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HMRC internal manual

Civil evasion penalties for Customs, Excise and VAT

Civil evasion penalties for Customs, Excise and VAT: legislation and legal advice on liability: customs

General

For the purpose of alleging evasion under Section 25 of the Finance Act 2003, Section 25(1) provides that, in any case where -

  1. a person engages in any conduct for the purpose of evading any relevant tax or duty, and
  2. his conduct involves dishonesty (whether or not it is such as to give rise to criminal liability),

that person shall be liable to a penalty equal to the amount of tax or duty evaded or, as the case may be sought to be evaded.

Subsection (2) refers subsection (1) to the following provisions.

Subsection (3) goes on to state:

Nothing in this section applies in relation to any customs duty of a preferential tariff country.

Subsection (4) goes on to state:

Any reference in this section to a person’s evading any relevant tax or duty includes a reference to his obtaining or securing, without his being entitled to it:

  • any repayment, rebate or drawback of any relevant tax or duty
  • any relief or exemption from, or any allowance against, any relevant tax or duty, or

any deferral or other postponement of his liability to pay any relevant tax or duty or of the discharge of payment of any such liability,

and also includes a reference to his evading the cancellation of any entitlement to, or the withdrawal of, any such repayment, rebate, drawback, relief, exemption or allowance.

Subsection (5) goes on to state:

In relation to any such evasion of any relevant tax or duty mentioned in subsection (4), the reference in subsection (1) to the amount of tax or duty evaded or sought to be evaded is a reference to the amount of:

  • the repayment, rebate or drawback,
  • the relief, exemption or allowance, or
  • the payment which, or the liability to make which, is deferred or otherwise postponed.

What is meant by ‘relevant tax’

Section 24 (2) provides

For the purpose of this Part ‘relevant tax or duty’ means any of the following: 

  • customs duty
  • Community Export duty
  • Community Import duty
  • Import VAT.

What is meant by ‘revenue’

The revenue has been defined in S25(4) as

  • any repayment, rebate or drawback of any relevant tax or duty, or
  • any relief or exemption from, or any allowance against, any relevant tax or duty, or
  • any deferral or other postponement of his liability to pay any relevant tax or duty or of the discharge by payment of any such liability.