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HMRC internal manual

Tobacco: Control of Supply Chains

Penalty notices: Factors to take into consideration


The primary legislation, section 7C(2) of the TPDA, sets out nine factors that shall beconsidered in calculating the amount of any penalty. These are also reproduced in section 7.5 of Notice 477. The factors are:

  • the nature and extent of the breach of the manufacturer’s duty not to facilitate smuggling;
  • action the manufacturer has taken to ensure that he is complying with his duty;
  • the content of the manufacturer’s supply chain control policy;
  • the extent to which the TM has complied with his supply chain policy;
  • action the manufacturer has taken following any notification by us to him of specified brands and countries;
  • whether the manufacturer has provided us with the information we have requested relating to specified brands and countries;
  • the number, size and nature of the notified seizures of the manufacturer’s tobacco products;
  • the loss of revenue by way of duty or VAT in respect of the notified seizures; and
  • any other matter we consider relevant (this is explained more fully at the end of the next section).

The method of calculating the penalty has been designed to demonstrate clearly how each of these factors will be applied. Additionally the following principles have been adopted:

  • any calculated penalty must be proportionate to the level of non- compliance involved;
  • any method must be straightforward and transparent; and
  • a balance needs to be achieved between structure and discretion in order that the method can be successfully defended at tribunal.