application fails our fitness criteria or where you cannot demonstrate a genuine business need.

5.3 The conditions that must be met before goods may be dispatched and received under direct delivery arrangements

To receive goods under direct delivery arrangements the following conditions apply:

your Registered Consignee approval must cover the category of goods you wish to receive
you must be shown as the legal consignee for the goods on the eAD
the address that the goods are to be delivered to must be entered as the actual place of delivery on the eAD
you must receipt the eAD

If goods are to be directly delivered to your customers you must have procedures in place to make sure that your customers notify you immediately when the goods are received by them.

Regardless of the ownership of the goods, under direct delivery arrangements the approved Registered Consignee is responsible for:

keeping records
accounting for the duty

Question 6

6.  Duty deferment accounts

Accepted Answer

6.1 How to apply for a duty deferment account

You will find more information about this in How to use your duty deferment account. Please note – where a deferment account is used to account for duty on goods received by a Registered Consignee, a deferment guarantee is required to cover the full duty liability in each Registered Consignee accounting period.

6.2 How to gain authorisation to use another person’s deferment account

You must obtain written authority, on form HM8 Authority to use another trader’s Deferment Approval Number, from the person whose duty deferment account you wish to use. You must send the completed form to the Registered Consignee Accounting Centre. Once the Registered Consignee Accounting Centre has received this form, it will notify you of the date from which you may use the third party deferment account.

You should obtain confirmation from the duty deferment account holder that the duty deferment guarantee level is sufficient to cover the duty for the period of use.

6.3 If your duty deferment account number changes

You must tell HMRC if your duty deferment account number changes, or when the guarantee in place is insufficient to cover your liabilities as a Registered Consignee.

Question 7

7.  VAT status

Accepted Answer

7.1 If your turnover is below the VAT registration threshold

To become a UK-Registered Consignee you must be VAT registered in the UK (see paragraph 4.2). If your turnover is below the VAT registration threshold (see VAT guide (VAT Notice 700)) and you wish to apply for approval as a Registered Consignee then you must first apply for voluntary VAT registration. Further information about VAT registration is available, or if you need more information contact the VAT: general enquiries helpline.

If you’re already registered as a Registered Consignee you must remain registered for VAT whilst approved as a Registered Consignee.

7.2 If you have a VAT group registration

Individual corporate bodies within a VAT group which require Registered Consignee approval must apply for separate approval. They should quote the VAT group registration number and their unique site reference number when applying.

Question 8

8.  EMCS

Accepted Answer

8.1 What EMCS is and how will it affect you as a Registered Consignee

EMCS is the electronic system for recording and validating all movements of duty-suspended excise goods within the EU. For each movement an electronic record known as an eAD must be raised on EMCS and the Administrative Reference Code (ARC) that is generated as a result of this must accompany the goods.

8.2 Special IT systems you’ll need to receive goods as a Registered Consignee

You will need to use an EMCS third party software supplier to access the internet in order to use EMCS to access eAD notifications sent to you and send a message back to your supplier confirming receipt of the goods (known as a report of receipt). EMCS can be accessed through HMRC’s Online Services, by developing an in-house IT system that interfaces with EMCS or by purchasing a bespoke IT system designed by a suitable software supplier to interface directly with EMCS.

Whichever option you choose, you will first need to register for access our Online Services. Guidance on how to do this is provided on the Online Services homepage. (If you’re already registered for Online Services for another reason, you do not need to re-register.) You will then need to add EMCS onto the list of services you wish to have access to. Your activation code will be sent to you through the post, which may take up to 7 days to process.

As access to EMCS requires an excise registration number, you will only be able to enrol once you have been approved as a Northern Ireland Registered Consignee. Your Registered Consignee number should then be used as your user ID for all future access.

You must make sure that you can access EMCS before you order your first consignment.

8.3 Consignor must always use EMCS to move Registered Consignee goods

The consignor must always use EMCS to move Registered Consignee goods. But, where EMCS is not available the goods may be dispatched under fallback arrangements (see paragraph 8.9).

The only exception to this is where a consignment of wine is being dispatched by a small wine producer based in a member state that exempts such traders from the requirements of EMCS. In these cases the movement should be accompanied by a document drawn up by the small wine producer in accordance with EU Commission Regulation 436/2009. There are no receipt provisions under this regulation therefore you should discuss with your supplier what evidence of receipt they require.

8.4 Who raises the eAD instead of the consignor

The consignor is the only one who can raise the eAD at the start of a movement.

8.5 When the consignor has raised an eAD for your consignment

Once the consignor raises an eAD, you will receive a message through EMCS to tell you that this has been done. It’s therefore in your interest to regularly access EMCS to check for messages.

On arrival of the goods, you should also expect the ARC to be noted on the accompanying commercial documentation. The ARC is generated when your supplier raises the eAD. We recommend that you remind your consignor to do this when placing an order, as goods moving without an ARC are liable to forfeiture.

8.6 Who may receive goods in duty-suspension

In the case of Registered Consignees, EMCS will only permit dispatches where the consignee is authorised to receive the category of goods being sent. When ordering goods, you must supply (or arrange to supply) the consignor with your Registered Consignee approval number and your name and address. The consignor of the goods will need these details for the completion of the eAD.

The consignor must raise the eAD which in turn produces the ARC. This code must accompany the goods at all times.

Once the consignor raises an eAD you will receive a message through EMCS to tell you this has been done.

8.7 When Registered Consignees must record the receipt of goods in their records

As soon as any goods correctly consigned to you as the legal Registered Consignee are received by you or at a direct delivery address you must record this permanently in your duty account. Once you’re in receipt of the goods (whether at your registered premises or at a direct delivery address) you must submit a report of receipt. In order to do this, you need to access EMCS, find the correct eAD using the ARC for that movement, and follow the online instructions.

You must submit a report of receipt within 5 business days of receiving the goods.

The approved Registered Consignee is the only person who can provide the report of receipt.

8.8 If something happens to the goods during transit

Where there’s a serious incident affecting the movement, for example, an accident or theft, you should notify the Registered Consignee team immediately. HMRC will then raise an event report on EMCS, based on the information you provide. This message will be visible to both you and your supplier.

Where an event report is raised by the authorities in the dispatching member state there may be documents attached, which you will not be able to view on EMCS. In such cases the message you receive will tell you that an attachment has been removed. You can obtain a copy of the attachment by contacting the EMCS helpdesk.

8.9 If you receive goods with a Fallback Accompanying Document instead of an ARC

If EMCS is unavailable at the time the goods are dispatched they will travel under ‘fallback’ arrangements, which require the goods to be accompanied by a fallback accompanying document. You will be able to identify this document because it will include the statement ‘fallback accompanying document for movements of excise goods under duty-suspension of excise duty’. If a consignment of goods is received under cover of a fallback accompanying document you should wait for your consignment to be shown on EMCS and then provide your report of receipt on EMCS in the normal way.

The fallback accompanying document will not include an ARC; as the movement was not recorded on EMCS at the time of dispatch. A Local Reference Number (LRN) provided by the consignor will uniquely identify the movement instead. As soon as the system becomes available again in the other member state the consignor will record the movement on to EMCS. You can use the LRN provided by the consignor in place of the ARC to identify your movement on EMCS.

8.10 If EMCS is not available to submit the report of receipt

If EMCS is not available for you to provide a report of receipt, you should wait for EMCS to become available and then provide your report of receipt in the normal way.

If EMCS is available but you continue to have problems submitting a report of receipt, you should contact the EMCS helpdesk and issue a fallback report of receipt (see section 15 for contact details). Where the problem is with the system and cannot be resolved, they will issue you with a manual closure request form. This must be completed and returned to the helpdesk without delay, as the movement will remain open on EMCS until the required information is received.

On receipt of a fully completed manual closure request form, HMRC will forward it on to the authorities in the member state of dispatch for them to close the movement on EMCS. You and the consignor should receive a message through EMCS confirming that the movement has been manually closed.

Note – you could become liable to a financial penalty where you fail to receipt movements you receive through EMCS. In addition, where a movement is not closed on EMCS your supplier may be required to pay duty in the member state of dispatch.

8.11 What Registered Consignees must do when operating direct delivery

Note – you must be approved to operate direct delivery.

You must make sure that your clients and their suppliers know that you’re the consignee for the movement. The consignor must enter your details, along with the direct delivery address, onto the eAD.

If you are approved and operate direct delivery it’s in your own interests to regularly check EMCS and make sure that all goods consigned to you and their delivery addresses are ones you’re aware of. As soon as you become aware that the goods or addresses are not proper to you, you should contact the consignor. The consignor can then cancel the movement or change the intended destination.

As the approved Registered Consignee you must make sure that the recipient of goods at direct delivery addresses notifies you immediately of their arrival and that you send an appropriate Report of Receipt, no later than 5 working days after the goods are received at the intended delivery address, to the consignor using EMCS.

8.12 If you receive an EMCS message for a movement that you’re not expecting or is incorrect

On EMCS you will be able to see the details of all movements that are consigned to you. As soon as you become aware of an unwanted consignment, for example, one that you believe has been incorrectly consigned to you, or which is a different brand or quantity than you asked for, you should contact your supplier to alert them to the problem.

EMCS provides the ability to do this electronically. You have the option to send either an alert message in relation to a specific consignment to inform the consignor of an error on the eAD, or to send a rejection message in order to reject the consignment entirely. The consignor can then cancel the movement or change the intended destination.

In the event of an unwanted consignment physically arriving at your premises, you are able to issue a refusal or partial refusal report of receipt or alternatively you should immediately notify the excise enquiries helpline, who will tell you what you should do (see paragraph 8.17).

8.13 If the destination of the goods is changed in transit

If necessary the destination address can be changed by the consignor. If you operate direct delivery and have given your supplier the wrong delivery address then you must contact your supplier immediately for a change to be made, as it’s only the consignor who can make changes to the delivery address.

If you do not operate direct delivery, goods may only be consigned to your registered address or, if you reject the consignment, to someone authorised to receive them (for example, returned to the warehouse of dispatch). Changes can only be made by the consignor.

8.14 If discrepancies are discovered on receipt

Registered Consignees, their customers and their staff must make sure that systems are in place to record shortages and surpluses in their commercial records. The customer must also make sure that the Registered Consignee for that movement is made aware of any discrepancies. The Registered Consignee should notify the consignor of any discrepancies on the EMCS Report of Receipt.

8.14.1 Shortages

In addition to reporting the shortage to the consignor through EMCS, the Registered Consignee must also report any shortages, that is, goods which have not been received at the Registered Consignee’s or customer’s place of delivery, to the Excise Liaison Office (ELO) (see section 15) as soon as the shortage is known.

In some circumstances you may also wish to consider submitting an explanation on reasons for shortages or excesses message. Unlike the information that can and should be entered on the Report of Receipt when reporting a shortage, this message can only be read by you, the UK authorities and the authorities in the member state of dispatch. This message can be useful where you may wish to provide information regarding discrepancies that may be sensitive and which you do not wish to share with your supplier.

As a Registered Consignee you’re only liable for the duty on the goods received at the delivery address. The person liable for any duty on any chargeable losses, whilst the goods are in transit, is normally the person who guaranteed the movement of the goods. Allowable losses are losses due either to a genuine accident or to the nature of the goods.

8.14.2 Excesses

If you discover excesses you must enter the goods into your stock accounts and account for the duty on the excess goods. You should contact ELO if your approval does not include the type of excess goods which you have received. All excesses must be recorded on the report of receipt.

In some circumstances you may also wish to consider submitting an explanation on reasons for shortages or excesses message (see paragraph 8.14.1).

8.15 Paying any duty due on shortages or consignments which go missing

The person liable for any duty on chargeable losses whilst the goods are in transit is normally the person who guaranteed the movement of the goods.

The rate of duty which applies will depend on the member state in which the loss occurred or, where this is unknown, it was detected. If HMRC detects, or becomes aware of, an irregularity which results in a UK duty point we will take steps to recover the duty from the person who provided the movement guarantee.

As a Registered Consignee, if any expected goods do not arrive within a reasonable time and you do not know the reason for the delay then you should tell your consignor and our ELO. You must also try to find out what happened to the goods.

8.16 If the goods are not what you ordered

If you have taken delivery of goods which you have not ordered, you should account for the duty when the goods arrive. If you decide to return or destroy the goods you may be able to claim the duty back under drawback. You will find more information about this in Excise Notice 207: excise duty drawback.

You will also find more information at paragraph 8.17.

8.17 Refusal to accept a consignment

Registered Consignees are not permitted to use the refusal functionality on EMCS to refuse a consignment. This is because the refusal (either full or partial) is made by submitting a Report of Receipt. This creates a duty point, requiring immediate payment of UK duty.

But, EMCS provides Registered Consignees with the option to reject a consignment before or during transit. If you receive an eAD on EMCS which is incorrect or which you’re not expecting, then you can use the facility to either alert the consignor to the discrepancy or reject the consignment outright, provided that the goods have not yet physically arrived at their destination.

In most cases, you may not reject goods consigned to you once they have physically arrived at your premises. You must take full account of the goods immediately, submit the Report of Receipt accepting the movement and enter the details to your duty account records. You must pay any outstanding duty.

But, in certain circumstances, for example, health and safety reasons, we may allow you to reject the consignment, even though the goods have arrived. This is only possible where a problem has been discovered on arrival, for example, during a tailgate check. If goods have been offloaded and the transporting vehicle has departed, then this option is no longer available. If you wish to reject a consignment that has arrived, you should immediately contact the Registered Consignee Accounting Centre to obtain authorisation to do so. Once you have received this you must inform your supplier of your decision and reject the consignment on EMCS.

The consignor will then amend the destination on the eAD to allow the goods to be delivered to an alternative address.

If you have accepted a consignment, you cannot subsequently reject it.

Question 9

9.  Accounting for duty

Accepted Answer

9.1 Who’s liable for the duty

Registered Consignees are liable for the duty on all consignments of excise goods that are correctly consigned to them, regardless of where the goods are actually delivered to or which deferment account is used. For details on how to account for discrepancies discovered on receipt please see section 8.

If you’re the Registered Consignee then you’re responsible for the receipt and duty payment of those goods. This includes any damaged goods. You may not reject properly consigned goods after you have received them (orders may only be rejected before the goods are dispatched by the consignor, or when they’re in transit). You must enter them in your records and make sure that any duty due is properly accounted for.

If you decide to return or destroy the goods you may be able to claim drawback of the excise duty. You will find more information about this in Excise Notice 207: excise duty drawback.

9.2 When the duty is due

Duty becomes due when goods reach an excise duty point. Where goods are consigned to a Registered Consignee the duty point occurs when the goods are received in Northern Ireland by the Registered Consignee at their registered address or at a direct delivery address (if the Registered Consignee is approved to receive goods under direct delivery arrangements). The Registered Consignee is principally liable for the duty on all goods correctly consigned to them.

The Registered Consignee must note the date of receipt in their records for each consignment.

A Registered Consignee must have a duty deferment account, or have permission to use a third party’s deferment account. The payment is deferred and the duty is paid in accordance with the deferment arrangements (see section 6 and section 13).

9.3 The rate of duty you use

Duty is due on the goods at the rates in force at the time the duty point occurs. This is the time when the goods are received at either the Registered Consignee’s registered address or a direct delivery address. You can find the current duty rates in the Rates and allowances guidance.

9.4 What to do if the duty rate changes during an accounting period

When you’re completing your Registered Consignee returns you should check that you’re using the correct rate of duty in force at the duty point.

9.5 Who’s responsible for working out the duty on excise goods

You, the Registered Consignee for the excise goods, are responsible for working out the correct duty due on each receipt, even if you employ someone else to calculate the duty on your behalf.

You must:

determine the correct 3-digit tax type code for the product
use this code for each class of goods received

You should then calculate the duty due on the consignment (see section 16 for examples of duty calculations).

Current duty rates can be found in the Rates and allowances guidance. The tax types can be found in the UK Trade Tariff: excise duties, reliefs, drawbacks and allowances.

You should contact the excise enquiries helpline if you have any enquiries about duty rates, tax types or the category of the goods.

9.6 The accounting period

Registered Consignees must use calendar monthly accounting periods.

9.7 The duty account you must keep

You must keep a duty account in accordance with our guidance in Excise Notice 206: revenue traders’ records, summarising both:

all your Registered Consignee transactions
the duty which you’re liable to pay

The duty account and its supporting documents must show, per deferment account used:

the duty due in each accounting period
the excise duty point for each consignment referenced to the ARC for that consignment
the date and method of payment of any duty due
any adjustments made to the amount of duty due in current or earlier accounting periods (for further information see section 12)

You should make sure that your duty account is kept fully up to date.

In particular, you should make sure that, if you operate direct delivery, duty has been correctly accounted for, in the correct accounting period, on all consignments consigned to you and delivered to direct delivery addresses.

Question 10

10.  Submitting returns

Accepted Answer

10.1 The duty returns you must submit

You can access and download form form HM2.

This return must be completed and delivered to the Registered Consignee Accounting Centre (see section 15) within 4 consecutive working days (3 if a non-business day intervenes) after the end of the accounting period (calendar month).

HMRC may also allow you to submit a plain paper return as long as it contains the same information as our standard return. If you wish to submit plain paper returns you should send an example of your proposed document to the Registered Consignee Accounting Centre so we can consider your proposal.

10.2 If you fail to submit returns in time or inaccurate returns

If you fail to submit your returns in time, or if you submit an inaccurate return HMRC may:

impose financial penalties
revoke your approval

10.3 ‘Nil’ returns

You must submit a return for accounting periods in which your duty liability is ‘nil’.

Question 11

11.  Completion of returns

Accepted Answer

11.1 How to complete a return

At the end of each accounting period you must calculate the duty due for each tax type. A separate return must be used for each deferment account you intend duty to be paid through. Each return must include all goods on which the duty is being paid using that deferment account. You must declare all goods received by you when you are shown as the Registered Consignee, either directly or through a direct delivery address.

11.2 What you must do

You must:

complete the return HMRC requires
obtain and complete a separate return form HM2 Registered Consignees return of excise duty if you’re declaring duty by someone else’s deferment account
enter the total amount due (rounded down to the nearest penny) for each specific tax type in the accounting period, a separate return line should be used for each tax type imported
enter the cumulative duty due for all tax types in the ‘total’ box
complete the declaration at the foot of the return

You must then send the return to the address shown on the return.

Question 12

12.  Errors from previous accounting periods

Accepted Answer

12.1 Important information

Procedures in this section cover errors which you discover. They do not apply where HMRC has begun to examine your accounts for the periods in which the errors were made. Nor do they cover any case where you’re aware that an irregularity has occurred which involves a breach of the law.

12.2 If you discover errors amounting to a net duty of less than £2,000 in total in any accounting period

For such errors, you must make the necessary adjustments in your records by tax type for the current accounting period in a way which makes it easy for HMRC to check. You must draw attention to the adjustment by ticking the relevant box on your next return.

12.3 If you discover errors amounting to duty of £2,000 or more in total in any accounting period

In addition to making the necessary adjustments in your records, you must tell HMRC, with an explanation, as soon as the errors are found. You must do this in writing to the Registered Consignee Accounting Centre.

12.4 If you have overpaid duty

If you have overpaid duty to HMRC, those sums can be offset against the same tax type code on subsequent declarations, provided the deferment account is the same.

12.5 Make a direct repayment

If you, the Registered Consignee, can justify a request for direct repayment you should complete form HM6 Claim for repayment of excise duty and submit it to the Registered Consignee Accounting Centre. HMRC will accept such requests only if we are satisfied that you cannot make the adjustment through your normal systems, for example, if you have an unusually high duty liability for a particular tax type in one particular accounting period.

We will only repay the holder of the deferment account which was originally debited.

12.6 If HMRC discovers an error on your return

If we discover errors on your return we will tell you what you must do and whether or not a penalty is due.

Question 13

13.  Payment of duty

Accepted Answer

13.1 How to pay

HMRC will check your return and debit the appropriate sums from the relevant deferment account on the next ‘payment day’.

13.2 The Registered Consignee payment days

The payment day for Registered Consignee transactions is the 15th of each month following each calendar monthly accounting period (except for beer which is the 25th of each month).

If the payment date falls on a non-banking day (when banks are closed) the payment date is the:

last banking day before the 25th of the month for beer
first banking day after the 15th of the month for all other goods

13.3 When HMRC sends you a statement

Seven days before the payment day we will send each deferment account holder a Registered Consignee statement showing the amount being debited.

13.4 Enquiries about your deferment holder’s statement

Check your records thoroughly and make sure that any discrepancy relates to Registered Consignee transactions. If it does, contact the Registered Consignee Accounting Centre who will advise on the appropriate action to be taken, if not, you should follow the guidance set out in How to use your duty deferment account.

13.5 Time limits on how much duty you can declare in each period

You must declare all duty due within each accounting period therefore there’s no limit to how much you can declare on each return. However, due to Bacs payment scheme restrictions HMRC can no longer collect direct debits in excess of £20 million. If you have a payment to make which exceeds £20 million, you should make arrangements to pay us, on the due date, by an alternative payment method such as CHAPS.

Question 14

14.  General information

Accepted Answer

14.1 HMRC may ask for information about your business

We may ask about your business from time to time. If we need such information, we will contact you directly.

14.2 HMRC visits to your main business and direct delivery addresses

We will visit you from time to time to check your business.

When we visit you must do all of the following:

admit us to your premises
produce records for us to check
allow us to inspect any stock

Alternatively, there may be occasions when we ask you to produce records at one of our offices.

Failure to comply with these requirements may result in your approval being revoked.

14.3 HMRC will make an appointment

We will normally make an appointment. Occasionally, visits are made without an appointment but the attending officer will give the reason for the unannounced visit.

All HMRC officers carry identification and will show this when they arrive. We aim to carry out our visits as quickly and efficiently as possible. You can help by providing the relevant records and helping us to understand them, especially if there’s anything special or unusual about your particular business.

14.4 Responsibility for the safety of HMRC personnel

While HMRC officers are on your premises you must ensure their safety at all times.

If you do not provide our officers safe access to your premises and to your excise goods we will restrict or revoke your approval.

14.8 If you disagree with any decision HMRC makes about your affairs

When HMRC makes a decision that you can appeal against we will tell you and offer you a review. We will explain the decision and tell you what you need to do if you disagree.

For example with:

the amount of an assessment
the issue of a financial penalty
a decision specifically connected to Registered Consignees

You will usually have 3 options. Within 30 days you can:

send new information or arguments to the officer you have been dealing with
have your case reviewed by a different officer
have your case heard by an independent tribunal

A review will be handled by a different officer from the one who made the decision. If you prefer to have an independent tribunal hear your case, you must write directly to the Tribunals Service (see paragraph 14.12).

14.9 Time limits to ask for a review

If you want HMRC to review a decision, you must write to the person who issued the decision letter within 30 days of the date of that letter. We will complete our review within 45 days unless we agree another time with you.

You cannot ask the tribunal to hear your case until the 45 days (or the time agreed with you) has expired, or we have told you the outcome of the review.

If you’re not satisfied with the conclusion of the review, you have 30 days within which to ask the tribunal to hear your case.

If we cannot complete our review within 45 days, or any time agreed with you, we will ask you whether you are willing to agree to an extension so that we can complete the review. If you do not agree to an extension the review is treated as concluding that the decision being reviewed is upheld.

We will write to tell you this and you then have 30 days from the date of that letter to ask the tribunal to hear your case.

14.10 What you must include in your request for review

Your request should set out clearly the full details of your case, the reasons why you disagree with HMRC and provide any supporting documentation. You should also state what result you expect from our review.

14.11 If you do not want a review

If you do not want a review you may appeal to an independent tribunal. You need to send your appeal to the Tribunals Service within 30 days of the date of decision letter.

14.12 Where to get further information

Get more information about reviews and appeals in:

There’s also information about how to appeal to the Tribunals Service.

Question 15

15.  How to contact HMRC

Accepted Answer

Application and registration queries

Contact the Excise Processing Team about an application you’ve submitted or if you need to tell us about any changes.

General enquiries

Contact excise enquiries helpline if you have a general query.

EMCS queries

If you’re having problems with EMCS, check EMCS service availability and issues to see if the answer is there.

If you still need help contact Excise Movement and Control System: general enquiries.

Movement queries

Contact the ELO to report any shortages or excesses for consignments you’ve received as a Registered Consignee.

HM Revenue and Customs
Excise Processing Team
BX9 1GL

Email: nvcglasgow@hmrc.gov.uk

Telephone: 0300 322 7072 (option 5)

Returns and repayments

Contact the Registered Consignees Accounting Centre if you’re:

submitting returns
making a request for direct repayment
making an enquiry about your deferment holder’s statement

Registered Consignees Accounting Centre
HMRC Duty Paid Movements Team
BX9 1XT

Telephone: 03000 583 099

Question 16

16.  Examples of duty calculation

Accepted Answer

Unless HMRC has approved the use of an alternative method of calculating the duty that does not disadvantage the revenue, you must work out each constituent stage of the calculation process to a minimum of 4 decimal places.

The amount of duty due should be rounded down to 2 decimal places (for example, £2,957.3532 should be expressed as £2,957.35).

The following examples may assist you in calculating excise duty. Please note – the rates used are only examples and are not the current duty rates.

Current rates of excise duty for all excise goods can be found in the Rates and allowances guidance or in Part 12, Volume 1 of the Tariff.

Wine and cider

Excise duty on wine and cider is charged on the total hectolitres of product. It’s charged in bandings, according to the strength of the product (its abv) and whether it’s still or sparkling. It’s calculated by converting the bulk litres of products into hectolitres and then applying the current rate of excise duty.

To find the excise duty on a case of still wine containing 12 bottles of 75cl at 7% abv:

convert the total volume to bulk hectolitres (hl) – this is done by multiplying the number of bottles by their volume in litres and then multiplying that figure by the number of cases – this gives you the bulk volume in litres, therefore you need to divide this figure by 100 to convert it into hectolitres – in this case you get: 12 × 0.75/100 = 0.09hl
the duty rate for the product is then applied to the bulk volume calculated
multiply the bulk hl by the current rate of duty for the relevant product and duty banding (for the purposes of this calculation, we will use a duty rate of £214.02 per hl)
therefore the duty on the case in this example is: 0.09hl × £214.02 = £19.26

Beer

Beer Duty is charged on the hectolitre % of alcohol in the beer. It’s calculated by converting the bulk litres of beer into hectolitres and multiplying by the alcohol by volume (abv) figure declared. The current excise duty rate is then applied to this figure. There are 3 main rates of Beer Duty:

1. General Beer Duty (GBD). The standard rate of GBD applies to all beer with an abv exceeding 2.8% but not exceeding 7.5%.

To find the excise duty on 327 cases of beer each containing 24 bottles of 33cl at 5% abv:

convert the total volume to bulk hectolitres – this is done by multiplying the number of bottles by their volume in litres and then multiplying that figure by the number of cases – this gives you the bulk volume in litres, therefore you need to divide this figure by 100 to convert it into hectolitres – in this case you get: 24 × 0.33 × 327/100 = 25.8984hl
the bulk hectolitre figure is then multiplied by the declared abv amount: 25.8984 × 5 = 129.492hl %
multiply the hl % amount by the current GBD rate – for the purposes of this calculation we will use a rate of £18.57
therefore the duty on 327 cases in this example is: 129.49 × £18.57 = £2,404.62

2. High Strength Beer Duty (HSBD) is payable on beer exceeding 7.5% abv. It is payable in addition to GBD. For the purposes of the calculation below we have used a GBD rate of £18.57 (as in the previous example) and a HSBD rate of £4.64 (25% of the General Beer Duty rate).

To find the total excise duty on 450 cases of beer each containing 24 bottles of 27.5cl at 8% abv.

First work out the hectolitre % of alcohol in the consignment (as explained in the previous example).

24 × 27.5cl = 6.6 litres per case.

6.6 × 450 = 2,970 litres in total.

2,970/100 = 29.7hl in total.

29.7 × 8 = 237.6hl %.

Then multiply this amount by both the GBD and the HSBD rates:

237.6 × GBD rate of £18.57 = £4,412.232, truncated to £4,412.23.

237.6 × HSBD rate of £4.64 = £1,102.464, truncated to £1,102.46.

Total duty payable

GBD + HSBD = £4,412.23 + £1,102.46 = £5,514.69.

3. There is also a reduced rate of GBD for lower strength beer (beer exceeding 1.2% abv but not exceeding 2.8% abv). For the purposes of the calculation, we have used a GBD rate of £18.57 (as in the previous examples) and a reduced rate of £9.29 (50% of the General Beer Duty rate).

To find the excise duty on 375 cases of beer each containing 24 bottles of 27.5cl at 2.8% abv:

First find the hectolitre % of alcohol in the consignment (as explained in the previous examples)

24 × 275ml = 6.6 litres per case

6.6 × 375 = 2,475 litres in total

2,475/100 = 24.75hl in total

24.75 × 2.8 = 69.3hl %

To calculate the actual duty due, multiply the hectolitre % amount by the duty rate. 69.3 × £9.29 = £643.797, truncated to £643.79.

Please note – beer that qualifies for small brewery relief is eligible for different reduced rates of duty. For further information on how to calculate the correct duty rate on small brewery beer please see Excise Notice 226: Beer Duty.

Spirits

Duty is charged on the alcohol content of the spirit (the litres of pure alcohol). This is calculated by multiplying the bulk litres by the alcoholic strength (abv). The excise duty is then obtained by multiplying this amount by the spirit duty rate.

To calculate the excise duty on 79 cases of 43% whisky each containing 12 × 70cl:

calculate the total volume per case by multiplying the number of bottles per case by their volume in litres: 12 × 0.70 = 8.4 litres
the alcohol volume per case is then calculated by multiplying the total volume per case by the abv expressed as a decimal: 8.4 × 0.43 = 3.612 litres of alcohol
the total alcohol volume for the consignment is obtained by multiplying by the number of cases: 3.612 × 79 = 285.348 litres of alcohol
multiply the total litres of alcohol by the current spirit duty rate (for the purposes of this calculation we will use a duty rate of £22.64)
therefore the duty on 79 cases in this example is: 285.34 × £22.64 = £6,460.09

Question 17

17.  The due diligence condition

Accepted Answer

17.1 What due diligence is

Due diligence is the appropriate reasonable care a company exercises when entering into business relations or contracts with other companies, and how it responds in a deliberate reflexive manner to trading risks identified.

17.2 Why a due diligence condition is required

Without effective safeguards in place, there are considerable risks to all businesses along alcohol supply chains of becoming implicated in illicit trading.

This condition requires that all excise registered businesses operating in the alcohol sector consider the risk of excise duty evasion as well as any commercial and other risks when they are trading. Doing so will help to drive illicit trading out of alcohol supply chains, and reduce the risk to businesses of financial liabilities associated with goods on which duty has been evaded.

17.3 What you’re expected to do

From 1 November 2014 it becomes a condition of your approval as a Registered Consignee that you must:

objectively assess the risks of Alcohol Duty fraud within the supply chains in which you operate
put in place reasonable and proportionate checks, in your day to day trading, to identify transactions that may lead to fraud or involve goods on which duty may have been evaded
have procedures in place to take timely and effective mitigating action where a risk of fraud is identified
document the checks you intend to carry out and have appropriate management governance in place to make sure that these are, and continue to be, carried out as intended

17.4 How to assess the risks in your supply chains

The fraud risks within a supply chain are unique to each business, and objective assessment of the likelihood of your trading activities contributing to fraud is an essential first step to developing effective due diligence procedures. You will need to consider the full range of trading relationships you have established and the potential for fraud in each.

The main risks within the alcohol sector include:

involvement in the supply of goods for fraud
receiving goods that have been smuggled or diverted into the UK
inadvertently facilitating fraud by providing import or warehousing services

A key feature of the smuggling or diversion of alcohol to the UK market is the ability to source product either where the excise duty has been suspended or it has been refunded under drawback provisions. To assess your exposure to this risk you will need to objectively assess if there is potential for duty evasion resulting from your trading activity. You will need to know who you’re selling to and where the goods are destined for and understand the market for these products. Without this, there is a risk of supplying goods directly or through a third party into illicit supply chains.

Import and warehousing procedures are often exploited to provide cover for the illicit movement of goods. Fraudsters will seek to distribute duty evaded goods as well as counterfeit alcohol into legitimate retail supply chains. To assess your exposure to this risk you will need to objectively consider whether the supply chain and trading activity is credible which includes knowing who you source goods from and provide a service to.

High level indicators of risk include goods being received from unusually complex or apparently uneconomic supply routes, for example, regular supplies of UK produced goods that have been shipped out to another member state and then re-imported. If you’re sourcing duty paid goods you will also need to consider the credibility of suppliers and the level of evidence you can obtain to demonstrate the provenance and duty status of goods.

Paragraph 17.9 provides further detail on risk indicators.

17.5 The checks you should carry out

Once you have established the main risks of fraud you may be exposed to, your regular checks during trading should be of a type and level sufficient to establish the integrity of the excise transactions and supply chains you’re trading in. This level needs to be reasonable and proportionate to the risk.

Depending on the nature of your business and complexity of your transactions, checks will need to be individually tailored. In particular, they must be sufficiently sensitive, yet robust enough, to pick up potential fraud risks. These checks should provide protection from the threat of fraud or you becoming inadvertently involved in fraudulent activity.

As a general rule ‘fitted’ checks should normally focus on:

financial health of the company you intend trading with
identity of the business you intend trading with
terms of any contracts, payment and credit agreements
transport details of the movement of the goods involved whether or not you’re directly involved in this
existence, provenance of goods – where goods are said to be duty paid you should normally seek sufficient detail to satisfy yourself of the status of the goods
the Deal, understanding the nature of the transaction itself, including:
- how the cost of the goods is built up, for example, whether it includes appropriate taxes, transport and so on
- why it’s being offered
- whether it’s too good to be true
- how the deal compares to the market generally

Paragraph 17.10 provides more examples.

17.6 How you should respond to a fraud risk in your supply chains

It’s expected that your due diligence procedures will provide effective control over the risks of fraud within your supply chains. Where your checks indicated real concerns, we would normally expect aspects of your supply chain to be changed to address this, for example, the supplier or the destination of the goods. However, a decision of whether or not to trade with another party remains a commercial decision for your business to take.

If your checks lead you to suspect duty fraud you should also inform our Customs Hotline.

17.7 HMRC will review the due diligence checks you have in place

As part of HMRC’s enforcement and general audit programmes, we will consider whether or not the steps you have taken to embed anti-fraud due diligence into your trading activity are sufficient and timely to address fraud risks in your supply chains. We will aim to establish whether you have objectively assessed the risks in your supply chain, and you must be able to demonstrate that you have put in place reasonable and proportionate checks and effective procedures to respond to fraud risks when they arise.

17.8 What HMRC will do if your due diligence checks are found to be insufficient

If your due diligence procedures are considered insufficient to address fraud risks, HMRC will carefully consider the facts of the case before taking further action, but where appropriate we will seek to support you to strengthen your procedures.

In more serious cases such as a failure to consider the risks, undertake due diligence checks or respond to clear indications of fraud, we will apply appropriate and proportionate sanctions. For serious non-compliance, such as ignoring warnings or knowingly entering into high risk transactions, we may revoke excise approvals and licences.

You’re also reminded that handling goods liable to excise duty held outside a duty suspension arrangement may cause you to become liable for any excise duty due on those goods and an excise wrongdoing penalty. Any of those goods you currently hold could also be liable to forfeiture.

Paragraphs 17.9 and 17.10 provide further details on risk indicators and outline some of the checks that you may carry out to identify high risk transactions. Please note –these are not intended to be prescriptive or exhaustive. Once you have established the most appropriate due diligence tests for your business, these should be used to test both new and existing transactions and supply chains linked to your business. Some checks may be more appropriate to your business than others.

17.9 Examples of due diligence risk indicators

You should be concerned about a prospective transaction where you identify one or more of the following indicators in both suppliers and customers, the presence of which may lead you to make further inquiries.

Note – this list is not exhaustive.

Financial health of the company you intend trading with:

there is no, or poor, credit ratings but it is still able to finance substantial deals
there are high levels of debt
they are buying high value goods on extended credit
they are a new company with little or no trading history
there are little or no fixed assets

Identity of the business:

there’s a lack of detail about the business’ identity, for example, no address details, or HMRC approval number
they do not appear to be on Companies House records as originally described
they’re dealing in high value goods from short term lease accommodation and, or residential addresses
there’s no general visibility of the company you intend trading with, for example, they do not appear to advertise or have a website
they have returned only partly completed application or trading forms
if you’re a warehousekeeper, receiving duty suspension goods on behalf of a third party who is not WOWGR registered where they would otherwise be required to be registered

Terms of contract, payment and credit agreements:

an insistence on dealing in cash, especially where the deal is a high value one
cash payments made using money couriers
offers of credit appear to be outside normal business practice – payment terms are normally 21, 31 or 45 days but high risk transactions may have short payment terms, for example, 48 hours
you’re asked to make payment to an account or person which does not appear to be linked to the seller, or other unusual payment arrangements requested by the seller – the same applies to customers
a valid pro-forma or purchase invoice is not or will not be provided
the circumstances of the trading arrangement seem false or contrived, for example, a supplier provides you with the details of a customer for the goods they are selling to you, or offers you a contract with no financial loss to you

Transport

The goods are to be received from an unusual source or supply route, for example, UK produced goods are sourced from another country and directly compete with those from a more direct supply route.

Existence or Provenance of goods:

the goods are claimed to be duty paid but your supplier (or person on whose behalf you are storing the goods) cannot provide reasonable evidence of duty payment to support the status of the goods (for further detail about what constitutes evidence of duty payment please refer to Excise Notice 207: excise duty drawback
individuals in the company have little knowledge of your trade sector
where samples are provided or the goods have been received:
- for spirits there’s no duty stamp in circumstances where there should be one or the duty stamp does not fluoresce (refer to guidance)
- the goods appear counterfeit, in that, the quality of labels and or packaging is poor when compared to the genuine article
- the supporting paperwork seems false
- the goods are older than supporting evidence (such as documents demonstrating duty payment) suggest, for example, the best before dates indicate an earlier production date whereas documentation gives the impression you were buying newer stock
the company has only been trading for a very short period of time but has managed to achieve a large income in that short period of time

The deal:

customer demand for specific brands in other countries exceeds expected levels of consumption there
the goods are to be moved in an unusual supply route that in itself would add significant logistic costs and bring into question the economics of that trade (unless duty was to be evaded)
supplies are offered via unsolicited emails or flyers received out of the blue
goods are offered at incredibly low prices which seem too good to be true
free gifts of similar or other excise goods not fully documented and in themselves would place a question over the deal as a whole
there are other incentives such as contingency discounts which overall make the deal sound too good to be true

17.10 Examples of due diligence checks

Financial health:

obtain, undertake credit checks or other background checks on the business you intend trading with
where a poor credit rating is identified, establish how the transactions will be funded, what security can be offered that you will be paid
where credit is offered by the business, who is providing the credit facility
what payment terms are offered and are they commercially viable

Identity:

check company details provided to you against other sources, for example, website, letterheads, telephone directories, and so on
ask whether your customer or supplier is a member of a relevant trade association
obtain copies of certificates of incorporation, VAT registration certificates and excise registration certificates where appropriate and where a trade class is quoted on these check whether or not it relates to the type of trade you’re engaging in
verify VAT and excise registration details with HMRC (we recommend that these checks are undertaken regularly for new trading arrangements and proportionately longer for trusted ones, unless you suspect a problem)
if you’re a warehousekeeper receiving duty suspended goods into your warehouse then you should be satisfied that the owner of the goods is registered under WOWGR where required
obtain signed letters of introduction on headed letter paper and references from other customers or suppliers
insist on personal contact with a senior official of the prospective supplier and where necessary, make an initial visit to their premises – you should use this opportunity to confirm the identity of the person you intend doing business with and keep a record of your meeting
establish what your customer’s or supplier’s history in the trade is – can this be evidenced
obtain the prospective customer’s or supplier’s bank details – in the case of an import or export, does the supplier or recipient share the same country of residence as their bank
establish who you will be paying – is this the same company as the one you’re directly dealing with
if you’re providing a service who will be paying for it

Terms of any contracts, payments and credit agreements:

carefully consider the terms of any contracts and credit agreements before entering into these and challenge elements which appear unusual
what recourse is there if the goods are not as described
if payment is to be made to or from a third party, is there a sound commercial reason for this
if payment is to be made to or from a third party, is it to or from an off shore account
are there normal commercial arrangements in place for the financing of the goods
where payment is made from an overseas business how is it to be made
has your supplier referred you to a customer who is willing to buy goods of the same quantity and brand as being offered by the supplier
does your supplier offer deals that carry no commercial risk for you, for example, no requirement to pay for goods until the payment is received
are the goods adequately insured
are high value deals offered with no formal contractual arrangements
where you’re buying from a broker:
- what overall value does this link in the supply chain add
- is it possible to source more directly
- how competitive is the broker’s pricing to those from a more direct route
- how are the savings made in a longer supply chain to make it viable
where transactions are being financed by a third party, is this person a regulated financial body such as a bank

Transport:

establish where the goods will be sourced from – is this the country of production – if not why are the goods being routed in this way
who is responsible for the transport – is the cost of the goods inclusive of transport – if so, does this mean that the potential logistical costs make the unit price unrealistic
details of delivery vehicles should be retained and if necessary any variations to expected transport arrangements recorded

Existence or provenance:

how has the trader contacted you
do the goods exist
can you inspect the goods before purchasing them
are they in good condition and not damaged
do the quantities on offer seem credible for the type of business you intend trading with
where goods are said to be duty paid, seek sufficient detail to satisfy yourself that they are – this will be easier the closer you are in the supply chain to production – this point is also important where you intend holding goods on behalf of a third party