HMAG150600 - Excise duty points: holding of excise goods outside of a duty-suspension arrangement

This section applies when excise goods found in Great Britain are held outside of a duty suspension arrangement and the excise duty has not been paid, relieved, remitted or deferred. The relevant provisions are contained in The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (HMDP).

It also applies when excise goods are found held outside of a duty suspension arrangement in Northern Ireland. The relevant provisions are contained in The Excise Goods (Holding, Movement and Duty Point) Regulations 2010 (as amended), in force immediately before 11pm on 31 December 2020 as modified and applied in relation to excise goods in Northern Ireland by Part 1 of the Excise Duties (Northern Ireland Miscellaneous Modifications and Amendments) (EU Exit) Regulations 2020 (as amended) (commonly known as NI HMDP).

Excise duty point

Where excise goods are held outside of a duty suspension arrangement, and the excise duty has not been paid, relieved, remitted or deferred, there is a release for consumption under regulation 6(1)(b) and an excise duty point arises under regulation 5.

In most cases, the excise duty point will be at the time you find those goods being held outside of a duty suspension arrangement.

However, if you can identify an earlier ‘holding’ within the supply chain under regulation 6(1)(b), you should charge the excise duty at the earlier time. Similarly, if you identify an earlier excise duty point that occurred prior to any ‘holding’, you should charge the excise duty at the time of that earlier duty point.

Further information on the alternative duty points that may apply in Great Britain or Northern Ireland can be found within the Excise Duty Points guidance.


Liability to pay the duty

The person liable to pay the duty when there is a release for consumption under regulation 6(1)(b) is shown in regulation 10.

Under regulation 10(1) the person liable to pay the duty is the person holding the excise goods at that time.

Under regulation 10(2) any other person involved in the holding is jointly and severally liable to pay the duty with the person identified at regulation 10(1).

Strict liability

When considering whether someone is liable to pay the duty under regulation 10(1) or 10(2), it is important to note that the liability under both provisions is ‘strict’.

This effectively means that you only need to demonstrate that someone is ‘holding’ the goods, or is ‘involved in the holding’, for them to be liable under these provisions. There is no requirement to provide evidence of knowledge, or any degree of knowledge (whether actual or inferred) about the existence of the goods or their duty status on behalf of that person.


Definition of ‘holding’

There is no legal definition of 'holding' in the regulations. Therefore, the concept of holding should be kept as simple as possible, and it primarily means the person with physical possession of the goods. This would normally include some form of physical control over the goods (including access to those goods) and/or over the location where those goods are being held. You may also find that this person has a beneficial interest in the goods (for example, of a financial nature or legal ownership of the goods).

Where you can show that someone is physically holding excise goods, this should normally be sufficient for the purpose of regulation 10(1). There is no requirement to demonstrate knowledge of the goods, or the duty status of those goods, on behalf of that person. For example, it is generally enough to show that a driver was physically holding excise goods, even if they were concealed in the vehicle and there is no evidence to suggest the driver knew about the goods or their duty status.

‘De facto’ holding

In a small number of cases, the definition of holding under regulation 10(1) may extend beyond that of physical possession to ‘de facto’ holding. This is when another party is clearly exercising more authority or control over the goods and their location, and this takes precedence over the person physically holding the goods. In some cases, this may also include an element of authority or control over the person who is physically holding the goods.

Where ‘de facto’ holding applies, it does not mean that both parties are holding the goods but rather the party with ‘de facto’ control is (on balance) holding the goods at the excise duty point.
To demonstrate ‘de facto’ holding, you will need to provide evidence of that party’s authority and/or control, the form it takes, and the basis on which it is being operated. Once you have established the roles and responsibilities of the relevant parties and anyone having a beneficial interest in the goods, you should be able to assess whether the degree of authority and/or control presented outweighs that of physical possession.

One example where ‘de facto’ holding may exist is in the transport industry. For example, a haulage company employs a driver who is subsequently caught with excise goods in the back of their vehicle. When questioned, the driver provides comprehensive details about their employer, the goods and the movement of those goods. It is clear the driver was acting on behalf of that employer and has no further interest in the goods. On balance, you believe that the haulier has a much greater control over those goods, and the movement of those goods, and is therefore holding the goods for the purposes of regulation 10(1).


Establishing the duty status of the goods

To establish whether excise duty has been paid on the goods, you should first ask for evidence of duty payment. In genuine cases, the business should be able to provide you with sufficient evidence of duty payment from the original duty payer e.g. their supplier. You may also need to see additional documents, such as business records or invoices, to confirm that the duty has been paid.

It is worth remembering that the onus to demonstrate duty payment falls on the other party. Therefore, providing that you have taken reasonable steps to establish the duty status of the goods and are satisfied the duty has not been paid, you can continue to proceed on this basis.


Establishing the time when goods are first held outside of a duty-suspension arrangement

In most cases, the goods will have passed through the possession of other parties within the supply chain. This means that someone else may well have been holding those goods at an earlier moment in time.

You should therefore take reasonable steps to establish whether there is an earlier holding within the supply chain. To do this, you may need to look at relevant commercial documents including stock records, delivery notes, invoices or rental agreements.

Where an earlier holding is identified, you should assess the person liable for the duty at that time.

If that earlier holder turns out to be a missing or deregistered trader, then you can place the liability on the first identifiable holder in that supply chain. However, if the earliest identifiable holder subsequently enters into a voluntary arrangement or insolvency agreement, you will not be able to pass the liability onto a later holder in that supply chain.

Where you are unable to identify an earlier duty point, you should always assess the person currently holding the goods.
If you cannot determine the exact moment those goods were initially held outside a duty-suspension arrangement, the duty point will be set as the time when the earlier holding is discovered.


Transporting excise goods

Where the person found in possession of the goods is a driver or transporter, you should first try to establish whether they were in sole charge of the goods and the movement of those goods, or if they were acting under the authority or control of someone else. You should ask the driver for their employment details, and delivery instructions, as well as information about the owner of the goods and any other parties involved, to help clarify who has overall responsibility for the goods and their movement.

If you are satisfied the driver is holding the goods, and there is insufficient evidence of ‘de facto’ control, this should be sufficient for the purpose of regulation 10(1).

Third party’ storage

If excise goods are found on property that is legally owned by another party, such as a self-storage unit or lock-up facility, you must closely examine who is responsible for holding the goods under regulation 10(1). The evidence will often place the liability for holding upon those who are using or renting such facilities to store excise goods. However, there may be times when there is sufficient evidence to place the liability on the property owner instead. In either case, you must be able to demonstrate how the relevant person was holding the goods for the purposes of regulation 10(1).

To identify the person holding the goods, you will need to understand the type of arrangement that was taking place between the relevant parties. For example, was this a commercial or private arrangement? Is it a formal arrangement? What is the purpose and nature of that arrangement (is it to store goods, rent a room etc)? What due diligence was carried out by the property owner (do they have contact details, did they carry out background checks etc)? What financial arrangements were in place (how do they pay, was a deposit given, what if payment is not made etc)? Who can access the premises (who has keys to the property, opening times etc)? You may find that copies of contracts, rental or lease agreements, insurance documents, payments and any camera footage of those premises can help you to identify the person holding the goods.

Where you are unable to contact the person using or renting these facilities to store excise goods, either because the property owner cannot provide you with their details or they are missing, this does not automatically mean that the property owner is liable instead. You will still need to provide evidence showing how that property owner was holding the goods in their own right, for them to be liable.

Further consideration is needed when excise goods are found on premises that offer a broader range of services, such as hotels, airports or train stations. In such cases, you will still need to gather sufficient evidence of holding by the owner of the premises, for them to be considered liable. Similarly, where excise goods are found on private land or property, you will still need to show how the owner of that private land or property was holding the goods in their own right, for them to be liable.


Joint and several liability

Once you have identified the person liable to pay the duty under regulation 10(1), you may want to consider whether anyone is jointly and several liable to pay the duty under regulation 10(2). This is a valuable tool which can be used to capture other parties who are ‘involved in the holding’ of the excise goods. It can apply to anyone involved, either prior to, during or following the excise duty point. For example, the actions of a broker, agent, owner, driver or transport arranger can all form an integral part of the holding, which may lead you to conclude they are jointly and severally liable to pay the duty under regulation 10(2).

Under regulation 10(2), the liability is strict, meaning that you only need to show how someone was ‘involved in the holding’ to place a liability on them. There is no requirement to demonstrate knowledge (actual or inferred) of the goods or their duty status on behalf of that person.

If you are considering placing a joint and several liability on the legal owner of a business premises where excise goods are being held, such as a self-storage unit or lock-up facility, legal ownership alone will not normally meet the involvement threshold. To do so, you will need additional evidence to show the property owner’s level of involvement, such as an element of negligence or a wider interest in the goods.