Policy paper

The Excise Duties (Northern Ireland Miscellaneous Modifications and Amendments) (EU Exit) Regulations 2020

Published 24 December 2020

1. Who is likely to be affected

Businesses moving excise goods (alcohol, tobacco and energy products) between the United Kingdom (UK), the European Union (EU) and Northern Ireland.

2. General description of the measure

This measure will make modifications to secondary legislation which details the UK’s rules on the holding and movement of excise goods by businesses. It also makes new provisions in relation to the payment of excise duty due on goods which are moved to Northern Ireland from Great Britain as well as saving and modifying certain provisions as they applied immediately before the end of the transition period, in relation to Northern Ireland.

These are necessitated by the UK’s exit from the EU and will cover how these rules will work in Northern Ireland once the transition period has ended.

3. Policy objective

The measure will implement the Northern Ireland Protocol to the Withdrawal Agreement while ensuring that the excise treatment of goods moving between Great Britain and Northern Ireland remains as close as possible to the current approach.

4. Background to the measure

The UK left the EU on 31 January 2020 and entered a transition period which ends at 11pm on 31 December 2020. In order to meet the requirements of the Northern Ireland Protocol, EU legislation will continue to apply in relation to the movements of excise goods into and out of Northern Ireland.

Under the Northern Ireland Protocol, Northern Ireland maintains some alignment with EU processes, including EU rules for excise goods. One consequence of this is that excise goods become subject to excise duty on entering Northern Ireland, including when they are moved from Great Britain.

5. Detailed proposal

5.1 Operative date

The measure will have effect from the end of the transition period, i.e. 11pm on 31 December 2020.

5.2 Current law

The current rules and regulations about the holding and movement of excise goods within the EU are set out in Council Directive 2008/118/EC. This is implemented in UK law by the Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (HMDP). The HMDP regulations need amending to reflect the fact that Northern Ireland, although not an EU member state, will continue to be subject to the EU rules after the end of the transition period, while Great Britain will not.

Amendments to The Excise Goods (Holding, Movement and Duty Point) (Amendment etc.) Regulations 2019 are required to address the split functionality of the Excise Movement and Control System (EMCS). In addition, The Duty Stamps Regulations 2006 lay down the circumstances when retail containers of relevant alcoholic products in the UK must, and must not, be stamped when moving from Great Britain into Northern Ireland via the Republic of Ireland.

The Excise Duties (Miscellaneous Amendments) (EU Exit) Regulations 2019 make amendment to the Excise Goods (Drawback) Regulations 1995 to set out in what circumstances UK excise duty may be reclaimed and what evidence is needed to support such claims.

5.3 Proposed revisions

The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 Currently excise goods, on which UK excise duty has been paid, can move unrestricted within the UK. At the end of the transition period, some movements between Great Britain and Northern Ireland will trigger an excise duty point, which could require a second payment of UK excise duty.

Additional proposed amendments also modify the existing HMDP regulations governing the holding and movement of excise goods in several ways.

They ensure that the provisions which implement EU legislation continue to apply but only in relation to excise goods entering or leaving Northern Ireland or being held or moved wholly within Northern Ireland by changing references to “the United Kingdom” to read “Northern Ireland”.

Other references are also being amended, added, replaced or removed to achieve the same policy approach of ensuring that the excise rules apply as required in relation to Northern Ireland after the end of the transition period. For example, the reference to “another Member State” is replaced with “an EU Member State”, references to the Channel Islands and the Isle of Man are removed from the definition of a Member State. References to customs legislation which link to the Community Customs Code are replaced to ensure correct referencing to EU legislation and the Union Customs Code.

The definition of excise goods is also updated to ensure it covers all goods subject to excise rules in Northern Ireland including heated tobacco products.

Part 4 of the HMDP regulations, which concerns registered consignors, is also amended to make it clear that it only applies in relation to movements which involve an EU Member State.

Parts 8 and 9 of the HMDP regulations are removed as they govern movements of duty suspended goods wholly within the UK (and any references to these parts throughout HMDP are also removed for the purposes of these Northern Ireland modifications). Movements wholly within Northern Ireland will continue to be subject to same rules as they are now. Equally, movements between Northern Ireland and the rest of the UK will, as far as possible, be subject to the same rules as they are now.

The Excise Goods (Holding, Movement and Duty Point) (Amendment etc.) (EU Exit) Regulations 2019 The amendments to the Excise Goods (Holding, Movement and Duty Point) (Amendment etc.) Regulations 2019 provide for the circumstances in which the UK Excise Movement and Control System (EMCS) will be used and the circumstances in which the EU EMCS will be applicable in relation to different duty suspended movements leaving, entering or within Northern Ireland. There will be two separate types of movement, one to and from the EU and the other to and from Great Britain. In effect there are two different versions of the existing EMCS, one of which shares data with the EU (for movements involving the EU) and one which purely applies for internal UK movements.

To avoid potential double taxation and prevent the need for a reclaim of any previous payment of excise duty, the proposed amendments introduce an off-set mechanism. This provides that where HMRC are satisfied that UK excise duty has already been paid on goods moved to Northern Ireland from Great Britain, the amount paid can be off-set against the amount due at the second duty point arising in Northern Ireland. In most cases this will result in no additional payment being necessary. It also provides that the Commissioners for HMRC may require compliance with such conditions and evidence of previous payment of UK excise duty in respect as the goods as they may specify in a public notice on gov.uk

There is also a provision that allows HMRC to remit excise duty where on application by a person liable to pay any excess duty due after the off-set. There may be excess duty to pay where a duty rate change has occurred. The power to remit is subject to a person complying with conditions and providing such evidence as the Commissioners for HMRC may specify in a public notice on gov.uk. The Duty Stamps Regulations 2006

In addition, amendments are required to the Duty Stamps Regulations 2006. They lay down the circumstances when retail containers of relevant alcoholic products in the UK, must and must not be stamped. UK duty paid excise goods bearing duty stamps must have their stamps destroyed before they are exported from the UK but can currently move between different parts of the UK without any effect on the stamps. This instrument amends the list of circumstances in which duty stamps must not be stamped to make it clear that the term export in these regulations does not include movements between Northern Ireland and the rest of the UK which simply pass through the Republic of Ireland on their journey. This allows for any UK duty stamps already applied to UK excise duty paid alcohol to be retained as currently and avoids the need to destroy them and reapply new ones upon arrival.

It also adds to the exceptions to the general principle that goods bearing duty stamps are not eligible for a reclaim of UK excise duty under the excise duty drawback scheme. This is to allow for a drawback claim where goods travel from Great Britain to Northern Ireland by way of the Republic of Ireland without the need to remove any duty stamps. This only applies in cases where those goods are not placed into a duty suspension arrangement upon leaving Great Britain. This is to try to maintain, as far as possible, the current ability to move stamped duty paid goods within the UK and avoid collecting the UK excise duty twice.

5.4 The Excise Duties (Miscellaneous Amendments) (EU Exit) Regulations 2019

The Excise Duties (Miscellaneous Amendments) (EU Exit) Regulations 2019 are amended to ensure the amendments which those regulations make to the Excise Goods (Drawback) Regulations 1995 (S.I. 1995/1046) (the 1995 Regulations) operate as required in Northern Ireland in relation to certain movements of goods. The 1995 Regulations set out in what circumstances UK excise duty may be reclaimed and what evidence is needed to support such claims. The amendments ensure the current rules continue to work for excise goods moving between Northern Ireland and Great Britain.

UK excise duty paid goods are generally not eligible to reclaim the UK excise duty on goods that will be consumed in the UK. However, after the end of the transition period goods that travel from Great Britain to Northern Ireland by way of an EU member state will be exported from Great Britain before arriving in Northern Ireland. This instrument amends the application of the drawback regulations to allow for a claim for goods that take this particular journey. It also gives HMRC the powers to provide for specific details as prescribed within a public notice in relation to the evidence of excise duty payment that would be acceptable in support of such a claim.

This instrument also saves, in relation to Northern Ireland, the following regulations as they applied immediately before the end of the transition period:

• The Denatured Alcohol Regulations 2005 (S.I. 2005/1524);
• The Excise Warehousing (Etc.) Regulations 1988 (S.I. 1988/809);
• The Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (1999/1278);
• The Excise Duty Point (External and Internal Community Transit Procedure) Regulations 1998 (S.I. 1998/202);
• The Excise Warehousing (Energy Products) Regulations 2004 (S.I. 2004/2064).

6. Summary of impacts

6.1 Exchequer impact (£m)

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

The Office for Budget Responsibility included the impact of EU exit in their Economic and fiscal outlook November 2020, this includes the impact of this measure.

6.2 Economic impact

This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families

This measure is expected to only impact individuals in limited circumstances when moving excise goods for their own use between Great Britain and Northern Ireland.

Customer experience is expected to remain broadly the same as this measure does not alter how private individuals interact with HMRC.

The measure is not expected to impact on family formation, stability or breakdown.

6.3 Equalities impacts

It is not anticipated that there will be impacts on groups sharing protected characteristics. Impact on business including civil society organisations

This legislation makes technical fixes to the statute book to implement the requirements of the Northern Ireland Protocol. An assessment was made of the impact of the Northern Ireland Protocol in 2019 to support passage of the European Union (Withdrawal Agreement) Act 2020.

This measure is not expected to have any additional impact on businesses, including civil society organisations, aside from familiarisation costs, as this measure is in line with the implementation of the Northern Ireland Protocol, which is already part of UK law, and as such the impacts have already been considered.

This measure is not expected to impact civil society organisations. Operational impact (£m) (HMRC or other)

This measure is not expected to have an operational impact upon HMRC or other government departments. Other impacts

Other impacts have been considered and none has been identified.

7. Monitoring and evaluation

The measure will be kept under review through communication and ongoing stakeholder engagement with trade bodies and other representative businesses.

8. Further advice

If you have any questions about this change, please contact Nicholas Hampson on Telephone: 03000 576 416 or email nicholas.hampson@hmrc.gov.uk

9. Declaration

Kemi Badenoch MP, Exchequer Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.

*[HMDP: Holding Movement and Duty Point Regulations 2010 *[EMCS]: Excise Movement and Control System
*[EU]: European Union *[UK]: United Kingdom