Notice

Notice 300: customs civil investigation of suspected evasion

Published 20 May 2013

Foreword

This notice cancels and replaces Notice 300 (October 2011).

1.Introduction

1.1 What is this notice about?

This notice explains what happens when HM Revenue and Customs (HMRC) investigate:

• a potential smuggling offence by a traveller or a trader
• fraudulent declarations and dishonest claims for repayment of duty or relief from duty

under their civil evasion penalty procedure.

The investigation is conducted with a view to the imposition of a civil evasion penalty for dishonest conduct, if our suspicions are confirmed. It is not being conducted with a view to your prosecution for evasion of customs taxes or duties.

These provisions apply to individual travellers, commercial importers and exporters or their agent or representative.

This notice outlines:

• HMRCs approach to reaching an agreement on the amount of taxes and/or duties under declared or deferred
• how you can reduce any penalty

1.2 What’s changed

The title of this notice has been changed to make it clearer that it relates to investigations into Customs evasion.

The process by which passengers are dealt with has changed, and a new section has been included to explain the expectations and rights of the individual.

1.3 Related publication

Civil penalties for contraventions of customs laws which do not involve evasion are covered in Notice 301: civil penalties for contraventions of customs law.

2.How does this affect me?

If we identify irregularities due to conduct involving dishonesty, a civil evasion penalty will normally be applied.

We will normally ask you and your professional adviser, if you have one, to attend a meeting with us. Please tell us in advance if you need an interpreter or have any special needs so that we can take these into account when we prepare for the meeting.

We will tell you:

• the check is not being conducted with a view to a criminal investigation in relation to the matters that are the subject of our check. However, giving us information that you know to be untrue, whether verbally or in any document, may make you liable to prosecution
• the matters that are the subject of the check. This means the behaviour(s) and period(s) under enquiry, rather than the specific information we hold that gives rise to our suspicion of dishonesty or deliberate behaviour

You will have an opportunity to disclose any irregularities or matters in relation to your tax affairs.

We will:

• listen to any explanations that you or your professional advisers give
• keep an open mind to the possibility that there may be an innocent explanation for the suspected irregularities

We make notes of all meetings and can give copies of the notes to you or your adviser if you ask for them.

If you wish to disclose irregularities or matters in relation to your tax affairs in areas that are not the subject of our check we may not be able to deal with these as part of the check. However we will consider any disclosures that you make, or additional matters that we may uncover during the check, to determine how they should be treated. Any irregularities outside of the matters being checked may be considered for criminal investigation, if appropriate.

We expect you to be truthful, to tell us all relevant facts and to co-operate fully in putting your tax affairs in order. If you are unsure whether particular facts are relevant, you should tell us anyway.

It may be necessary to make further checks. If this happens, we will explain to you the compliance checks process and the steps that need to be taken to establish the relevant facts. It may be necessary to use our statutory information powers, including contacting third parties.

We will invite you to make payments on account towards any tax arrears, both at the initial meeting and throughout the check. This will reduce any interest charges.

If, as a result of the check, we believe that the tax arrears are due to conduct involving dishonesty or deliberate behaviour on your part we will consider whether you should pay a penalty.

2.1 Do I have to co-operate with your check?

When we are considering penalties Article 6 of the Human Rights Act give you certain rights.

The extent to which you co-operate with us and provide us with information is entirely a matter for you. In making your decision, you may wish to get help from a professional adviser. If you do, your adviser can accompany you to all meetings held with us. They may correspond with us on your behalf.

We would welcome your co-operation with the check and in establishing the correct amount of tax due. Such co-operation can significantly reduce the amount of any penalties due.

When we are considering penalties you have a right under Article 6 not to answer our questions. This is sometimes referred to as the right not to self-incriminate or the right to silence. This right does not cover information of documents that already exist. This means that you must provide us with such information or documents that already exist, if we have a legal right to ask for them.

Please also read factsheet Compliance checks: The Human Rights Act and penalties — CC/FS9 which tells you about your rights under the European Convention on Human Rights when we are considering penalties.

2.2 Which taxes and duties are covered by the regime?

The Customs Civil Evasion Penalty (CCEP) regime will cover breaches of the UK and EU customs law relating to the import, export and holding or processing of imported goods under customs supervision. This includes breaches by individual travellers as well as businesses. The duties and taxes covered by these provisions include Customs Duty, EU Customs Duty, import VAT and customs duties in the agricultural sector (the ‘relevant tax and duty’).

We will impose a CCEP when we are satisfied that you have evaded the ‘relevant tax and duty’ and that your conduct was dishonest. For example if you claim (including deferred or postponed payments) any repayment, rebate, drawback, relief, exemption or allowance to which you are not entitled; or if you make a false declaration to HMRC.

These procedures do not affect our ability to seize goods liable to forfeiture. The current legal and policy provisions remain. In some circumstances seized goods may be offered for restoration. The restoration sum will include a penalty and the duty/VAT payable must be paid in full before the goods are released.

2.3 What is not covered by the regime?

Customs civil evasion penalties do not apply to excise duties, there are separate penalties due for excise offences. They will also not apply to the importation or exportation of prohibited or restricted items, such as offensive weapons or illicit drugs. Current legal provisions in these areas will continue to apply.

2.4 Penalty for evasion of the relevant tax or duty

A penalty may be imposed in any case where:

• a person engages in any conduct for the purpose of evading any relevant tax or duty
• his conduct involves dishonesty (whether or not such as to give rise to any criminal liability)

The penalty that the law imposes is an amount equal to the relevant tax or duty evaded or sought to be evaded.

The penalty can be mitigated (reduced) to any amount, including nil. Our policy on how the penalty can be reduced is set out in section 3.

The penalty can also be imposed on a director or managing officer of a business. This includes a manager, secretary or other similar officer of the business or a person purporting to act in any such capacity.

2.5 What happens first?

2.5.1 Individual travellers/passengers

Where the UK Border Force suspects that you have evaded paying the relevant customs duty/import VAT the information they have collected from you will be referred to HMRC. We shall consider the information and if we decide that further action is appropriate we shall contact you.

You may be asked to attend a meeting with HMRC. At this meeting the officer will explain why they consider you have committed a potential smuggling offence, along with the evasion of customs duty or import VAT, and why we consider your actions to be dishonest.

You shall be given an opportunity to provide explanations and if you have a satisfactory explanation for your behaviour, a customs civil evasion penalty will not apply.

Your full co-operation during the interview (an early and truthful admission of the smuggling attempt, and value of the goods) will enable our officer to reduce the amount of penalty you may have to pay.

The amount you may have to pay only relates to the relevant import duties and any related penalty and is not a fee for return of any seized items. For details about our process for dealing with seized items please refer to Notice 12A: what you can do if things are seized by customs.

2.5.2 Businesses

We will normally ask you to attend a meeting with us. You are welcome to have your professional tax or legal adviser present at this interview and to involve them at any stage throughout the investigation.

During the interview the officer will:

• explain the civil evasion penalty procedure
• explain that the matter is not being investigated with a view to a prosecution in relation to the matters under investigation
• ask for your co-operation to establish your true liability to the relevant tax or duty
• ask questions to examine his/her concern as to the accuracy of your records and invite you to provide explanations

The aim of this process is for our officer to establish the facts. During the meeting you will be given the opportunity to make an early and truthful disclosure of any contravention of the UK or EU customs law.

Our officer will discuss with you their concerns that a contravention of a the UK or EU customs law may have arisen from dishonest conduct on your part, but will listen to any explanations that you, or your representative, wish to give. If you have a satisfactory explanation for the discrepancy, a civil evasion penalty will not apply.

2.6 How are the penalties worked out?

The penalty will be a percentage of the relevant tax or duty evaded.

3.How can I reduce the penalty?

It is for you to decide whether or not to co-operate with our investigation, but if you do you should be truthful as making a statement to us you know to be false may render you liable for prosecution.

If you choose to co-operate and disclose details of your true liability then you can significantly reduce the amount of any penalties due.

You should tell us about anything you think is relevant when we are conducting the investigation. At the end of the investigation we will take into account the extent of your co-operation.

3.1.1 Disclosure

During the investigation an early and truthful admission of the extent of the arrears and why they arose will attract a considerable reduction (up to 40%). By the extent of the arrears we mean what has happened and over what period of time, along with any information about the value involved, rather than the precise quantification. Disclosure forms the first part of the available reduction of any penalty as described in Section 3.2.

3.1.2 Co-operation

You will receive further mitigation (up to 40%) if you:

• attend all the interviews (where necessary)
• provide all information promptly
• answer all questions truthfully
• give the relevant information to establish your true liability
• co-operate until the end of the investigation

We will consider the extent to which your co-operation when applying a penalty.

You may receive no penalty reduction at all if you:

• delay supplying information, or refuse to provide it
• avoid attending interviews (where necessary)
• give untrue answers to questions
• obstruct the course of the investigation

Our officer has to decide how much information you gave, how soon you gave it and how it contributed towards settling the investigation when considering the reduction of any penalty.

3.2 By how much can the penalty be reduced?

You should tell us about anything you think is relevant during the investigation. At the end of the investigation we will take into account the extent of your co-operation.

The maximum penalty of 100% import duties evaded will normally be reduced as follows:

• up to 40% — early and truthful explanation as to why the arrears arose and the true extent of them
• up to 40% — fully embracing and meeting responsibilities under the procedure by, for example; supplying information promptly, providing details of the amounts involved, attending meetings and answering questions

In most cases, therefore, the maximum reduction obtainable will be 80% of the value of import duties on which penalties are chargeable. In exceptional circumstances however, consideration will be given to a further reduction, for example, where you have made a complete and unprompted voluntary disclosure.

4.Payment of customs civil evasion penalties

4.1 How will I be notified of the amount of the civil penalty?

When the final arrears have been established and/or agreed, you will receive a demand notice notifying the amount of the tax or duty evaded and any interest chargeable on this amount. You will receive a separate penalty demand notice which will show you how much reduction has been allowed and the penalty due to be paid by you and how this was calculated. The demand notices will indicate the alternative methods of payment and where to send your remittance.

4.2 What if I cannot afford to pay the amount in full?

It may be possible to pay by instalments. If you need time to pay please contact our Debt Management Division to discuss your options. Failure to pay will result in Civil Recovery Proceedings.

4.3 What if I do not agree with the arrears and/or penalty?

If you disagree with the amount(s) as detailed in the demand notice(s), you can request a review of the matter. If you are still not satisfied with the outcome you have the right to appeal to the independent First-tier Tribunal.

More detailed information on HMRC’s review and appeal procedures are available on our website What to do if you disagree with an HMRC decision or see our factsheet HMRC 1 HM Revenue and Customs decisions — what to do if you disagree.

Your rights and obligations

The HMRC Charter explains what you can expect from us and what we expect from you.

Putting things right

If you are unhappy with our service, please contact the person or office you have been dealing with. They will try to put things right. If you are still unhappy, they will tell you how to complain.

If you want to know more about making a complaint go to hmrc.gov.uk and under quick links, select Complaints and appeals.

How we use your information

HMRC is a Data Controller under the Data Protection Act 1998. We hold information for the purposes specified in our notification to the Information Commissioner, including the assessment and collection of tax and duties, the payment of benefits and the prevention and detection of crime, and may use this information for any of them.

We may get information about you from others, or we may give information to them. If we do, it will only be as the law permits to:

• check the accuracy of information
• prevent or detect crime
• protect public funds

We may check information we receive about you with what is already in our records. This can include information provided by you, as well as by others, such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HMRC unless the law permits us to do so. For more information go to hmrc.gov.uk and look for Data Protection Act within the Search facility.