Consequences of breaking customs laws, procedures and duties and what action HM Revenue & Customs (HMRC) can take.
This guide explains what will happen if you break the laws regarding customs rules, procedures and duties and what action HM Revenue & Customs (HMRC) can take against you if you do. It also explains how warnings are delivered, how penalties are calculated, when interest may be charged and how to appeal against findings.
The penalties for import duty and excise duty operate under separate systems. Legal regimes operate differently depending on whether a contravention is committed under customs legislation or under laws covering the operation of excise. It is important that you fully understand the differences between the customs and excise regimes as different sets of penalties and procedures operate for each.
An overview of customs civil penalties
HMRC can impose civil penalties on traders who contravene customs, excise or import VAT rules and regulations. The type of penalty imposed will depend on the nature of the contravention.
Two main customs penalties operate under civil law:
- Customs Civil Penalties (CCPs) may be imposed when traders have contravened customs rules and regulations that relate to customs duty, community export duty, community import duty, import VAT or duties of a preferential tariff country - CCPs may also be imposed for contraventions of customs rules and regulations in regard to exports.
- Customs Civil Evasion Penalties (CCEPs) may be imposed when it can be established that a trader has dishonestly evaded the payment of an import duty, an export duty or import VAT
HMRC can detain or seize goods and the containers or vehicles carrying them when the correct duty and or import VAT has been evaded or when they have been used to carry or are packed with goods that are prohibited or restricted.
Read about paying HMRC penalties in the guide on how to pay HMRC penalties and other miscellaneous payments .
The importation of restricted goods without the correct documentation and the importation of prohibited or counterfeit goods will be dealt with as a criminal offence.
If customs duty debts are not paid by the due date, HMRC will charge interest. The rate of interest is set in accordance with Section 197 of the Finance Act 1996.
Read about customs debts and interest in Notice 199.
Regulatory civil penalties for customs contraventions
This page explains the penalties that HMRC officers can issue to traders for regulatory contraventions.
Customs civil penalties are designed to encourage compliance with legal obligations, and may be imposed when a trader has contravened statutory requirements relating to various types of customs duties and procedures.
Customs civil penalties
A CCP may be imposed when a trader has contravened customs rules/regulations relating to various types of customs duty, import VAT and exports. Schedules containing details of the relevant rules and descriptions of who is liable as well as the maximum penalty amounts that may be imposed for a contravention are available in Notice 301 for schedules of the relevant rules, export penalties and how HMRC calculates and notifies customs civil penalties for contraventions of legal requirements.
Traders may not receive a penalty if they discover and disclose a contravention voluntarily.
Civil evasion penalties for customs contraventions
There are different penalties that HMRC officers can issue for fraudulent paperwork or evading duty.
HMRC will not normally prosecute in the criminal courts where a person has been invited to co-operate with their investigation, but they reserve the right to do so.
Customs civil evasion penalties
CCEPs for breaches of EU and UK customs law were introduced in the Finance Act 2003. They are levied where HMRC has reasonable grounds to believe that customs duties or import VAT has been evaded or sought to be evaded.
Traders may face a CCEP if HMRC are satisfied that duty and/or import VAT has been evaded and dishonest conduct can be established.
The duties and relevant taxes covered by CCEPs include:
- UK customs duty
- EU customs duty
- import VAT
- customs duties in the agricultural sector
A CCEP may be imposed by HMRC when it is satisfied that a trader has evaded the payment of a relevant tax and duty or if they have claimed any repayment rebate, drawback, relief, exemption or allowance to which they are not entitled.
The amount of penalty payable is calculated as a percentage of the duty and/or import VAT that has been evaded. If traders co-operate fully in the investigation, the amount of penalty payable may be reduced. An early and honest admission of the true extent of the evasion may attract a considerable reduction.
Read more in Notice 300 on CCEP investigations.
These procedures do not affect HMRC’s ability to seize goods. In normal circumstances a trader will be able to reclaim seized goods when they have paid the CCEP and the duty and import VAT that is due. See ‘Customs seizures’.
CCEPs do not apply to offences involving prohibited or restricted goods. In these instances, criminal proceedings will be taken.
When HMRC believes a trader has contravened regulations, they may send a warning letter.
Customs civil penalty warning letters
For some irregularities a direct CCP may be considered appropriate. These are issued for serious errors or where HMRC has given clear written advice which has been ignored. Each case is looked at on its own merit and most cases would not result in a direct penalty being issued.
HMRC encourages traders to comply with regulations. Issuing warnings is part of HMRC procedure to support traders without having to issue financial penalties.
Customs officers may issue warning letters - or in certain circumstances financial penalties to traders for the first contravention of customs rules and regulations. HMRC will consider all the facts of the case and then select the most appropriate course of action.Read more on the warning process for civil penalties for contraventions of customs law in Notice 301.
Warning letters for a contravention of customs regulations give details of the alleged contravention. Traders alleged to have contravened customs regulations will be warned that if there is a further broadly similar contravention within a two-year period a penalty demand may be issued.
Civil penalty warning letters stay on record for two years, after which they expire. If there is a further contravention after two years have passed, a new warning letter lasting another two years or a Penalty Demand may be issued.
Warning letters for deficiencies in systems or records set out what must be done by traders to comply. Deadlines are set to allow traders time to rectify any deficiencies. If traders fail to comply, penalties may be issued.
However, in case of serious errors HMRC will not send a warning letter first. Officers may issue a penalty demand for a first contravention in cases where the resulting customs debt is £10,000 or more, or if traders or agents have been given written guidance by customs.
The civil penalty officer will make this decision after evaluating the circumstances. Traders retain the right to request a departmental review and can appeal decisions to issue warning letters and penalties to an independent tribunal.
Disagreeing with a customs warning letter
If traders do not agree with the customs civil penalty warning letter, they can request a departmental review. If they are still not satisfied, they have the right to appeal to the Independent tribunal.
This page details the current HMRC civil penalty and civil evasion penalty amounts.
CCPs for regulatory breaches are stepped. The minimum penalty is £250 and the maximum penalty for further breaches is either £1,000, or £2,500 for more significant breaches as set out in the statutory schedules. If there is a reasonable excuse there will be no liability to a penalty. Notice 301 details this but all cases are judged individually, and penalties can be reduced for certain mitigating circumstances.
CCEPs are worked out as a percentage of the duty traders have evaded or sought to evade. The penalty is equal to the duty dishonestly evaded or sought to be evaded. HMRC can reduce penalties to recognise the help traders provide in establishing how the evasion arose and in quantifying the duty amount involved.
Read about HMRC’s Schedules of Contraventions and CCPs and mitigation of penalties in Notice 301.
Reductions for co-operation
Although traders don’t have to co-operate with an HMRC investigation, the level of their penalty may be reduced further if they do. If they choose to co-operate, they must:
- attend interviews
- supply information promptly
- admit early the extent of the arrears and how they arose
- answer questions honestly and accurately
- give relevant facts to establish the true liability
- co-operate until the investigation ends
HMRC will consider how much the trader’s co-operation has saved its officers in time and resources when determining by how much to reduce the penalty. HMRC also take into account how forthcoming a trader has been about unpaid or late levies, or any other information required.
Read Notice 300 on CCEPs and how to gain a reduction.
Disagreeing with a penalty
Traders who disagree with a penalty decision made by HMRC can do either of the following:
- request a review of their case by a different HMRC officer to the one who made the original decision
- appeal against the decision to an independent tribunal
If you are unhappy with HMRC’s service, you should contact the person or office you have been dealing with and they will try to put things right. If you are still unhappy, they will tell you how to complain
When HMRC seize goods or vehicles, traders can ask for the goods back, complain about HMRC treatment, or appeal if they disagree. If traders have goods seized by HMRC, they will receive either:
- a Notice of Seizure through the post if neither the trader nor their agent were present when the goods were seized
- a Seizure Information Notice (Form C156) handed to the trader or their agent if either was present when the goods were seized
If traders believe the goods were correctly seized by HMRC, the matter will be closed. However, if traders believe that HMRC was incorrect in seizing the goods, or if they want them back, they can take matters further.
Seizure of vehicles
When customs officers seize goods in transit, they can also seize the vehicle that is carrying the goods. Read more about seizures in Notice 12A.
Traders can appeal against the legality of the seizure of goods by sending a Notice of Claim to HMRC. The notice must be received within one month of the seizure otherwise a trader won’t be able to challenge it. Find information about appeals in section two of Notice 12A
Return of goods
Traders can write to HMRC asking for the return of goods, even if they agree the goods have been legally seized. This process is called restoration. Traders can ask for restoration even after the month’s limit for an appeal has passed. Read section three of Notice 12A on restoration.
Traders can apply for restoration and make a complaint at the same time.
Making a complaint
HMRC has a complaints procedure that traders can use if they are unhappy about the way they were treated during seizure of the goods. They cannot use this process to complain about the actual seizure of goods - instead, they must complain to their regional complaints unit. If they are still unhappy, they can apply to the Adjudicator. Find out how to complain and putting things in factsheet C/FS.
Protecting intellectual property rights
Intellectual Property (IP) rights are protected and customs officers can help you if you suspect your rights are being infringed.
IP rights such as copyright, trademarks or designs are protected under European law. Goods that infringe IP laws include:
- counterfeit or pirated goods
- goods that infringe patents
- plants that infringe national or community plant variety regulations
- goods that infringe geographical labelling regulations
HMRC will act for UK traders who suspect their business identity or products are being abused by the import of bogus goods. Read about IP procedures in Notice 34.
If you suspect that goods are infringing your IP rights, you can request that HMRC take action to detain the goods when entry into the EU or export from the EU is attempted. You must inform HMRC and provide a description of the goods that is accurate enough to enable the goods to be intercepted. You must also be able to show that you hold the IP rights that you think are being infringed. To advise HMRC of a suspected copyright infringement in the UK, complete the National Form (Intellectual Property Rights Application). Action at the frontier will be carried out by officers of the UK Border Agency (UKBA).
If you are an EU IP holder and you think an infringement is taking place in two or more member states, you should tell HMRC using the Community Form (Community Intellectual Property Rights Application).
If the UKBA detects suspect goods, it will detain them for ten working days and inform the IP right holder or their nominated representative of the detention and will provide details of the consignment including in most cases a representative sample. Before expiry of the ten working days the right holder must decide on the status of the goods and if applicable take the appropriate steps leading up to their removal from the market. Except in the case of perishable goods, for which the total detention time is three working days, an extension of a further ten working days may be requested.
Within the period set out above the right holder must either reach an agreement with the owner to abandon the goods or initiate court proceedings to determine their IP status. If upon expiry of the period there is no agreement to abandon or proceedings have not been initiated the goods are liable to release.
You must keep HMRC informed about the referral and any decision by the court so that the goods can be dealt with in line with any court order. If you reach an agreement the case officer will treat the goods as abandoned and arrange for their destruction.
Under normal circumstances goods will be destroyed by HMRC or UKBA but at the request of the right holder the goods may be used for training or educational purposes or upon removal of any trademark may be donated to charity. The right holder is liable for the cost of destruction.
Find out more about the patents, trademarks, copyright and other types of IP you can use to protect designs and products.
Help and support for traders
This page lists the main sources of government help for traders, including where to seek advice with queries about warning and penalties.
Read the guide on advice if your business can’t pay what it owes HMRC.
Excise & Customs Helpline
Run by HMRC, this telephone service is available from 8am to 6pm, Monday to Friday, to deal with general questions on customs duties. Advisers will not deal with transactions relating to a specific case.
If your query relates to a specific area outside HMRC’s remit, such as the Department for Food and Rural Affairs, the National Advice Service will provide you with further details of who to contact in other government organisations.
If English is not your first language, HMRC offers an interpreting service to help answer your queries in your own language.
If you have received a visit from a customs officer, you must deal direct with the officer.
HMRC Customs Hotline
Telephone: 0800 595 000