Policy paper

Changes to Schedule 3 of CEMA 1979 for Seizure in situ

Published 3 March 2021

Who is likely to be affected

Businesses involved in the importation of goods into the UK who divert them onto the UK market without payment of the correct amount of import duty and import VAT. This measure will only impact non-compliant traders.

General description of the measure

This measure is a legislative amendment to Schedule 3 of the Customs and Excise Management Act (CEMA) 1979 to allow HMRC to levy a civil penalty for goods seized ‘in situ’ that are removed without prior authorisation.

Goods that have been seized by HMRC are normally kept in Border Force controlled Queen’s Warehouses. When goods that have been seized are kept on the trader’s premises, the seizure is known as ‘in situ’.

Currently, Schedule 3 CEMA 1979 allows for goods to be seized and kept on the trader’s premises but does not refer to seizure ‘in situ’ and therefore if seized goods are removed without prior authorisation, no penalty can be issued. This measure is a legislative amendment to Schedule 3 of CEMA to include a civil penalty for where goods, seized in situ, are removed without authorisation. This will align with existing legislation in Schedule 2A, CEMA, and the current penalty for unauthorised removal of ‘detained’ goods in situ.

Policy objective

Legislating for a civil penalty will tackle unauthorised removal of goods seized in situ, thereby protecting the import duty and VAT owed on seized goods and ensuring a level playing field for compliant businesses in the UK. This measure seeks to deter the deliberate act to remove goods seized in situ by penalising unauthorised removal and would not impact legitimate traders.

Legislating for a penalty will also support existing schemes to provide assurance against non-compliance such as the Fulfilment House Due Diligence Scheme, and the Soft Drinks Industry Levy, both schemes have forfeiture provisions and will apply to goods in bulk.

Having a penalty for the unauthorised removal of goods enables HMRC and Border Force officers to fulfil regulation requirements where seizure is necessary and assist officers in tackling non-compliance. It will also mitigate the logistics, costs and environmental impact of moving goods seized in bulk.

Background to the measure

Schedule 2A of CEMA 1979 allows for goods to be detained ‘in situ’, i.e. goods that are detained can remain in the place of first detention such as the trader’s premises or a Fulfilment House, rather than being removed to a Queen’s Warehouse. Schedule 2A CEMA 1979 also provides for a civil penalty under section 9 of the Finance Act (FA)1994 for the unauthorised removal of detained goods. A penalty may be issued for the value of the goods, and the duty owed on them (or £250, whichever is greater).

This amendment to Schedule 3 CEMA will mirror the existing penalty for detained goods in Schedule 2A CEMA.

There has not been a prior consultation process for this measure. Consultation was not required as this is a minor amendment, and it will align with the existing penalty regime for detained goods in CEMA 1979.

Detailed proposal

Operative date

The measure will take effect on, or after, the date that Finance Bill 2021 receives Royal Assent.

Current law

The current law is contained in the Customs & Excise Management Act (CEMA) 1979, s139 and Schedule 3 to that Act.

This includes the provisions to allow goods to be seized and detained. It also sets out the circumstances where the power can be exercised by any officer, or others, including police officers and the coastguard.

The provisions to allow a penalty to be effected for contraventions of statutory requirements are set out in section 9 of FA 1994. Section 10 of FA 1994 allows for the Tribunal to take any reasonable excuse into account. This would apply irrespective of whether the goods were in fact liable to forfeiture. The penalty will be ‘duty geared’ to the equivalent amount of 100% of the duty. The existing appeal process will apply to this penalty as well.

Proposed revisions

The legislation will insert a new paragraph to Schedule 3 of CEMA 1979 titled “Unauthorised removal or disposal of seized goods”. This measure will allow the goods to be seized and, with the agreement of a person responsible, remain at the place where it is first seized rather than being removed elsewhere.

The legislation will also introduce statutory safeguards by way of time limits and an appeal mechanism. The proposed safeguards include that owners will have one calendar month in which to contest the seizure before goods are destroyed. At the end of the one calendar month, if there is no appeal, the goods will be deemed as forfeit to the Crown and can be destroyed.

The amendment to Schedule 3 of CEMA 1979 to include a civil penalty under the Finance Act 1994 for where goods, seized in situ, are removed without authorisation will mirror the existing penalty for detained goods in paragraphs 4 and 5 of Schedule 2A to CEMA 1979 for detention.

Summary of impacts

Exchequer impact (£m)

2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026
Nil	Nil	Nil	Nil	Nil	Nil

This measure is expected to have a negligible impact on the Exchequer.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

There is no impact on individuals as this measure only affects businesses. This measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

It is not anticipated that there will be impacts on groups sharing protected characteristics.

Impact on business including civil society organisations

This measure is not expected to impact compliant traders. It will only impact non-compliant businesses. Customer experience for compliant businesses is expected to remain broadly the same as it does not change how they interact with HMRC. There is expected to be no impact on civil society organisations.

Operational impact (£m) (HMRC or other)

HMRC will incur extra staff costs to monitor operation of the new penalty and enforce compliance, at an estimated cost of approximately £470,000 over a 5 year period.

Other impacts

Other impacts have been considered but none has been identified.

Monitoring and evaluation

This measure will be kept under review and monitored through information collected. This will include how many penalties are issued, and the amount of revenue protected.

Further advice

If you have any questions about this change, please contact Giselle Bowen, Excise & Customs Law team on Telephone (03000 593707) or email:

• giselle.bowen@hmrc.gov.uk
• enquiries.excisecustomslawteam@hmrc.gov.uk